The Employment Insurance

System in Korea

Ministry of Labor

Ⅰ	Introduction / 1
	1. Background / 3 2. Characteristics of the Korean Employment Insurance System / 6 3. Basic Structure of the Korean Employment Insurance System / 8
Ⅱ	Coverage / 11
	1. Principle of Coverage / 13 2. Coverage Exclusions / 15 3. Trend of Insured Employees / 18
Ⅲ	Employment Stabilization Program / 19
	1. Program Outline / 21 2. Support for Employment Creation / 24 3. Support for Employment Adjustment / 28 4. Support for Employment Promotion / 39
Ⅳ	Skills Development Program / 47
	1. Program Outline / 49 2. Assistance to Employers / 53 3. Assistance to Employees / 55 4. Assistance for Training of the Unemployed / 56 5. Performance of the Skills Development Program / 57

Ⅴ	Unemployment Benefits / 59
	1. Outline of Unemployment Benefits / 61 2. Job-seeking Allowance (JSA) / 63 3. Employment Promotion Benefits / 79
Ⅵ	Maternity Leave Benefits and Childcare Leave Benefits / 83
	1. Overview / 85 2. Maternity Leave Benefits / 87 3. Childcare Leave Benefits / 88
Ⅶ	Financing / 89
	1. Financing Principle / 91 2. Contribution Rate / 92 3. Employment Insurance Fund / 94
Ⅷ	Administration / 95
	1. Administrative Agencies / 97 2. Appeal Process / 99

Ⅰ

Introduction

1. Background

2. Characteristics of the Korean
Employment Insurance System

3. Basic Structure of the Korean
Employment Insurance System

1

Background

	Ⅰ. Introduction

The Employment Insurance System in Korea

1. Background

	The Employment Insurance System in Korea

It was in the early 1970s that Korea began to discuss the need for an unemployment insurance system to stabilize the living conditions of the unemployed.

When the first oil shock hit the Korean economy in 1973, the Administration of Labor and some scholars discussed the need for an unemployment insurance system. Those discussions, however, proceeded only informally within the Administration of Labor.

When the second oil shock and political turmoil hit the Korean economy in 1979, the economy recorded a negative economic growth rate, and the unemployment rate reached 7.5 percent in 1980. The high unemployment in the early 1980s forced the Korean government to consider introducing the unemployment insurance system when the Korean government designed the Fifth Five-Year (1982-1986) Economic and Social Development Plan in 1981. Even in the early 1980s, however, most Koreans were opposed to introducing the unemployment insurance system because they believed it would weaken the job search efforts of the unemployed, thereby resulting in a higher unemployment rate. Moreover, many people thought the time was not yet right mature for Korea to introduce the unemployment insurance system because the Korean economy was not strong enough to implement it. Hence, the Korean government decided not to introduce the unemployment insurance system during the 1980s.

In the process of discussing the unemployment insurance system in 1981, however, Korea achieved a very important social consensus on the direction of the Korean system. This was that the government should not seek to address unemployment with a cash benefits. Rather, the important thing was to prevent unemployment itself through stable economic growth and an efficient labor market system. In this respect, they agreed to name the future Korean system the Employment Insurance System rather than the Unemployment Insurance System.

In 1990, the Korean government assigned several public research institutes to design a specific area of the Seventh Five-Year (1992- 1996) Economic and Social Development Plan. The Korea Labor Institute was in charge of designing labor policies for the year 1992-1996. It recommended the government to introduce the Employ-ment Insurance System and provided an outline of the Korean system. The Government reviewed the proposal from the Korea Labor Institute and held several public hearings. It later confirmed that most people supported the proposal. On August 23, 1991, Korean government finally decided to introduce the Employment Insurance System during the mid-1990s.

On March 9, 1992, the government decided to ask the Korea Labor Institute to design a detailed Korean Employment Insurance System. At the government's request, the Korea Labor Institute launched the Employment Insurance Research Commission on May 18, 1992. The Commission was composed of 28 scholars, and observers from the government, management and labor were invited to participate in the discussion process of the Commission. The role of the Commission was to design the Korean Employment Insurance System in detail and carry out the necessary research. The Commission studied the unemployment insurance systems and experiences of many developed countries, as well as Korea's labor market conditions. After one year of research and a series of workshops and seminars with representatives from the government, labor, management and academia, the Commission presented its research findings and policy recommendations to the government on May 18, 1993, under the name, Proposed Employ-ment Insurance System for Korea.

The government then collected opinions of various strata of society through public hearings, created the Employment Insurance Bill based on the Commission's recommendations and submitted it to the National Assembly in September 1993. The National Assembly pass-ed the bill unanimously on December 1, 1993, promulgating it on December 27, 1993. The Employment Insurance Law was put into effect on July 1, 1995, and the unemployment benefits, which requires at least a year's contribution by the insured, became operational from July 1, 1996.

2

Characteristics of the Korean Employment Insurance System

2. Characteristics of the Korean Employment Insurance System

2.1. Compulsory Social Insurance System

The Korean Employment Insurance System is a compulsory social insurance system. All employers and employees in the covered enterprises should pay an insurance premium regardless of their willingness, and they are entitled to receive grants or unemployment benefits from the Employment Insurance Fund.

In a compulsory or involuntary unemployment insurance system, the law decides the coverage of the system, and the covered em-ployees and employers cannot choose to be exempted. All of these covered employees are entitled to claim unemploy-ment benefits provided they meet the requirements.

2.2. Combination of Active and Passive Policy Measures

Whereas the traditional unemployment insurance system concent-rates on remedial measures in post-factum by giving cash benefits to the unemployed, the Korean Employment Insurance System institu-tionalizes preventive measures against unemployment as well by adopt-ing various measures for active labor market policy. The Korean Employment Insurance System is designed not only to help unem-ploy-ed workers by giving them unemployment benefits, but also to enhance employment stabilization and employability of workers through active labor market programs within the framework of the Employment Insurance System (EIS). Thus Korea's EIS is a combination of traditional unemployment benefits and active labor market programs.

Korea's EIS has three major programs: i) Employment Stabilization Program (ESP), ii) Skills Development Program (SDP) and iii) Unemployment Benefits.

ESP seeks to prevent massive layoffs, stimulate reemployment and expand job opportunities by providing economic incentives to employers who have averted massive unemployment and employed marginal displaced workers. It also seeks to promote job placement by providing accurate information on the labor market and administering vocational counseling and guidance.

JSDP seeks to foster and stimulate vocational training for new entrants to the labor market and develop the job skills of employees and displaced workers. The current world economy dictates that a nation's comparative advantage in the quality of human resources determines its competitiveness, and countries are trying to reform their education and training system. JSDP is a way Korea hopes to strengthen its competitiveness, improve labor productivity and guarantee stable employment and employee earnings.

Unemployment Benefits aim to stabilize living conditions and promote reemployment of the unemployed by providing unemploy-ment compensation.

3

Basic Structure of the Korean Employment Insurance System

3. Basic Structure of the Korean Employment Insurance System

The first clause of the Korean Employment Insurance Law stipulates the principal purpose of fostering economic and social development by i) preventing unemployment and promoting employment in conjunction with the development of and improvement in vocational knowledge, skills and capabilities; ii) strengthening development of job skills of the labor force and efficient job placement services; and iii) providing financial assistance to displaced workers.

For these purposes, Korea's EIS has three basic programs: the Employment Stabilization Program, Skills Development Program and Unemployment Benefits.

The Employment Stabilization Program (ESP) seeks to prevent massive layoffs and expedite transfers, reorientation and adjustment when sudden changes in the industrial structure or technology result in extensive corporate restructuring, and to promote utilization of job seekers' skills and interests by providing accurate information on the labor market.

The Skills Development Program (SDP) seeks to foster and stimulate lifelong vocational training and job skill development. JSDP provides financial incentives to encourage individual firms to invest in employee training, thereby improving labor productivity, employ-ment stability, marketability of workers and firm competiti-veness.

Unemployment Benefits aim to stabilize living conditions and promote early reemployment of displaced workers by providing unemployment compensation. For those who are taking vocational training for reemployment, who have found new employ-ment in a relatively short period of time, or who are actively seeking work, there are financial benefits in EIS. This financial incentive system is to induce recipients of unemployment benefits to participate in retraining programs and actively seek new employment.

Other arrangements under the EIS include maternity (pre-natal and post-natal) leave benefits and childcare leave benefits, both of which were adopted in November 2001. Maternity leave benefits is intended to ensure a minimum level of protection for pregnant workers before and after child delivery (including miscarriage and stillbirth) and to support employment stability of women workers by funding employee wages during the leave and thereby relieving their employers of a financial burden. Childcare leave benefits is to fund employee wages while a working father or mother is on leave to take care of his/her child, in order to ensure that the employee sustains employment while being absent from work for a parenting purpose.

The structure of Korea's EIS is shown in Figure 2.1.

