What are illegal labor contracts?

Even when the employer and employee sign and agree on a labor contract, disputes may arise that are decided according to labor standards law. Here are five illegal labor contract practices to be aware of:

 

1. Failure to create a written labor contract is illegal. Regardless of whether a worker is a contract or non-permanent employee, a labor contract must be created if work is performed and wages are received. Failure to do so may result in a fine of up to 5 million won.
2. Clauses such as requiring an employee to repay salary if leaving within a year are illegal. Employers must pay employees according to the amount of work performed, and wages paid cannot be reclaimed if an employee leaves within a year.
3. Combining severance pay with monthly salary is invalid. Even if the employee has contractually agreed to be paid using a comprehensive salary or annual salary system, severance pay is not a type of wage that can be paid monthly. If an employer has paid severance pay monthly and an employee demands it upon leaving, the employer may have to pay it. Severance pay must only be paid once upon leaving.
4. Employers must enroll employees in the four types of insurance (health, employment, industrial accident, and national pension) if they work more than 15 hours per week.
   • Industrial accident insurance must be enrolled even if work hours are less than 15 hours per week.
   • Employment insurance must be enrolled if an employee has worked for more than three months, even if work hours are less than 15 hours per week.
   • National health insurance is mandatory for all citizens.
   • National pension must be paid until age 60.
5. Employers must pay at least minimum wage regardless of the type of employment contract. Failing to do so may result in a fine of up to 20 million won or a prison sentence of up to three years. However, during a probationary period, an employee can be paid 90% of the minimum wage for up to three months.

These are the main five illegal labor contract practices to be aware of.

 

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