Newsletter
The Impact on HR Policy in 2016 as a Consequence of the Amendments of the Labor Standards Act
There are notable amendments to the Labor Standards Act ("LSA"), which will affect the company's HR policy in 2016. Those amendments include the reduction of the statutory working hours (Sub-article 1 of Article 30 of the LSA), reinforcement of the contribution to the pension reserve fund under the old pension scheme (Sub-article 2 of Article 56 of the LSA), non-competition covenants (Article 9-1 of the LSA), job transfer (Article 10-1 of the LSA) and restriction to a minimum service period of employment (Article 15-1 of the LSA). The amended provisions thereof are available for review on the websites of the Ministry of Labor and other relevant government authorities. Below are the key points of the amended provisions.
1. Reduction of the Statutory Working Hours
The number of statutory working hours will be reduced from 84 every two weeks to 40 per week, effective 1 January 2016. The reduction of working hours should not have an adverse impact on the employees' salary. As part of the amendments to the reduction of the working hours, national holidays (public holidays) have been reduced from 19 days to 12 days in 2016 and onwards.
2. Reinforcement of the Contribution to the Pension Reserve Fund under the Old Pension Scheme
Under the old pension scheme, an employer shall appropriate a certain sum of money every month as the pension reserve fund for retirement benefit for employees. Before the close of each year, an employer shall check and estimate whether the balance of the reserve fund is sufficient to pay the total amount of retirement payment of workers eligible for retirement next year. If the reserve fund is under-funded, the employer is required to make up the difference in one lump-sum appropriation before the end of March the following year.
3. Non-competition Covenants
An employer should provide a reasonable compensation to the employees who agree to non-competition covenants. The compensation shall not include the payments that are paid during the employment period. The employer should provide additional compensation. In the absence of the reasonable compensation, any non-competition covenants will be considered null and void. According to a directive issued by the Ministry of Labor on October 5, 2015, a monthly compensation for an employee's non-competition covenants should not be less than 50% of the average monthly salary that the subject employee received immediately before his/her employment with the previous employer ceases.
4. Job Transfer
The amendments to the LSA have the five guidelines previously issued by the government authority concerning job transfer codified. In addition, the amendments include an additional requirement that any job transfer should not be driven by improper intent or purpose (e.g. interference with a labor union's activities).
5. Restriction to Minimum Service Period of Employment
The amendments to the LSA have the "necessity" and "reasonableness" principles previously stated in the judgments of the Supreme Court concerning restriction to the minimum service period of employment codified. Therefore, in order to validate a restriction to minimum service period of employment, the employer should (1) provide the employee with professional or technical training, (2) pay for such training, and (3) provide reasonable compensation for the employee to comply with the minimum service period covenant.