Figure 2.1. Structure of the Korean Employment Insurance System

										Subsidy for Shorter Hours of Work at SMEs
										Subsidy for Work Shift Conversion
					Support for Employment Creation					Subsidy for Better Environment of Employment at SMEs
										Subsidy for Utilizing Professional Workforce at SMEs
										Subsidy for SMEs' Entry to New Business Sector
										Subsidy for Employment Retention
					Support for Employment Adjustment
										Subsidy for Outplacement Service
										Subsidy for Employment of Displaced Workers
										Subsidy for Hiring the Aged
	Employment Stabilization Program				Support for Employment Promotion					Grant to Promote New Employment
										Grant to Promote Childcare Leave and Grant to Promote of Employment of Substitute Workers
										Grant to Promote Employment of Elderly Training Graduates
										Allowance to Compensate for Loss Due to Wage Peak System
										Grant to Promote Women's Return to Work after Childbirth
										Aid to Management of In-company Daycare Centers
										Loan for Establishing In-company Daycare Centers
										Subsidy for Construction Workers' Mutual Aid for Retirement Benefits
					Support for Employment Stabilization of Construction Workers
										Subsidy for Employment Security of Construction Workers
					Assistance to Employers					Subsidy for Employer-provided Training
										Subsidy for Paid Training Leave
	Skills Development Program									Loan for Vocational Training Facilities and Equipment
										Subsidy for Taking Training Courses
					Assistance to Workers					Loan for Employee's School Expenses
										Loan for Training Costs
										Subsidy for Certification
										Assistance for Vocational Training of the Unemployed
					Job-seeking Allowance
	Unemployment Benefits
										Early Reemployment Allowance
					Employment Promotion Benefits					Skills Development Allowance
										Wide-area Job-seeking Allowance
										Moving Allowance
	Maternity Leave Benefits and Childcare Leave Benefits				Maternity Leave Benefits
					Childcare Leave Benifits

Ⅱ

Coverage

1. Principle of Coverage

2. Coverage Exclusions

3. Trend of Insured Employees

1

Principle of Coverage

	Ⅱ. Coverage

1. Principle of Coverage

Coverage means that the employment of these workers is insurable and that their earnings are subject to a contribution assessment for which they and their employers are liable.

In principle, the Employment Insurance System (EIS) of Korea is mandatory for all enterprises. Therefore, all employees in any enter-prise are covered by EIS with some specific exceptions.

Considering the administrative difficulties in collecting the insurance premium in very small enterprises, the EIS coverage began in enterprises with 30 employees or more for Unemployment Benefits, and enterprises with 70 employees or more for the Employ-ment Stabilization Program (ESP) and the Skills Development Program (SDP).

The unexpected financial crisis in November 1997 changed the Korean labor market situation drastically. After the International Monetary Fund (IMF) bailout package in December 1997, the unemployment rate, which was 2.6 percent in November 1997, began to soar to 5.9 percent in February 1998 and further to 7.6 percent in July 1998. Facing a with rapidly increasing unemploy-ment rate, Korea expanded the coverage of EIS to enterprises with five employees or more for Unemployment Benefits on March 1, 1998. From July 1, 1998, the coverage of ESP and JSDP also extended to enterprises with five employees or more. On October 1, 1998, all enterprises were be covered by EIS regardless of their size and EIS program. The process of expanding EIS is summarized in Table 2.1.

Table 2.1. EIS Coverage Expansion

Date	Unemployment Benefits	Employment Stabilization Program and Skills Development Program
July 1, 1995	30 employees or more	70 employees or more
January 1, 1998	10 employees or more	50 employees or more
March 1, 1998	5 employees or more	50 employees or more
July 1, 1998	5 employees or more	5 employees or more
October 1, 1998	1 employee or more	1 employee or more

2

Coverage Exclusions

2. Coverage Exclusions

Basically, all workers are to be covered by EIS. Considering the various types of employment and administrative difficulties, however, the following employees are excluded from EIS coverage.

2.1. Workers Employed in Companies with Four or Less Employees in
Agriculture, Forestry, Fishery, and Hunting Industries

Companies with four or less employees in the agriculture, forestry, fishery and hunting industries are excluded from EIS coverage, because employment in these enterprises tends to be occasional, casual, temporary or part-time. It is extremely difficult to get correct information on their employment and wages. Therefore, workers in (unincorporated) companies with four or less employees in agriculture, forestry, fishery and hunting are excluded from Korea's EIS.

2.2. Workers Employed in Construction with Extremely Small Scale

Construction work of which the cost is less than the amount specified annually by the Minister of Labor (the noted amount is 20 million won, as long as the construction work is conducted by an individual) and small-scale housing construction not executed by a housing contractor based on the Housing Construction Promotion Act, are excluded from EIS coverage. The size of the housing construction work not covered by EIS is determined by the criteria of the Basic Construction Industry Act.

Most workers employed in very small construction jobs with extremely small scale are usually temporary, part-time or seasonal workers, and so it is very difficult to get correct information on their employment and wages. Therefore, workers employed in construction with extremely small scale are excluded from EIS coverage.

2.3. Workers Employed in Household Services

Workers employed in household services are usually temporary, part-time, or seasonal workers, and usually there are no records on their employment and wages in Korea. So workers employed in household services are not covered by EIS.

2.4. Part-time Temporary Workers

EIS mainly focuses on full-time employees under normal conditions of employment. Those whose monthly working hours are less than 60, or whose weekly working hours are less than 15 are excluded from EIS coverage (but those who have been hired for 3 consecutive months or longer to earn a living are not excluded).

Short-term, temporary workers whose employment period is shorter than or equal to one month are covered by ESP and JSDP, but they are excluded from Unemployment Benefits. Most temporary employ-ment is contracted on a daily basis, and there is no guarantee of further work opportunity. Administrative constraints that result from such unstable working relationships account for the exclusion of short-term employment from Unemployment Benefits. The govern-ment is considering a special benefit program for them.

2.5. Government and Private School Employees

Both national and local governments as well as private school employees, as defined by respective laws, are not covered by EIS since they are protected by special pension plans and enjoy a very stable employment status. However, even among government and private school employees, those who are not protected by the special pension plans are covered by EIS.

2.6. Foreign Workers Without Work Permits

Foreign workers are covered by EIS in Korea if they hold work permits from the government. But, if they are employed without work permits, their employment is illegal and they are excluded from EIS.

3

Trend of Insured Employees

1. Background

With the expansion of EIS coverage, the number of employees and enterprises actually covered is increasing. The actual number of covered employees that paid their EIS premiums and registered at the public employment offices as insured employees was 4.2 million in 1995, 5.3 million in 1998, 7.2 million in 2003, and 8.1 million in 2005 (see Table 2.2).

Table 2.2. Number of Insured Employees and Enterprises

(in thousands)

	1995	1998	2003	2005
Actual Number of Insured Enterprises	39	400	846	1,148
Actual Number of Insured Employees	4,204	5,268	7,203	8,064

Source : Ministry of Labor.

Ⅲ

Employment Stabilization Program

1. Program Outline

2. Support for Employment Creation

3. Support for Employment Adjustment

4. Support for Employment Promotion

1

Program Outline

	Ⅲ. Employment Stabilization Program

1. Program Outline

1.1. Purpose of the Program

In a rapidly changing globalized economy, each firm has to continuously adjust to changing circumstances. In the adjustment process, firms may inevitably need to modify their employment structure. It is needless to say that a flexible labor market will respond effectively to labor market conditions in the long run. There-fore, improving the flexibility of the labor market would be the correct direction for labor market policy. However, improving the flexibility of the labor market could worsen unemployment and income inequality in the short run, because employment adjustment some-times results in massive unemployment, and the marginal workers would be the victims in most cases. Therefore, it is important to harm-onize efficiency and equity in the process of employment adjustment and development of labor market flexibility, which is the major target of the Employment Stabilization Program (ESP).

ESP seeks to prevent massive layoffs, stimulate reemployment of displaced workers, promote employment of marginal workers, expand job opportunities, and improve job matching by connecting job seekers to the right job offerers.

For these purposes, ESP provides economic incentives to employers who have avoided massive unemployment and employed marginal displaced workers. In order to prevent massive un-employ-ment, ESP gives grants to employers who have prevented layoffs by maintaining the same level of employment, reducing work hours, and training and relocating workers. To improve job matching, ESP also provides job placement services to labor market participants.

Article 15(1) of the Employment Insurance Act states, “The Ministry of Labor is to administer employment stabilization policies to pre--vent massive layoffs, stimulate reemployment, expand job opport--unities, etc., in the case of employment instability created by business cyc-l-es, technological and structural changes, and other economic factors.”

1.2. Priority Enterprises Versus Large Enterprises

Article 16(3) and Article 21(2) of the Employment Insurance Act establish the legal bases for conferring preferential treatment to relatively small enterprises in implementing ESP and JSDP. Based on this, when Korean EIS programs give subsidies to qualified employers, preferential treatment to relatively small-sized enterprises is conferred in the form of larger amounts of financial aid. These relatively small-sized enterprises are called “priority enter-prises,” and non-priority enterprises are called “large enterprises” under EIS. Determination of priority enterprises in each industry depends on the following criteria, provided that small and medium enterprises (SMEs) as defined in the Framework Act on Small and Medium Enterprises shall be considered priority enterprises even if they do not fulfill any of the following:

Mining industry : less than 300 employees;

Manufacturing industry : less than 500 employees;

Construction industry : less than 300 employees;

Transportation, Storage and Communication industries : less than 300 employees;

Other industries : less than 100 employees.

1.3. Program Structure

The ESP is composed of five sub-programs : Support for Employment Creation, Support for Employment Adjustment Assistance, Support for Employment Promotion, Support for Facilities to Promote Employment, and Employment Security Support for Construction Workers (see Figure 3.1).

