Lee Chang-yong Raises the Issue of Work Hour Structure Reform... Calls for Introduction of "Korean-Style White-Collar Exemption"

Seeking Measures Beyond Simple Work Hour Reduction to Improve Both Quality of Life and Productivity
Proposal: "Work Without Time Constraints Focused on Performance, Take Proper Rest Through Long Vacations"
Compensation Should Clearly Be Performance-Based, Not Tied to Additional Work Hours

Lee Chang-yong, former Governor of the Bank of Korea and a visiting professor at Seoul National University, published an academic paper for the first time since leaving office, proposing the introduction of a "Korean-style white-collar exemption (performance- and autonomy-focused work hour system)." He suggested that certain managerial, professional, and office workers earning more than 200% of the median wage—over 82 million won—be subject to a system in which "work is performed autonomously, with a focus on results and without time constraints, while rest is ensured through long vacations or other means for proper recuperation." He emphasized that compensation should not be calculated based on overtime hours but instead rely on a clear, performance-based remuneration system.

On October 6, at the Population Cluster Forum hosted by Seoul National University Institute for National Future Strategies, Lee publicly presented his paper titled “How Should We Change the Work Hour System?” He stated, “In the past, Korea’s economic growth was centered on blue-collar workers. However, the problem is that we are still viewing all workers through a blue-collar framework. We need to enhance work hour flexibility centered on white-collar workers and shift to performance-based annual salaries.”

On the 6th, at Seoul National University in Gwanak-gu, Seoul, Lee Chang-yong, former Governor of the Bank of Korea (right in the photo), and attendees are taking a commemorative photo at the Population Cluster Forum hosted by the SNU Institute for National Future Strategies. Photo by Yuri Kim

"Weekly 52-Hour Cap for Certain White-Collar Workers... Abolish Overtime Pay and Shift to Performance-Based Compensation"

The paper was co-authored by former Governor Lee, Oh Sam-il, Head of the Employment Research Team at the Bank of Korea's Research Bureau, Yoon Jin-young, Manager of the Employment Research Team, and Han Jin-su, Senior Researcher at the Research Bureau. The presentation was delivered by Team Leader Oh. He stressed, “Amid an aging population and the spread of artificial intelligence (AI) that is changing the scale of the workforce and work methods, Korea’s work hour system must also evolve.” He emphasized, “There is a need to introduce a ‘Korean-style white-collar exemption’ for roles where substantial autonomy and performance-based compensation are practical.”

Team Leader Oh said, “For knowledge-based, high-skilled roles in research and development, IT, and finance—which are driven by performance—creativity and engagement are essential, and focused work is mandatory in today’s globally competitive environment. In industries where there is a high proportion of knowledge-based workers, a clear positive relationship is observed between work hour flexibility and productivity per person.”

The potential target group is estimated at approximately 1.49 million people, accounting for 10.8% of all salaried employees. Oh explained, “Eligible workers are managers, professionals, and office workers earning at least 200% of the median wage (about 82 million won), representing 79% of managers, 19% of professionals, and 16% of office staff.” About 42% of these potential targets are engaged in knowledge-based service industries. For this group, performance-based bonuses averaged 18.5% of total compensation, suggesting that a foundation for performance-linked rewards is already in place.

In the United States, the white-collar exemption exempts managerial and professional positions with compensation above a certain threshold from overtime pay requirements. In Japan, the "highly professional system" was introduced in 2019 for high-skilled professionals with an annual income exceeding 10.75 million yen. Oh noted that “in Japan, the vast majority of employees (87.7%) expressed satisfaction, particularly viewing the system positively in terms of performance and autonomy.” However, critiques regarding long working hours (68.5%) indicate that health protection measures must accompany such systems.

For the Korean-style white-collar exemption, the first requirement is to exempt these workers from the work hour and overtime pay regulations. This would involve excluding them from the 40-hour and 52-hour weekly limits (Articles 50 and 53 of the Labor Standards Act), as well as from overtime, night, and holiday premium pay (Article 56).

Additionally, it is necessary to set target criteria that are clear and periodically adjusted. Oh stated, “The target group should be those earning at least 200% of the median wage among salaried workers, and it must be periodically updated in line with wage growth and labor time conditions. Also, for job functions, roles in which employers substantially control work hours and methods should be excluded, especially if actual discretion and performance measurability are lacking.”

Building on this, he emphasized the need to establish a fully performance-based compensation system. The basis and calculation method for performance-based pay should be specified in the employment contract, base salaries must be preserved, and pre-agreed performance should be rewarded as additional compensation. Sufficient health protections are also required. Oh stated, “Measures such as guaranteeing minimum continuous rest time, mandating the use of annual holidays and leaves, conducting health checkups and interviews for long hours of work, and health protection obligations for employers are needed.”

"Rigid Adherence to the Standard Work Model... Focused Work and Adequate Rest Are Essential"

Over the past 20 years, annual work hours have steadily declined. The average annual work hours in Korea decreased from 2,447 hours in 2000 to 1,846 hours last year. The gap with the OECD average also shrank from 687 hours to 141 hours. However, Korea’s growth potential has been fading rapidly. According to OECD data, Korea’s potential growth rate dropped from 2.5% in 2021 to 1.9% last year, a decrease of 0.6 percentage points—greater than the change among the G7 countries during the same period (-0.4 to 0.5 percentage points).

Oh pointed out, “Our current work patterns can be summarized as low productivity, long work hours, rigid work hour structures, low vacation usage, and limited adoption of flexible work arrangements.” The introduction of the 52-hour cap reduced overtime, but the decrease in income was concentrated among low-income groups. In firms with a high proportion of performance-based incentives, productivity suffered adverse impacts.

Oh stressed, “Potential growth per work hour (GDP) in Korea is below the OECD average. We compensate for low productivity with long working hours. The standard work model—Monday to Friday, 9 a.m. to 6 p.m.—remains firmly entrenched.” He explained that while flexible work enabling intensive effort when needed and adequate rest afterward is required, such flexibility is still highly limited. Oh noted, “The proportion of workers in Korea who have experienced more than 10 hours of overtime per day stands at 31.4%, higher than in Europe (8.9%) but significantly lower than in the United States (55.2%).”

The most problematic issue identified was formalized and rigid work hours. Oh said, “While various flexible work arrangements exist under the law, their real-world usage is limited by requirements for advance schedule confirmation, short application periods, narrow eligible job scopes, and legal uncertainty. Korea’s paid leave utilization rate is 75%, second lowest among 12 major countries, behind only Japan (63%). Workers not only underutilize their allocated leave, but also make very little use of long-term vacations.”

He cautioned against a uniform reduction in work hours, stressing instead the need to foster a culture of “resting properly when it is time to rest.” He stated, “If the leave utilization rate rises from 75% to 95%, it could result in an annual reduction of approximately 31 working hours. This shows the necessity of a Korean-style white-collar exemption.”

This content was produced with the assistance of AI translation services.