Implementing Maximum Working Hours: International Practices ¹

Korea is cutting the maximum number of weekly working hours from 68 to 52. Several other countries have introduced similar limits. While regulations and implementation differ across countries and industries, they typically have resulted in a reduction in working hours. In Korea, it will be important to monitor implementation to ensure an effective and widespread decrease in hours worked across sectors. The implications for firms and productivity will need to be assessed regularly.

1. Among advanced economies, there has been a long secular decline in annual hours worked. This tendency has been driven by broad convergence of legal standards and technological advances, against the backdrop of empirical evidence showing a negative correlation between working hours and productivity (Pencavel, 2014). Korea’s average hours worked per employee are the second highest in the OECD and about 19 percent above the OECD average.

Average Yearly Hours Worked Per Person Employed

Citation: IMF Staff Country Reports 2019, 133; 10.5089/9781498314824.002.A005

Source: OECD.

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Average Yearly Hours Worked Per Person Employed

Citation: IMF Staff Country Reports 2019, 133; 10.5089/9781498314824.002.A005

Source: OECD.

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Average Yearly Hours Worked Per Person Employed

Citation: IMF Staff Country Reports 2019, 133; 10.5089/9781498314824.002.A005

Source: OECD.

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Productivity and Working Hours in OECD Economies, 2016

Citation: IMF Staff Country Reports 2019, 133; 10.5089/9781498314824.002.A005

Source: OECD.

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Productivity and Working Hours in OECD Economies, 2016

Citation: IMF Staff Country Reports 2019, 133; 10.5089/9781498314824.002.A005

Source: OECD.

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Productivity and Working Hours in OECD Economies, 2016

Citation: IMF Staff Country Reports 2019, 133; 10.5089/9781498314824.002.A005

Source: OECD.

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2. On March 20, 2018, Korea promulgated an amendment to the country’s 1997 Labor Standards Act in order to reduce working hours. Before the amendment, Korea’s Labor Standard Act stipulated that workers could work up to 52 hours a week and be paid a 50 percent premium for overtime. However, due to the ambiguity on whether “one week” included weekends, employees were in effect allowed to work an additional 16 hours during the weekend, for a maximum total of 68 hours per week. Under the revised law, weekends are instead included in the definition of the weekly working period, so the maximum allowed working hours are reduced to 52 per week.² Exceeding the limit is allowed as long as average weekly working hours does not exceed 52 hours over a reference period. This reference period was initially set at three months, but will likely be extended to six-months, following an agreement between the government and the Labor Council. Implementation will be phased in over a three-year period, starting with large companies and the public sector. Management positions are exempted from working hours regulations.³

3. Several other countries have in place legal limits on weekly working hours. Nowadays, 40-hour or less is the most prevalent limit for regular weekly hours in advanced economies. Caps on maximum working hours including overtime have been in place in EU members for over 20 years and have just been introduced in Japan.

4. In the European Union the legislation on maximum working hours leaves flexibility of implementation. The 1993 Council Directive 93/104/EC (later superseded by the Directive 200⅜8/EC of the European Parliament) established 48 hours as the maximum average working time for each seven-day period, but this can be calculated over a reference period of four months (Art. 6). Member states had a three-year period to introduce legislation consistent with the Directive. Beside excluding certain sectors (e.g., transportation), the directive also introduced the possibility of derogation to the weekly limit in the following cases:

• For managers and professional staff. Derogation is permitted when, “on account of the specific characteristics of the activity concerned, the duration of the working time is not measured or predetermined, or can be determined by the workers themselves, and particularly in the case of managing executives or other persons with autonomous decision-taking powers, family workers or workers officiating at religious ceremonies” (Article 17).

• When an individual worker decides to “opt out” of the 48-hour limit by signing an agreement. This is permitted provided that the principle of protection of workers’ health and safety is guaranteed. Employers are not allowed to compel workers to work more than 48 hours if they are not willing to sign an opt-out (Article 18).

5. Modalities of implementation of the working hours caps vary across the EU, but, on average, 16 percent of workers continue to work 48 hours or more weekly. Collective bargaining and agreements have a major role in defining working time standards. There are also significant differences in the application of the opt-out option from the weekly maximum of 48 hours. Five countries (Bulgaria, Cyprus, Estonia, Malta and the U.K.) allow the individual opt-out with no restrictions. In eleven countries (e.g., France, Germany, Spain) it is possible only in limited cases— typically in the health and/or emergency sectors or for jobs demanding a significant amount of on-call time. In the other twelve EU members (e.g., Italy) the opt-out option is not allowed. For the 12 EU countries for which data are available, the share of the labor force working 48 hours or more weekly has declined to 12 percent in 2010 from 22 percent in 1991—before the enactment of the Working Hours Directive (Eurofound, 2010, 2016).

6. In the U.K., individuals can opt-out of the working hours limits irrespective of the sector of activity or occupation. According to a 2011 survey, in 32.4 percent of the workplaces there was at least one worker who had signed an opt-out agreement. In 15.6 percent of workplaces all employees had signed an opt-out agreement. Opt-out agreements were more prevalent in private than public sector workplaces. They were the most frequent (40 percent) in the business services sector, which includes non-financial professional occupations, such as lawyers. Surveys suggest that there is broad based support for the opt-out amongst U.K. business, long-hours workers, and the wider public (Department for Business Innovation and Skills, 2014). Nevertheless, there have been claims that in some cases employees are pressured in to signing the opt-out, which is not permitted under the Working Time Directive.

7. In spite of the opt-out option, the number of employees working in excess of 48 hours in the U.K. decreased by 15 percent between 1997—before the adoption of the Directive— and 2013. About 13 percent of the labor force was working over 48 hours per week in 2013. Long-hours working is generally more prevalent in high income and highly skilled occupations (Department for Business Innovation and Skills, 2014).

8. In contrast to the UK, working hours limits are particularly strict in France. The legal maximum is a weekly average of 44 hours over three months, and 48 working hours in a given week. Company level agreements are allowed up to the limit of a weekly average of 46 working hours over three months. However, executives are typically not subject to working time limitations.

9. Japan also introduced a legislation on maximum working hours in 2018. The law envisages a cap of 100 hours a month on overtime, with a limit of 720 hours of overtime a year (corresponding to an average of 15–16 hours a week). White-collar workers with annual incomes of more than 10.75 million yen (about 100,000 US$) are exempted, as for them there is no distinction between regular working hours and overtime. This category includes product developers, financial traders, bankers, consultants and researchers. Given the opposition’s objection that this could be a loophole, a provision was added allowing white-collar workers to give up the exemption status if they so wish. In that case, the distinction between regular working hours and overtime would apply to them, and they would be subject to the overtime cap. The legislation will become effective in April 2019 for large firms, and April 2020 for SMEs.

10. The international experience with caps on working hours suggests that they can be an effective way to reduce hours worked. While implementation differs across countries, in the EU flexibility to the regulation is typically introduced by (i) allowing weekly working hours temporarily exceed the limit, provided that they do not surpass the ceiling on average over a reference period;(ii) consenting derogation for managers, professional staff and specific working categories. Only five EU members permit individual workers to opt-out with no restrictions. In spite of this flexibility, hours worked declined across EU countries.

11. In Korea, it will be important to ensure a widespread implementation of working hours ceilings across sectors. Korea’s hours worked per employee are well above the OECD average, and the new maximum working hour limit is high relative to the EU limits. Effective implementation of Korea’s new legislation will be essential to improve people well-being and support female labor force participation and fertility. The impact on firms and their productivity will have to be regularly evaluated.