Figure 3.1.  Structure of the Employment Stabilization Program

Support for Employment Creation

Subsidy for Shorter Hours of Work at SMEs

Subsidy for Work Shift Conversion

Subsidy for Better Environment of Employment at SMEs

Subsidy for Utilizing Professional Workforce at SMEs

Subsidy for SMEs' Entry to New Business Sector

Support for Employment Adjustment

Subsidy for Employment Retention

Subsidy for Outplacement Service

Subsidy for Employment of Displaced Workers

Support for Employment Promotion

Subsidy for Hiring the Aged

Allowance to Compensate for Loss Due to Wage Peak System

Grant to Promote New Employment

Grant to Promote Employment of Elderly Training Graduates

Grant to Promote Childcare Leave (Grant to Promote Employment of Substitute Workers)

Grant to Promote Women's Return to Work after Childbirth

Support for Facilities to Promote Employment

Aid to Management of In-company Daycare Centers

Loan for Establishing In-company Daycare Centers

Support for Employment Stabilization of Construction Workers

Subsidy for Construction Workers' Mutual Aid for Retirement Benefits

Subsidy for Employment Security of Construction Workers

2

Support for Employment Creation

2. Support for Employment Creation

Support for Employment Creation is intended to encourage employers to expand employment opportunities by improving the working environment and reforming the organization of work. This Support includes: Subsidy for Shorter Hours of Work at SMEs; Subsidy for Work Shift Conversion; Subsidy for Better Environment of Employment at SMEs; Subsidy for Utilizing Professional Workforce at SMEs; and Subsidy for SMEs' Entry to New Business Sectors.

2.1. Subsidy for Shorter Hours of Work at SMEs

An SME employer should meet the following requirements, in order to be a qualified recipient of the Subsidy for Shorter Hours of Work at SMEs:

The employer who is running a priority enterprise adopted the 40-hour workweek scheme at least 6 months before the day of coming-into-effect of the law that enforces introduction of the shorter workweek. The coming-into-effect day varies, depending on the company size: July 1, 2005 for companies with 300 permanent employees or more; July 1, 2006 for companies with 100 or more; July 1, 2007 for companies with 50 or more; July 1, 2008 for companies with 20 or more; and yet to be determined for companies with fewer than 20; and

The number of employees has grown since the 40-hour workweek was adopted.

Once the requirements above are fulfilled, the employer concerned may claim the Subsidy for Shorter Hours of Work at SMEs, which is available until 1 day before the day of coming-into-effect of the enforcing law and amounts to 600,000 won per month per employee added since the adoption of the 40-hour workweek scheme.

2.2. Subsidy for Work Shift Conversion

An employer should meet the following requirements, in order to be a qualified recipient of the Subsidy for Work Shift Conversion:

The employer who has already used work shifts changed the shift scheme by increasing the number of shifts to no more than four teams; and

The number of employees has grown since the increase in work shifts.

Once the requirements above are fulfilled, the employer concerned may claim the Subsidy for Work Shift Conversion for 1 year, which amounts to 600,000 won per month per employee added.

2.3. Subsidy for Better Environment of Employment at SMEs

An SME employer should meet the following requirements, in order to be a qualified recipient of the Subsidy for Better Environment of Employment at SMEs:

The employer who is running a priority enterprise in the manufacturing or knowledge-based service sector has made facility investment to improve the employment environment. The facilities applicable here are categorized into: the facilities for a better working environment, including emergency exits and protective equipment, and welfare facilities, including in-company cafeterias and dormitories; and

The number of employees has grown since such facility investment was made.

Once the requirements above are fulfilled, the employer concerned may claim the Subsidy for Better Environment of Employment at SMEs, which is equal to 50% of the expenditure of facility investment, plus 1.2 million won per employee added.

2.4. Subsidy for Utilizing Professional Workforce at SMEs

An SME employer should meet the following requirements, in order to be a qualified recipient of the Subsidy for Utilizing Professional Workforce at SMEs:

The employer who is running a priority enterprise in the manufacturing or knowledge-based service sector has hired professional workers. Professional workers here refer to: those who are skilled in business planning after having been engaged in personnel management, skill development, accounting/treasury/ marketing, etc. for a certain period of time at a listed company, a KOSDAQ-registered firm or a company with 300 permanent employees or more; those who are skilled in developing products and technologies; and the professionals and experts who are necessary for planning business strategies, such as lawyers and patent attorneys;

The employer did not displace his/her employee for the purpose of employment adjustment during the period from 3 months before hiring such professional worker(s) to 6 months after hiring the worker(s).

Once the requirements above are fulfilled, the employer concerned may claim the Subsidy for Utilizing Professional Workforce at SMEs, which amounts to 1.2 million won per month per professional employee for 1 year.

2.5. Subsidy for SMEs' Entry to New Business Sector

An SME employer should meet the following requirements, in order to be a qualified recipient of the Subsidy for SME Employers' Entry to New Business Sector:

The employer who is running a priority enterprise in the manufacturing or knowledge-based service sector has advanced to a new business sector. Entry to a new business sector includes the cases where new business activities have been added to the existing activities; and

The number of employees has grown since the entry to the new sector.

Once the requirements above are fulfilled, the employer concerned may claim the Subsidy for SMEs' Entry to New Business Sector, which amounts to 600,000 won per month per employee added for 1 year.

3

Support for Employment Adjustment

3. Support for Employment Adjustment

Business activity can be defined as the process of adaptation and development in response to changing environments, both internal and external. Economic changes, in particular, cause firms to continually alter their level of employment to equilibrate it with the level of production. This creates the problem of employment adjustment. Article 16 i) of the Employment Insurance Act states, “The Ministry of Labor may assist the employer who has stabilized employment by taking proper measures for employment retention such as a temporary shutdown, reduced working hours, employment retention training, dispatching of employees, leave of absence and relocation of employees in his/her efforts to adjust to the changing economic environment and industrial structure.” Article 16 ii) of the Employ-ment Insurance Act promotes unemployment prevention by decreeing assistance to the employer who has contributed to the stabilization of the labor market by hiring displaced workers in the process of employment adjustment. Reflecting these goals and purposes, the Enforcement Ordinance of the Employment Insurance Act stipulates employers who have stabilized employment through a temporary shutdown, reduced working hours, employment mainten-ance training, change in shift-work system, leave of absence, and employee relocation as concrete means of employment adjustment are eligible for Employment Retention Assistance.

Employment Adjustment Support is composed of Subsidy for Employment Retention, Subsidy for Outplacement Service and Subsidy to Promote Employment of Displaced Workers.

3.1. Subsidy for Employment Retention

Subsidy for Employment Retention encourages employers to maintain employment and avoid laying off employees in the process of employment adjustment.

An employer is qualified for the Subsidy for Employment Retention when he/she satisfies all of the following conditions:

In the process of employment adjustment, layoffs are inevitable.

An employer has guaranteed continued employment by taking proper measures for employment retention.

An employer has reported the employment retention plan to the public employment office, and the measures for employ-ment retention have been carried out according to the plan.

Before and during the measures for employment retention are implemented, there should be no reduction of employees.

3.1.1. Inevitability of Layoffs

If the enterprise meets the following conditions, layoffs are considered inevitable.

As of the first day of taking measures for employment retention, the inventory of the enterprise has increased by more than 50 percent compared with the average stock of the previous year.

Production for the month of the first day of taking measures for employment retention has been reduced by more than 10 percent compared to the previous month, compared to the average production of the last three months, or compared to the average monthly production of the previous year.

Sales in the month of the first day of taking measures for employment retention have fallen by more than 10 percent compared to the amount of sales in the previous month, the average amount of sales in the last three months, or the average amount of monthly sales in the previous year.

The inventory for the month of the first day of taking measures for employment retention and the monthly inventory in the previous two quarters are continuously increasing or the amount of sales for the month of the first day of taking measures for employment retention and the monthly inventory in the previous two quarters are continuously decreasing.

The size of the enterprise has been reduced because sections have been abolished, organizations in the enterprise have been reduced, parts of production lines have ceased, etc.

Labor-saving facilities such as automation have been installed, or a labor-saving way of working or production method has been introduced.

The public employment office recognizes that a reduction in the workforce is inevitable considering the circumstances of the concerned industry and local economy.

When employees take over the business, more than 60 percent of the former employees have been relocated to the concerned business, and more than 50 percent of the stocks of the concerned business have been transferred to the former employees.

3.1.2. Proper Measures for Employment Retention

An employer is qualified for Subsidy for Employment Retention when the employer has stabilized employment by taking proper measures for employment retention such as a temporary shutdown, reduced working hours, employment retention training, change in shift-work system, leave of absence and employee relocation.

Temporary Shutdown

Article 45 of the Labor Standards Act of Korea requires the employer responsible for a business closure to compensate the employees for an amount that exceeds 70 percent of the employee's average wage rate of the three months preceding the business closure. Although the compensation provides a measure of economic security for laid-off workers and their families and may prevent massive unemployment, it may also result in employment instability when the employer resorts to layoffs, as opposed to shutdowns, to avoid the undue expense of shutdown compen-sation. Therefore, the Employ-ment Insurance Law guarantees financ-ial assistance to employers encumbered with paying shut-down compensation resulting from industrial restructuring, business fluctuation, and other economic reasons, with the end goal of ameliorating management difficulties and preventing massive layoffs.

In order to receive the Subsidy for Employment Retention for a temporary shutdown, the employer must satisfy the following conditions:

The shutdown must be due to economic reasons and carried out during a designated period. Non-economic reasons, such as labor disputes, strikes and fires, as well as a violation of the time requirement, preclude the grant.

The shutdown ratio must exceed one-fifteenth, and shutdown compen-sation to workers must have been paid. The shutdown ratio is the total number of shutdown days of the insured in a month divided by the total number of required working days of the insured in a month.

The shutdown must be carried out in accordance with the agreements made with the labor union organized by a majority of the employees.

Employment Retention Training

In order to receive the Subsidy for Employment Retention for employ-ment retention training, the employer must satisfy all of the following conditions.

The employer must train the workers with the purpose of enhancing their employablity.

The trainees in the employment retention training programs should not be engaged in work during the training period.

