Dismantling the Divide Between Regular and Non-Regular Workers Is the Answer

The government has now begun in earnest to reform the Fixed-Term Employment Act. It is welcome that discussions on reform have gained momentum with explicit recognition of the law’s side effects. However, if the effort amounts to nothing more than extending the allowable period of use or once again forcing conversion to regular employment, it will merely add another chapter to the history of failure.

The Fixed-Term Employment Act was enacted under the banner of good intentions—to protect workers. When it took effect in 2007, employing a non-regular worker for more than two years was deemed equivalent to entering into an employment contract with no fixed term. The aim was to encourage conversion to regular status. In reality, however, the opposite occurred. To avoid the burden of conversion, companies made it standard practice to terminate contracts just before the two-year mark—the so-called “1 year and 11 month contract.” A “protection law” became an “expulsion law.”

The results are evident in the numbers. According to the Korea Labor Institute, the conversion rate of non-regular workers to regular positions fell from 27.9% in 2009 to 19.4% in 2020. Based on the Ministry of Employment and Labor’s establishment survey, the conversion rate stood at only 8.6% at the end of 2024. Since the law took effect, non-regular employment has not decreased; if anything, the door to conversion has become even narrower. This is a textbook example of what happens when well-intentioned regulation ignores market realities.

Extending the period of use is not a fundamental solution. The core of the current debate is to increase the allowable period from two years to three years or more. Successive administrations have tried this several times, only to see it collapse each time in the face of labor opposition. Even if the period is extended, companies will simply repeat the same behavior and terminate contracts just before the new deadline.

Changing the height of the partition cannot eliminate the distortions created by the partition itself. The same is true of “restrictions on grounds for use,” advocated by some in labor circles. Such measures would only reduce total employment and produce more new detours through outsourcing and subcontracting.

The root of the problem lies in the dual structure of the labor market. Once regular workers are hired, dismissing them is virtually impossible. This rigidity leads companies to avoid hiring regular workers in the first place. It also makes it harder to offer contracts with strong employment stability. No matter how much fixed-term employment regulations are adjusted, the dual structure will not be resolved unless the excessive protective regulations surrounding regular employment are changed.

The solution lies in expanding autonomy in employment contracts. The limit on the period of fixed-term employment should be abolished or substantially eased so that companies and workers can freely determine contract duration according to the nature of the job. Dismissal protection regulations for regular workers should also be adjusted to a reasonable level to lower the threshold for hiring. When labor market flexibility rises, companies can hire the workers they need in a timely manner, which paradoxically leads to greater overall employment and greater stability at the same time.

Flexibility should also be increased through a performance-based pay system. As long as the compensation structure differs according to employment type, the barrier between regular and non-regular workers will not disappear. Only when a compensation system centered on capability, performance, and job function is firmly established will the fixation on employment type begin to fade.

The lesson of the past is clear. We must recognize that forcing conversion to regular employment by law does not reduce non-regular employment. The stronger the regulations became, the more workarounds proliferated—and the damage fell squarely on non-regular workers.

Reform of the Fixed-Term Employment Act must not end as yet another stopgap regulatory fix. Autonomy in employment must be expanded, and the artificial barriers between regular and non-regular workers must be dismantled. Only then can a flexible and stable labor market emerge—one in which workers and businesses thrive together.

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

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Original title: 정규직·비정규직 해체가 답이다

Author: Sung-no Choi

Date: 2026-04-19

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=28817