Weekly Holiday Pay Should Be Abolished Before It’s Too Late

Voices of discontent over weekly holiday pay are growing louder, especially among small self-employed business owners. After the Minimum Wage Commission rejected employers’ demand to address the weekly holiday pay issue, the Small Business Council announced that it would take action calling for reform of the weekly holiday pay system.

In fact, it was a mistake by the Minimum Wage Commission not to include reform of the weekly holiday pay system when setting the 2020 minimum wage. Had the minimum wage been raised while also correcting the problems in the weekly holiday pay system, this kind of confusion could have been avoided. It is regrettable that the Minimum Wage Commission ignored problems on the ground and focused solely on raising the minimum wage.

As the minimum wage has risen rapidly over the past three years, business conditions for small merchants have deteriorated significantly. Their complaints about the burden of labor costs are entirely understandable. Nevertheless, the government raised the minimum wage from 8,350 won in 2019 to 8,590 won in 2020. Including weekly holiday pay, the effective wage rises to 10,308 won, which is expected to further increase the burden on business owners. Though belated, the government should now recognize the problems with the weekly holiday pay system and pursue institutional reform to correct them.

As the Small Business Council argues, excluding weekly holiday pay from the minimum wage is one realistic solution. In fact, the current monthly conversion standard of 209 hours for the minimum wage, which includes paid weekly holiday hours, needs to be changed to 174 hours excluding weekly holiday hours. Doing so would reduce the scope of minimum wage violations by employers.

Weekly holiday pay grants a paid weekly rest day to workers who have worked the prescribed number of days in a week. In other words, it means that workers receive additional pay on a weekly holiday even if they do not work on that day.

For that reason, weekly holiday pay is compensation for hypothetical hours rather than for hours actually worked. Small self-employed business owners are at risk of being treated as lawbreakers simply because they did not pay wages for fictitious hours. Because of this issue, the Supreme Court has consistently ruled that paid holidays should not be counted as working hours.

In fact, most advanced countries do not have a weekly holiday pay system. Among OECD members, only five countries legally mandate weekly holiday pay. U.S. federal labor law does not mandate holiday-related matters at all, viewing them as issues to be resolved through agreement between employers and workers.

Workers’ conditions today are very different from when the weekly holiday pay system was introduced. When it was first introduced in 1953, many workers labored without any holidays at all. But now the five-day workweek has become established, and the labor environment has changed. As the reality of work has changed, the system also needs to be reformed to reflect current conditions.

Since this year, with the payment of weekly holiday pay for those working 15 hours or more per week explicitly codified, the number of ultra-short-term workers working less than 15 hours a week has surged. This is a significant burden for both business owners and workers. The government’s failure to reform this outdated system, which is causing harmful effects in the real economy, can only be seen as a case of policy failure.

There is a need to promptly reform this outdated weekly holiday pay system, or even consider abolishing it altogether. Improving the problems in the workplace is the right thing for the government to do.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 더 늦기 전에 주휴수당 폐지해야

Author: Sung-no Choi

Date: 2019-08-11

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=24&idx=20419