The employment retention training programs should be twenty hours or more in total, and four hours or more per training day.

The employer must consult and negotiate with the labor union or the employee representative on employment retention training.

Change in shift-work system

An employer who has changed the shift-work system by increasing the number of shifts to retain his/her employees and fulfills the following requirements is qualified for the Subsidy for Employment Retention:

The employer has successfully retained his/her employees by increasing the work shifts (to no more than 4 teams); and

The employer completed changing the shift-work system no later than one and a half year from the date when he/she submitted the written plan to change the shift-work system, and reported the completion to the Employment Stabilization Center (public employment service office).

Leave of Absence

An employer who has provided continued employment to insured workers through a paid or unpaid leave of absence even when employment reduction is inevitable qualifies for the Subsidy for Employment Retention.

In order to receive the Subsidy for Employment Retention for the leave of absence, the employer must satisfy all of the following conditions.

The leave of absence should be an effort to avoid reducing the workforce when such a measure is deemed necessary. The employer does not have to pay any allowance to an employee during his/her leave of absence.

The employer must get a written agreement from the employee on the leave of absence.

The leave of absence should be one month or longer.

Relocation of Employees

The relocation of employees involves transferring employees who face layoffs to new businesses. This has the beneficial effects of preven-ting unemployment as well as transforming the industrial struct-ure.

Subsidy for Employment Retention is awarded to an employer who satisfies all of the following conditions.

An employer should guarantee continued employment of the transferred workers by relocating them in the process of business reorient-ation to a properly equipped facility.

The number of transferred workers must comprise at least 60 percent of the insured employees at the time of submitting a reorganization proposal.

The relocation of employees has to be completed within 18 months since the employer reports the proposal to relocate the employees to the Employment Stabilization Center.

The employer must consult and negotiate with the labor union or the employee representative on the relocation of em-ployees.

3.1.3.  The Amount and Duration of the Subsidy for Employment
Retention

The amount of the Subsidy for Employment Retention depends on the measures an employer has taken to guarantee continued employment for the employees in the process of employment adjustment.

The maximum duration of the Subsidy is 180 days in total, including each period of measures for employment retention,  excepting that it is 1 year in the case of employee relocation and change in shift-work system. When an employer has taken several measures for employment retention on the same day, it is counted as one day.

Temporary Shutdown

When an employer maintains employment through a temporary shutdown, priority enterprises may receive the Subsidy for Employment Retention totaling two-thirds of the shutdown compensation which the employer has paid during the shutdown period, while large enterprises receive 50 percent of the shutdown compensation, for up to 180 days.

Employment Retention Training

When an employer maintains employment through employment retention training, priority enterprises may receive total training costs and three fourths of wages the employer has paid for the trainees during the training period for up to 180 days. Large enterprises receive total training costs and two thirds of wages, for up to 180 days.

Change in shift-work system

When an employer has retained his/her employees by way of change in the shift-work system, the employer, if he/she is running a priority enterprise, shall receive 20% of the wages he/she paid to insured employees who are affected by the changed shift-work system (15%, in case it involves a change from 3-shift to 4-shift structure). The amount of the Subsidy is 15% of the wages paid (10%, in the case of change from 3 to 4 shifts), if the qualified employer is running a large company. The duration is 1 year from the date when the employer completed changing the shift-work system.

Leave of Absence

If the leave of absence is paid, priority enterprises may receive two-thirds of the allowances the employer has paid for the employees during the leave of absence, while large enterprises receive 50 percent of the allowances, for up to 180 days.

If the leave of absence was unpaid and the employer supplied social insurance contributions and other fringe benefits for the employees on a leave of absence, employers in priority enterprises may receive 200,000 won per person per month during the leave of absence for up to 180 days.

“Won” is the unit of Korean currency. As of the end of 2005, 1 US dollar=1,011 won.

If an employer trains employees who are on an unpaid leave of absence, he/she may receive total training costs, and the trainees may receive 70 percent of the minimum wage and 30,000 won for transportation costs as a training allowance during the training period, for up to 180 days.

Relocation of Employees

When an employer maintains employment through employee relocation, priority enterprises may receive the Subsidy for Employment Retention totaling two-thirds of the payroll of transferred employees that an employer has paid during the period of relocation, for up to one year. Large enterprises receive 50 percent of the payroll for up to one year from the day the employees are relocated.

3.2. Subsidy for Outplacement Service

The Subsidy for Outplacement Service, which took effect in July, 2001, is given to the employers who provide leaving employees (and employees who have already left) as the consequence of employment adjustment with counselling and information, job placement service and education/training with regard to career transition, or support human resources for such services, with the aim of facilitating their re-employment or business opening.

3.2.1. Eligibility requirements of the Subsidy

An employer should meet the following requirements to be eligible for the Subsidy for Outplacement Service:

The employer has an unavoidable reason to perform such employment adjustment (see 3.1.1);

He/she provided counselling and information, job placement service, education/training and other services with regard to career transition to his/her employee who has left or is to leave due to employment adjustment, the predetermined age for retirement or maturity of the contract of employment. These services are offered by the employer him/herself or by an outside service provider on a contracting-out basis; and

The employer has set out a plan on outplacement service after consulting the union (employee representatives) and offered the service as planned.

3.2.1. Amount and Duration of the Subsidy

Once the requirements above are fulfilled, the employer concerned is entitled to the subsidy equivalent to three-fourths (two-thirds, in the case of larger companies) of the cost of the outplacement service for 1 year. However, the total amount of the subsidy that an employer has received may not exceed the amount that comes after multiplying the frequency of the outplacement service by 3 million (won).

3.3. Subsidy to Promote Employment of Displaced Workers

The Subsidy to Promote Employment of Displaced Workers is given to the employers who re-employ the workers who were displaced by a reason of corporate restructuring or pregnancy. This Subsidy is intended to facilitate a smooth supply and demand of workforce and re-employment of displaced workers.

3.2.1. Eligibility requirements of the Subsidy

An employer should meet either of the following requirements to be qualified for the Subsidy to Promote Employment of Displaced Workers. However, if an employer has dismissed an employee during the period from 3 months before re-employing a displaced employee to 6 months after such re-employment, the employer shall be disqualified for the Subsidy:

The employer re-employed a worker who had been displaced for employment adjustment, within 2 years of the date of such displacement (but 6 months after the date); or

He/she re-employed a female worker who had been displaced by a reason of pregnancy, delivery or childcare, within 5 years of the date of such displacement (but 6 months after the date).

3.2.1. Amount and Duration of the Subsidy

Once the requirements above are fulfilled, the employer concerned is entitled to the subsidy amounting to 400,000 won (300,000 won, in the case of larger companies) per re-employed person per month for 6 months.

4

Support for Employment Promotion

4. Support for Employment Promotion

Support for Employment Promotion is to promote employment of marginal workers such as the elderly and female household heads, as well as to encourage employers to establish employment promotion facilities for female employees. Support for Employment Promotion is composed of Subsidy for Hiring The Aged; Allowance to Compensate for Loss Due to Wage Peak System; Grant to Promote New Employment; Grant to Promote Employment of Elderly Training Graduates; Grant to Promote Employment of Women; and Grant for Facilities to Promote Employment.

4.1. Subsidy for Hiring The Aged

Subsidy for Hiring The Aged is to aid those who experience difficulties in obtaining employment under the prevailing labor market conditions.

The Subsidy for Hiring The Aged is classified into the following two categories:

Grant to Promote Employment of Many Elderly Workers

Grant to Promote Sustained Employment of Workers at Retiring Age

4.1.1. Grant to Promote Employment of Many Elderly Workers

The Grant to Promote Employment of Many Elderly Workers is awarded to an employer who hires workers aged 55 or over at a given percent (ranging from 4 to 42%, depending on the industrial sector) or more of his/her total workforce. For the number of workers aged 55 or over in excess of the given sector-specific rate of elderly employment, the employer may receive the given amount per older worker per quarter, set each year by the Ministry of Labor. The current amount per older worker per quarter is 150,000 won.

4.1.2. Grant to Promote Sustained Employment of Workers at Retiring Age

An employer should meet the following requirements, in order to be a qualified recipient of the Grant to Promote Sustained Employment of Workers at Retiring Age:

The employer of an enterprise where the retiring age is 57 or older has retained an employee who had worked for the enterprise for 18 months or longer before reaching the given retiring age, or re-employed the employee no later than 3 months after his/her retirement upon reaching the retiring age; and

The employer did not dismiss any other employee for the purpose of employment adjustment, during the period from 3 months before retaining or re-employing the elderly worker to 6 months after such retention or re-employment.

Once the requirements above are fulfilled, the employer concerned may claim the Grant to Promote Sustained Employment of Workers at Retiring Age, which amounts to 300,000 won per month per older employee retained or re-employed, for 6 months. The duration of the Grant shall be lengthened to 12 months, in the case of a manufacturing company with 500 permanent employees or fewer.

4.2. Allowance to Compensate for Loss Due to Wage Peak System

The Allowance to Compensate for Loss Due to Wage Peak System is a new incentive introduced in 2006 to facilitate adoption of the wage peak system which is to address the persistency of job insecurity problems, such as early retirement of elderly workers, attributable to the high wage rates relative to productivity under the seniority-based wage structure. Unlike the other subsidies or grants of the Employment Stabilization Program, this Allowance is paid directly to employees at their request.

The following requirements should be met, for an employee to be a qualified recipient of the Allowance:

The wage peak system is in place at the company where the employee is hired. The wage peak system guarantees employment until an employee reaches a given age, in exchange for reduced rates of wage, based on age, service period or wage level; and

The employee has worked for the company for at least 18 months and is aged 54 or older. In addition, the wage of the current year is 10% lower than the peak wage.

Once the requirements above are fulfilled, the employee concerned may claim the Allowance to Compensate for Loss Due to Wage Peak System, which amounts to 50% of the wage loss, for 6 years.

4.3. Grant to Promote New Employment

An employer should meet the following requirements, in order to be a qualified recipient of the Grant to Promote New Employment:

The employer has hired an insured worker who was registered at a public employment service office, such as the Employment Stabilization Center, for a job-seeking purpose, while being unemployed for a certain period of time. The qualifying period of unemployment depends on the nature of the unemployed worker, as shown in the table below; and

Table. The variance in the qualifying periods of unemployment

Descriptions of potential recipients	Qualifying period of unemployment
1. The aged as prescribed in the provision of Article 2, subparagraph 1 of the Aged Employment Promotion Act, or the less aged (50~55) as prescribed in the provision of Article 15, paragraph 1 of the same Act, who correspond to the criteria set and published by the Labor Minister in consideration of income, duration of unemployment, etc. 2. The female unemployed with the responsibility of family support, who are prescribed in the Ordinance of the Labor Ministry (Article 32-5, paragraph 4 of the Enforcement Rules) 3. Persons with severe disabilities, as prescribed in Article 2, subparagraph 2 of the Employment Promotion and Vocational Rehabilitation of Disabled Persons Act, Article 4 of the Enforcement Ordinance of the Act, and Article 2 of the Enforcement Rules of the Act	1 month
4. The aged as prescribed in the provision of Article 2, subparagraph 1 of the Aged Employment Promotion Act, or the less aged as prescribed in the provision of Article 15, paragraph 1 of the Act (except for those corresponding to subparagraph 1) 5. Those under 29 in age 6. Persons with disabilities, as prescribed in Article 2, subparagraph 1 of the Employment Promotion and Vocational Rehabilitation of Disabled Persons Act and Article 3 of the Enforcement Ordinance of the Act (except for the persons with severe disabilities under subparagraph 3) 7. Those to be employed, under the provision of Article 11, paragraph 2 of the Enforcement Ordinance of the National Basic Living Security Act	3 months
8. Those who do not correspond to any of the categories above	6 months

The employer did not displace any of his/her employees for the purpose of employment adjustment, during the period from 3 months before newly hiring an insured worker to 6 months after such new employment.

Once the requirements above are fulfilled, the employer concerned may claim the Grant to Promote New Employment, which amounts to 150,000~600,000 per month per employee newly hired, for 1 year.

4.4. Grant to Promote Employment of Elderly Training Graduates

An employer should meet the following requirements, in order to be a qualified recipient of the Grant to Promote Employment of Elderly Training Graduates:

The employer has newly hired a worker aged 40 or older who completed a training course for the unemployed; and

The employer did not dismiss any of his/her employees for the purpose of employment adjustment, during the period from 3 months before and 6 months after such new employment.

Once the requirements above are fulfilled, the employer concerned may claim the Grant to Promote Employment of Elderly Training Graduates, which amounts to 600,000 won per month per employee newly hired for the first 6 months, and 300,000 won per month per employee for the following 6 months.

4.5. Grant to Promote Employment of Women

Childbirth necessitates a maternity leave for childbearing, recuper-ation and child rearing. The Equal Employment Act, legislated in 1987, guarantees a leave of absence for child rearing in firms. Therefore, the employer must allow a leave of absence for child rearing when requested by employees whose child is below one year old. The employer cannot hold this request against them, and the total period of the leave of absence for child-bearing and rearing may not exceed one year, as specified in the Equal Employment Act, Article 19. This period of absence is included in the period of continuous service.

Grant for Childcare Leave, instituted to promote the popularization of parental leaves, is awarded to employers who have granted such a leave for more than 30 days in accordance with the Equal Employment Act, Article 19. It also specifies those days overlapping with paid maternity leave, lasting 60 days, will be discounted. Afterwards the worker must be re-employed for at least 30 days.

Each year the Minister of Labor announces the amount of the Grant per person. As of 2005, the amount of the Grant per person is set at 200,000 won,

4.6. Grant for Facilities to Promote Employment

When an employer or a group of employers establish daycare centers for the children of their employees, the Employment Insurance Fund offers support for managing the daycare centers and/or loans for their establishment. The Grant for Facilities to Promote Employment is intended to reduce daycare expenses and promote the economic activities of female workers.

4.6.1. Aid to Management of In-company Daycare Centers

Aid to Management of Daycare Centers is awarded to an employer or employers managing a daycare center for the children of their employees. The Aid subsidizes the salary of the teachers in the daycare centers. As of 2005, 800,000 won is granted toward a teacher per month.

4.6.2. Loan for Establishing In-company Daycare Centers

An employer or a group of employers establishing new daycare centers for their em-ployees' children or expanding current daycare centers may receive a loan from the Employment Insurance Fund at a low interest rate for up to 500 million won.

Ⅳ

Skills Development Program

1. Program Outline

2. Assistance to Employers

3. Assistance to Employees

4. Assistance for Training of the
Unemployed

5. Performance of the Skills Development
Program

1

Program Outline

	Ⅳ. Skills Development Program

1. Program Outline

1.1. Purpose of the Program

Globalization has broken down the economic walls among countries and thus national boundaries not only in the movement of physical resources but also in the movement of human resources. The development of technology and information requires knowledge-based workers. If workers lag behind new information and technology, they lose their competitiveness and employability while their enterprises lose competitiveness in the world market. In order to maintain competitiveness, both employers and employees have to invest in building up their human capital.

The trend of globalization and development of information technology will be accelerated in the 21st century. In the era of globalization and information, competitiveness of a nation and its quality of life would largely depend on human resources armed with information, knowledge and technology. The employability and employment security of a worker would mainly depend on his/her job skills, which can only be developed through lifelong education and training. Therefore, one of the core strategies for the growth of a nation and enterprise would be to develop an education and training system to produce creative and future-oriented human resources through life-long learning and training. As a result, all the countries and enterprises are fiercely competing with each other in a borderless world market for the more competitive labor force. Workers are also faced with unlimited competition not only with other workers in their countries but also workers in other countries.

Rapid changes in know-how and technology would create significant voids in demanded skills, which would result in massive structural unemployment. It will become increasingly important in the 21st century to build up a flexible and efficient life-long education and training system and to implement efficient and effective unemploy-ment policies and programs.

In order to enhance the quality of the labor force, Korea's EIS has a series of programs for supporting vocational education and training in the Skills Development Program (SDP). SDP is an incentive system to encourage employers' and employees' active participation in lifelong vocational training and education through financial support to vocational education and training. In addition, it is designed to provide opportunities for vocational education and train-ing to new entrants to the labor market and the unemployed to improve the occupational skills of the labor force.

1.2. Reform in the Korean Vocational Training System

In order to improve the quality of human resources, Korea reformed its vocational training system in 1999. From 1976 to 1998, Korea maintained the training levy system based on the Basic Act on Vocational Training. Under the training levy system, enterprises with 150 employees or more had two choices: either (1) to invest a certain percentage of total wages in training their employees and/or new entrants to the labor market, or (2) to pay a training levy to the government instead of training. This system was quite effective in persuading employers to invest in vocational training during the authoritarian regime in the 1970s. The training levy system forced employers to follow the government's guidelines, which hardly satisfied the training needs of individual firms. If employers did not follow any of the government's training guidelines, they had to pay the levy to the government even if they trained employees or new entrants to the labor market. Since the training needs of firms were not reflected on time in the government's guidelines on vocational training, most employers did not follow the government's training guidelines and preferred paying the levy to training workers. When Korea introduced EIS in 1995, the Employment Insurance Research Commission recommended that the compulsory levy system be replaced with an incentive system of voluntary training within the framework of SDP. However, the Korean government kept the training levy system for firms with 1,000 employees or more, and applied SDP to firms with less than 1,000 employees.

The experiences from 1995 to 1998 showed that the incentive system through SDP was more effective in inducing employers to participate in vocational training than the compulsory training levy system. So in 1997, Korea enacted the Vocational Training Promo-tion Act, which would replace the Basic Act on Vocational Training from January 1, 1999. The basic idea of the Vocational Training Promotion Act is the same as SDP. Korea changed her vocatio-nal training system from a compulsory levy system to an incentive system of voluntary training by switching the Basic Act on Vocational Training to the Vocational Training Promotion Act on January 1, 1999.

When employers train their workers, the training cost will be reimbursed from the Employment Insurance Fund for up to 100 percent of training costs. The new system has been much more effective in encouraging employers to participate in training their workers because employers can choose their own training courses and methods, but continuous evaluation of the new system will be necessary.

In 2004, the Vocational Training Promotion Act was revised and changed the title of the act into the Workers' Skills Development Act. It includes a new paradigm for skills development programs based on a variety of partnership programs and enlarging support for disadvantaged workers (non-regular, SMEs), etc.

1.3. Program Structure

SDP is composed of three major sub-programs: Assistance to Em-ployers, Assistance to Employees, and Assistance for Training the Unemployed.

Assistance to Employers encourages employers to train their workers by subsidizing training costs. An employer is eligible for the Assistance when he/she trains employees and/or new entrants to the labor market. Assistance to Employers is composed of the Subsidy for Employer-provided Training, the Subsidy for Paid Training Leave, and Loan for Training Facilities and Equipment.

Assistance to Employees is direct support for employees parti-cipating in training programs. Assistance to Employees is composed of Subsidy for Taking Training Courses, Loan for Employees' School Expenses, Loan for Training Costs, and Subsidy for Certification Fee.

Assistance for Training the Unemployed provides free training opport-unities and training allowances for displaced workers and new entrants to the labor market. Assistance for Training the Unemployed is composed of Aid for Retraining Displaced Workers and Aid for Youth Training.

2

Assistance to Employers

2. Assistance to Employers

2.1. Subsidy for Employer-provided Training

An employer may claim the Subsidy for Vocational Training  only when the training courses for his/her covered employees and/or new entrants to the labor market have been authorized by the Labor Minister as necessary for employees' Skills Development. The eligible training courses may be given by the employer him/herself or a training program provider on a contracting-out basis. The Subsidies cover up to 80% of  training costs(unit cost of training courses announced by the Minister of Labor), excepting that, in case of priority companies, up to 100% of training costs is covered.

2.2. Subsidy for Paid Training Leave

When an employer provides his/her insured employee with paid leave during which the employee may take a training program, the employer shall be given a subsidy that covers training costs and part of the employee wage. The eligible paid leave is 7 days or longer in case of priority companies or companies with fewer than 150 permanent employees, and 30 days or longer in other companies. As another requirement for eligibility to the subsidy, training hours should be at least 30 hours during the training leave in case of priority companies or companies with fewer than 150 permanent employees, and at least 120 hours in other companies.

2.3. Loan for Vocational Training Facilities and Equipment

An employer or an association of employers that administers vocational training facilities and equipment or plans to install vocatio-nal training facilities and equipment may receive 90 percent of the total investment expenditure for vocational training facilities, equip-ment and other installations in a Loan for Training Facilities. The ceiling of the loan is six billion won. The rate of interest for priority employers or an association of those employers is one percent per year, and 2.5 percent for large enterprises. The loan must be repaid in five years with a five-year grace period, totaling ten years.

3

Assistance to Employees

3. Assistance to Employees

3.1. Subsidy for Taking Training Courses

If an employee covered by Employment Insurance takes  training courses, such as the training related to his/her job responsibilities, a basic course on information skills, a language course or an Internet-based remote training course at his/her own expense, he/she will receive 50%~100% of the training expense after completing the training. An eligible employee for this program should receive the notice of dismissal a month ahead of the date of dismissal and moved to other workplace while taking vocational training classes during the one month period or one month after completing the training, be aged 40 or over, work for a company with less than 300 permanent employees or be in non-regular employment, including daily jobs. The subsidy is limited to 1 million won per person per year, and should not exceed 3 million won during the 5 years of employment.

3.2. Loan for Employees' School Expenses

Insured employees admitted to or enrolled at a technical or a junior college or a higher institution of education may take out a low interest loan to finance tuition and other fees each semester to improve their vocational knowledge and skills. Tuition aid has an annual interest rate of 1～1.5 percent.

4

Assistance for Vocational Training of the Unemployed

1. Background

In order to assist in the reemployment of displaced workers, the Employment Insurance Fund provides free retraining programs. Insured employees who have become unemployed can obtain free vocational training for reemployment. In certain training courses, however, trainees may have to pay some part of training costs.

Any educational and training institute such as universities and public and private training institutes can participate in the retraining for displaced workers. If a vocational education and training institute conducts retraining for displaced workers on commission, the institute receives total training costs within the designated amount of training fee per trainee. This amount of training fee per trainee varies depending on the quality of the training programs of the institute, set by the Ministry of Labor after evaluating the quality of the training programs of each training institute.

5

Special support for training at SMEs

5. Special support for training at SMEs

Support program	Main Contents	Remarks
SMEs training consortium	If a large company, an employers' organization, a public training provider or a college forms a consortium with an SME to provide vocational training for incumbent employees, prospective employees or job applicants, a generous subsidy will be given to the consortium to compensate the costs of purchasing facilities/equipment, labor costs, and operational expenses.	○ Budget : 45 billion won in 2006 ○ Participating organizations : 47 in 2005 → 60 in 2006 ○ Number of trainees : 71,000 in 2005 → 100,000 in 2006
Subsidy for promotion of organized learning at SMEs	If an SME establishes learning organizations at workplace to promote employees' learning, the costs and technologies required will be subsidized.	The costs required for consulting service, constructing knowledge- sharing system, HRD personnel, OJT programs, etc. will be covered.
Subsidy for training to upgrade core job competencies	The Labor Minister selects the highest-quality courses of the quality training providers every year, and provides SME employers and employees with the opportunity to attend the courses for free.	For employees, the labor costs and training expenses are reimbursed after the completion of training.
Mobile vocational training	At the request of an SME, the training instructors visit the workplace and give training there, using a mobile bus equipped with training materials and devices for technology-based or new technology areas.	Mobile training is conducted at night or on weekends, not to disturb the production process at SMEs.

Ⅴ

Unemployment Benefits

1. Outline of Unemployment Benefits

2. Job-seeking Allowance (JSA)

3. Employment Promotion Benefits

1

Outline of Unemployment Benefits

	Ⅴ. Unemployment Benefits

1. Outline of Unemployment Benefits

Unemployment Benefits are intended to alleviate the hardships of the unemployed and facilitate to help their job search activities in the form of cash benefits to the insured unemployed during a certain period of unem-ploy-ment.

Unemployment Benefits are comprised of the Job-seeking Allowance (JSA) and Employment Promotion Benefits (EPB). The former is the core of the unemployment safety net, designed to stabilize the living conditions of the unemployed and their families during unemployment, thereby facilitating active and unobstructed job-seek-ing activities. The latter purports to foster and stimulate reemploy-ment of the insured individuals receiving JSA by providing con-structive and effective job-search assistance. Hence, EPB is comple-mentary to JSA, and eligibility is restricted to those who qualify for JSA. The amount of the EPB, except for the Early Reemploy-ment Benefit, is rather minimal since it is a reimbursement of actual expenses incurred in specified job-seeking activities. EPB con-sists of the Early Reemployment Allowance, Skills Development Allowance, Wide-area Job-seeking Allowance and Moving Allowance.

Unemployment benefits may weaken the will and efforts of the claimants in finding employment, lengthen the duration of unemployment, and reduce the supply of labor by encouraging  unemployment. Hence, to minimize  the possible adverse side effects, the following restrictions apply:

Eligibility is established only after being insured for 180 days out of an 18 - month base period immediately before the layoff.

The unemployed must register for work at the public employ-ment office, remain ready and able to work, and seek new employment to the best of their abilities.

The first 7 days of unemployment are considered a waiting period, and there is no benefits payment for this period.

Those who voluntarily leave their jobs without good cause or who lose their jobs due to negligence do not qualify for the benefits.

Payment of benefits is suspended if the claimant refuses the job placement services and/or vocational training recommended by the public employment office.

In principle, unemployment benefits are awarded for a relati-vely short period, ranging from 90 to 240 days.

A claimant is entitled to receive unemployment benefits only within one year of the first day of being unemployed if there is no special permission from the public employment office.

Since unemployment benefits are instituted to secure the living condi-tions of the unemployed, the benefits are tax-free and cannot be transferred, confiscated or mortgaged.

2

Job-seeking Allowance (JSA)

2. Job-seeking Allowance (JSA)

2.1. Qualifications for JSA

In order to receive JSA, the claimant must satisfy the prescribed qualifying and eligibility requirements. Qualifying requirements refer to the claimant's prior work experience. Some of the eligibility conditions concern the circumstances of the claimant's job termina-tion, while others constitute requirements to be met during the period  JSA is being paid. Claimants may be disqualified from JSA for failing to meet any of the prescribed conditions. The qualifying requirements and eligibility conditions are intended to confine JSA to qualified insured workers, who have been regular members of the labor force and are involuntarily unemployed, as well as to prevent abuse of the unemployment benefit system.

The outline of the qualifying requirements and eligibility conditions for JSA are as follows.

The claimant's insured employment period should be at least 180 days out of the 18 - month base period preceding the day of job separation.

The claimant must register at the public employment office as a job seeker right after his/her job separation, and request JSA within the 1-year feasible period.

The claimant is out of work but remains willing to and able to work, and is actively seeking new employment to the best of his/her ability.

The reasons for job termination should not be of a nature that would disqualify the claimant from receiving unemployment benefits, such as voluntary unemployment without good cause, discharge for misconduct, etc.

2.1.1. Insured Employment Period and Base Period

Unemployment benefits are not for all of the unemployed, but for those who were recently insured employees for at  least a certain period of time. Therefore, in every country, entitlement to unemploy-ment benefits is based on the fulfillment of conditions relating to the claimant's qualifying period of insured employment and/or the amount of earnings within a specified covered period. In any case, such insured employment or earnings must have been fulfilled within a prescribed base period or reference period. Meeting such requirements demonstrates that the claimant has recently been a part of the labor force for at least an insured employment period within a base period.

In Korea, originally claimant's insured employment period was twelve months out of the 18 - month base period preceding the day of job separation. However, after the financial crisis in November 1997, the minimum insured employment period was temporarily amended from twelve months to six months, and the base period from eighteen months to twelve months during the period from March 1, 1998, to March 30, 2000. This temporary relaxation of requirements was to help the unemployed from those enterprises more recently covered by the Employment Insurance System (EIS) to claim unemployment benefits. From March 1, 1998, to March 31, 2000, the unemployed can claim unemployment benefits if they satisfy an insured employment period of at least six months out of the twelve- month base period preceding the day of job separation.

From April 1, 2000, the claimant's insured employment period and base period were  relaxed further, and now the required insured period is 180 days out of 18-month base period preceding the day of job separation.

The base period can be extended up to three years when the claimant has not received salaries and wages for more than or equal to 30 continuous days during the last 18 months prior to job separation due to i) disease or injury, ii) workplace closure, iii) a leave of absence due to pregnancy, childbirth or childcare, iv) service  abroad at the employer's order, v) labor disputes, vi) a leave of absence for taking care of a spouse or dependants because of an injury or disease, vii) a leave of absence for military service, viii) being dispatched to a workplace not covered by EIS, ix) a leave of absence for managerial reasons, and x) unfair dismissal.

Those not covered by EIS are disqualified for unemployment benefits. Therefore, employers, the self-employed, and employees who are not covered by EIS cannot claim unemployment benefits.

2.1.2. Registration As Job Seeker and the Feasible Period of JSA

An unemployed person claiming unemployment benefits must register at the public employment office as a job seeker right after his/her job separation and must be recognized as a qualified unem-ployed person for unemployment benefits. If an unemployed person does not register as a job seeker and does not claim unemployment benefits, he/she cannot receive the benefits even if he/she is qualified for unemployment benefits.

The claim for unemployment benefits should be requested within one year of the claimant's job separation. The period for claiming JSA is called a feasible period for unemployment benefits. The feasible period for unemployment benefits is the period within which a qualified unemployed person can claim and receive his/her unemployment benefits. The feasible period for JSA is one year from the day of claimant's unemployment. Therefore, if a person claims his/her JSA after eight months from the day of the layoff, for example, he/she can receive his/her unemployment benefits for only four months even if his/her total duration of benefits is longer than four months. This is because the remaining feasible period for his/her benefits is four months when he/she claims the benefits.

EIS specifies this feasible period for unemployment benefits to encourage the qualified unemployed person to register at the public employment office as a job seeker as soon as possible after his/her job separation, as well as to promote early reemployment through assisted job placement services from the  public employment office.

The feasible period can be extended up to four years (1) if the claimant is not able to work for more than 30 days because of i) pregnancy, ii) childbirth, iii) childcare, iv) illness or injury of the insured individual or his/her spouse or immediate family members, and (2) if the claimant has notified to the public employment office of such a circumstance. Moreover, the feasible period may be extended for the number of days the claimant receives vocational training mandated by the public employment office.

2.1.3. Willing and Able to Work

A claimant for the benefits should be willing, able and available to work. A claimant cannot be regarded as such unless he/she is readily prepared to accept any offer of employment. A claimant must declare that he/she is willing, able, and available to work when registering with the public employment office as an unemployed person and job seeker, every other week.

The public employment offices make decisions on whether a claimant can be regarded as willing, able, and available to work. The following are typical cases in which the claimant is regarded as not  being willing, able, and available to work.

When a claimant has quit his/her job because of pregnancy, childbirth, childcare, an elderly or disabled family member, household affairs, etc., and still fits one of these descriptions.

When a claimant rejects suitable job offers and insists on an overly specific occupation, employment term, and working conditions.

When a claimant insists on specific occupations and working conditions that are unavailable considering local labor market conditions.

When a claimant cannot work due to senility, disease, injury, childbirth or other mental or physical conditions.

When a claimant receives temporary disability benefits from the workers' compensation system.

When a claimant cannot work due to household affairs, school studies or other conditions.

When a claimant does not appear on the designated date for job placement services or job guidance services at the public employment offices without good cause.

When a claimant has entered an extended feasible period for unemployment benefits due to pregnancy, childbirth, childcare, injury or disease.

2.1.4. Work Search Requirement

A person claiming unemployment benefits must show that he/she is actively seeking work. Claimants are expected, for 1 to 4 week, to give a report of their reasonable active job search efforts. What are considered reasonable efforts for seeking work will vary considering the previous occupation, skills and knowledge of the claimant. Public employment offices will help claimants in their active job search efforts by providing job-opening information, job guidance and counseling services. A claimant is considered to be inactive in seeking work if he/she has never responded to job offers and never accepted job placement or job counseling services of the public employment office.

2.1.5. Restrictions on JSA

A claimant should be restricted from unemployment benefits because of reasons such as voluntary unemployment without good cause, discharge for  serious misconduct, and refusal of a suitable job offer or job placement services, and disobedience to training order.

Discharge for Serious Misconduct

A claimant who lost his/her job owing to serious misconduct on the job is disqualified from unemployment benefits. The reason for discharge should be related to the claimant's work situation rather than personal life, and the actions should have been willful and deliberate rather than accidental or unintentional.

The following are typical cases in which the claimant is disqualified from unemployment benefits due to job loss resulting from misconduct.

The claimant was in violation of the Criminal Law or work -  related laws, or he/she was discharged due to imprisonment or as more severe punishment for illegal labor disputes.

The claimant was discharged owing to willful destruction of company facilities or equipment.

A claimant was discharged for appropriating, pocketing or embezzling public money for his/her own use, or malfeasance.

A personnel management or accounting head was discharged owing to financial damages suffered by the company because of false documents.

A claimant was discharged because he/she informed rivals of company secrets, causing it to sustain considerable damages.

A claimant was discharged because he/she accepted a bribe and deliberately accepted defective goods, causing a failure in the company's production.

A claimant was discharged for stealing or misappropriating company materials or products.

Voluntary Leave Without Good Cause

A claimant who voluntarily leaves his/her job without good cause is disqualified from unemployment benefits. “Good cause” implies the reason for quitting was related to health conditions, working conditions, employment terms, the managerial situation of the company or other similar circumstances.

The following are typical cases in which the claimant has good cause for voluntarily leaving a position and do not constitute reason for disqualification from unemployment benefits.

Actual wages and hours of work had deteriorated by 20 percent or greater, without good cause, or because working conditions had considerably worsened without good cause.

He/she suffered discrimination from colleagues or management for reasons of religion, gender, appearance, etc.

Sexual harassment from his/her boss or colleagues.

He/she received more than 30 percent of wages or salaries for two consecutive months or longer.

His/her workplace had been temporarily closed for five days or longer in a month, or partially closed for 40 hours or longer per month during the last three consecutive months.

Valid fears of bankruptcy, business closure, or massive layoffs.

The workplace moved to another location, and the daily commute to work became extremely difficult despite measures by the employer to ease the commute. A round trip commuting time of three hours or longer is considered extremely difficult.

He/she has to live away from a spouse or dependants after his/her workplace moved.

A claimant volunteered to leave his/her job at the employer's request for such volunteers.

He/she could not adapt to new technology or new machinery at the workplace.

It became too difficult to perform his/her job for physical reasons, such as a lack of physical strength, disability, disease, injury or decline in eyesight or hearing ability.

To look after his/her young children or sick dependents, or because he/she moved to a place constituting an extensive commute to the workplace.

An employer asked him/her to produce or sell illegal goods and services.

His/her leave of absence without any payment due to managerial reasons lasted for two months or more.

Refusal of a Suitable Job Offer or Job Placement Services

If a claimant has without good cause refused to apply for suitable employment or refused job placement services offered by the  public employment office, he/she is to be suspended from receiving unemployment benefits for two weeks.

Good cause for refusing employment is closely related to the job's suitability because the circumstances that make particular employment unsuitable for a claimant automatically give him/her good cause for refusing it.

The following are typical examples of when employment offered is regarded as unsuitable for a claimant. Hence there is good cause to refuse the job offer, and the claimant may continue to receive unemployment benefits.

When the offered employment is not appropriate with respect to the claimant's skills, knowledge, age, health, etc.

When a claimant has to move his/her residence to accept the offered employment, and he/she is not able to do so.

When the proposed wage or salary of the offered employment is much less favorable than what the claimant might reasonably have expected to obtain. When the wage or salary of the offered employment is i) inferior by 20 percent or greater compared to similar employment in the same region, occupation, and skill level, or ii) inferior to the unemployment benefits the claimant would receive, the claimant is considered to have good cause to refuse the offered employment.

When the working conditions in the offered employment violate  labor related laws such as the Labor Standard Act.

When the employer in the offered employment has unpaid wages and has not cleared overdue wages.

When the production or sales of the goods and services of the offered employment is illegal or not in good public interest.

When a claimant has prospective employment that will be substantial or equivalent to the employment offered and lost by accepting the offer.

Disobedience to Suitable Training Order

If a claimant has without good cause refused or failed to avail himself of a reasonable opportunity to receive vocational training suggested by the public employment office, unemployment benefits are suspended for four weeks.

All vocational training programs ordered by the public employment office are intended to enhance the skill level of the claimant and promote normal reemployment as soon as possible. Refusal to follow such a training order without good cause may cast doubt on his/her willingness to work and availability for work. There is a close relation-ship between good cause for refusing training and the suitability of the suggested training program, however, because the circumstances which make particular training unsuitable for a claimant automatically give him/her good cause for refusing it.

The following are some legitimate reasons for refusing a training order.

When the suggested training program is not appropriate for the claimant considering his/her talents, skill level, etc.

When it is very difficult for the claimant to move residence in order to receive the suggested vocational training because there is no lodging facilities in the training institute, it is difficult to rent a house near the training institute, or because he/she has to live separately from family members who require his/her care.

2.2. Waiting Period

The first seven days of unemployment are considered a waiting period, and JSA is not paid even to qualified claimants.

The rationale for imposing a waiting period is as follows (Yoo and Lee, 1996). First, short-term unemployment will not gravely affect one's living conditions even without unemployment benefits. Second, there is a need to investigate the statements of the claimants in order to determine whether the claimant is eligible for unemploy-ment benefits or not. Third, there is a need to reduce the frequency of quitting by instituting a waiting period. Fourth, the initial stage of unemployment is often used to rest and identify employment opportunities and thus does not warrant protection under EIS.

2.3. Amount of JSA

Under Korea's EIS, the amount of JSA is based on the individual claimant's previous wage rate rather than a flat amount payable to all claimants. The amount of JSA is 50 percent of the  claimant's average wage rate during the last three months immediately preceding the layoff.

The daily amount of JSA is subject to a ceiling and a bottom. If the daily JSA calculated by the claimant's previous average wage rate during the last three months immediately preceding the layoff is greater than 40,000 won, the cap on the daily JSA is set at 40,000  won since Jan 1, 2006. If the daily JSA calculated by the claimant's previous average wage rate during the last three months immediately preceding the layoff is less than 90 percent of the minimum daily wage rate at the time of the layoff, 90 percent of the minimum daily wage rate becomes the bottom of the daily JSA. Until 1999, the bottom of the daily JSA was 70 percent of the minimum daily wage rate.

The ceiling of the daily JSA was 35,000 won until June 30, 1999. As the average wage of Korean workers decreased in 1998 and in 1999 due to the financial crisis of Korea, however, the ceiling of the daily JSA was reduced to 30,000 won from July 1, 1999.

JSA is paid to eligible claimants for 1 to 4 weeks for the number of unemployed days.

2.4. JSA Duration

The duration of unemployment benefits in some countries is uniform for all eligible claimants regardless of their duration of covered employment before the layoff. On the other hand, in other countries, the duration of unemployment benefits varies depending on the duration of the individual claimant's covered employment or age of the claimant.

The rationale for uniform duration is that the risk should be shared by all covered workers in social insurance. The rationale for different durations of unemployment benefits depending on the extent of the previous covered employment or age of claimants is that a significant number of qualified claimants with limited past employment is not regularly attached to the labor market and may not genuinely want to work all the time. Also, it is more difficult to find new employment as claimants become older, while young claimants would be encouraged to engage in active job search activities (Blaustein and Craig, 1977).

In Korea's EIS, the duration of JSA varies depending on the insured employment period and the age of the claimant, ranging between a minimum of 90 days and a maximum of 240 days as shown in Table 5.1. It was 60～210 days until 1999 as shown in Table 5.2, but from January 1, 2000, the duration of JSA in each cell of Table 5.2 extended by 30 days.

Since Korea's EIS was implemented on July 1, 1995, the insured employment period of each covered employee cannot exceed five years until June 30, 2000. Thus the actual duration of JSA is 90～180 days until June 30, 2000, depending on the insured employment period and the age of the claimant.

Table 5.1. Duration of JSA (From January 1, 2000)

		Insured Employment Period
		Less than 1 year	1-3 years	3-5 years	5-10 years	10 years or more
Age	Less than 30	90 days	90 days	90 days	150 days	180 days
	30-50	90 days	120 days	150 days	180 days	210 days
	50 or older and disabled	90 days	150 days	180 days	210 days	240 days

Table 5.2. Duration of JSA (Until 1999)

		Insured Employment Period
		Less than 1 year	1-3 years	3-5 years	5-10 years	10 years or more
Age	Less than 30	60 days	60 days	90 days	120 days	150 days
	30-50	60 days	90 days	120 days	150 days	180 days
	50 or older and disabled	90 days	120 days	150 days	180 days	210 days

2.5. Extended Benefits

JSA is paid to eligible claimants up to 90 to 240 days after the 7-day waiting period within the 1-year feasible period.  However, when a claimant receives vocational training by the order of the public employment office (Training Extended Benefits), when the public employment office recognizes that it is extremely difficult for a claimant to be re-employed in a short period of time (Individual Extended Benefits), or when the unemployment rate is very high (Special Extended Benefits), the duration of JSA can be extended.

2.5.1. Training Extended Benefits

When a claimant receives vocational training by the order of the public employment office, the duration of JSA can be extended up to 60 days for the training waiting period and two years for the training period. If a claimant undergoes vocational training on his own, however, he cannot receive the Training Extended Benefits because he did not receive a training order from the public employment office.

The daily amount of the Training Extended Benefits is the same as the JSA, while other extended benefits are 70 percent of JSA.

The purpose of the Training Extended Benefits is to assist in  reemployment in stable occupations through vocational training that is not a burden to the livelihood of the unemployed.

2.5.2. Individual Extended Benefits

When the public employment office recognizes that it is extremely difficult for a claimant to be re-employed in a short period of time, and the claimant has difficulties in maintaining his/her livelihood, the duration of JSA can be extended up to 60 days.

The daily amount of Individual Extended Benefits is 70 percent of JSA. If the daily amount of the Individual Extended Benefits is less than 70 percent of the daily minimum wage rate, however, the daily amount of the Individual Extended Benefits will be 70 percent of the daily minimum wage rate.

In order to receive the Individual Extended Benefits, the claimant must satisfy all of the following conditions.

He/she terminated employment in one of the occupations or regions designated by the Minister of Labor for its serious labor market conditions.

A claimant remains unemployed until the last day of JSA even though he/she received job placement services from the public employment office three times or more.

A claimant has a dependant or dependants aged 18 years or younger, or aged 65 or over.

A claimant's daily wage rate before unemployment was not more than 50,000 won.

A claimant who could not take or is not taking vocational training.

2.5.3. Special Extended Benefits

The Special Extended Benefits program is applied to all eligible claimants only when the Minister of Labor declares the program to be active because labor conditions nationwide have worsened. A period for Special Extended Benefits is announced if at least one of the following conditions is satisfied during the last three months.

The ratio of JSA recipients to insured employees is greater than 3.0 percent.

The ratio of JSA claimants for the first time to insured employees is greater than 1.0 percent.

The unemployment rate is greater than 6.0 percent.

Once the Minister of Labor announces a period for Special Extended Benefits, the duration of JSA for all claimants is extended for 60 days during the specified period.

The daily amount of the Special Extended Benefits is 70 percent of JSA. If the daily amount of the Special Extended Benefits is less than 70 percent of the daily minimum wage rate, however, the daily amount of the Special Extended Benefits will be 70 percent of the daily minimum wage rate.

The Special Extended Benefits program was introduced in 1998 when the financial crisis hit the Korean labor market. The period for the Special Extended Benefits was set for July 15, 1998, to January 14, 1999, for the first time, and it was extended to December 31, 1999.

2.6. Sickness Benefits

In order to qualify for JSA, a claimant must be able to and willing to work. Therefore, if a claimant cannot work because of injury, sickness or childbirth, the claimant is not eligible for JSA because he/she is not able to work. The livelihood of the unemployed would be threatened if the claimant could not receive JSA due to injury, sickness or childbirth. Thus, EIS has a Sickness Benefits program to cover those unable to receive JSA.

In order to receive Sickness Benefits, the claimant must satisfy both of the following conditions.

A claimant is not able to work for seven days or longer due to injury, sickness or childbirth after registering at the public employment office as an unemployed person.

A claimant has not been suspended from JSA for rejecting job placement services, job guidance services or a vocational training order by the public employment office.

The daily amount of Sickness Benefits is equivalent to JSA. Since the Sickness Benefits program is a substitute for JSA, it is limited to the number of days for which JSA is not paid.

3

Employment Promotion Benefits

3. Employment Promotion Benefits

Unemployment benefits have the primary purpose of assisting those involuntarily laid-off. If claimants do not actively search for work, they are unlikely to attain early reemployment and economic stability. Thus, in order to minimize abuse of unemployment benefits and promote job search efforts, Korea's EIS has Employment Promotion Benefits. They are composed of the Early Reemployment Allowance, Skills Development Allowance, Wide-area Job-seeking Allowance and Moving Allowance.

3.1. Early Reemployment Allowance

The Early Reemployment Allowance (ERA) is an incentive pay structure, created to minimize an individual's duration of unemployment and encourage speedy reemployment at a stable workplace. It is awarded when the recipient of JSA obtains stable reemployment.

In order to receive ERA, claimants must satisfy all of the following requirements:

The new employment must be deemed stable and guaranteed for more than six months.

The new employment must not be with the pre-vious employer or anyone closely related to the previous employer.

The new employment must not have been offered prior to a claimant's resignation at the previous workplace.

The claimant must not have received ERA in two years prior to the first day of new employment.

The amount of ERA is proportionate to the remaining days of the duration eligible for unemployment benefits. That is to say, if the benefit recipient gets reemployed with 2/3 of the benefit duration remaining, he/she shall be given 2/3 of the remaining benefit; and if the remaining duration of the unemployment benefit is 1/2 and 1/3, the ERA amount shall be equal to, respectively, 1/2 and 1/3 of the remaining unemployment benefit. If the recipient of ERA is laid-off within the feasible period, he/she may receive JSA for the number of days remaining after subtracting the period of JSA he/she has received and the converted portion of ERA from the total benefits period. The converted portion of ERA is calculated by the paid amount of ERA divided by the JSA rate.

There is a subsidy for job placement agents who have contributed to shortening the unemployment period of claimants of JSA by facilitating early reemployment through active vocational counseling and job placement services.

3.2. Skills Development Allowance

The Skills Development Allowance (SDA) is a supp-l-e-ment to JSA, instituted to facilitate vocational training of qualifying unemployed workers as recommended by the public employment office.

The training must takeplace within the unemployment benefits period. The days of absence and JSA suspension are subtracted from the duration of SDA. The Minister of Labor determines the level of SDA based on the expenses that the training necessitates, such as transportation and meal costs. For the 1999 fiscal year, SDA is set at 5,000 won per day.

3.3. Wide-area Job-seeking Allowance

The Wide-area Job-seeking Allowance (WJA) is designed to assist extensive job search efforts of qualifying individuals by sub-sidizing transportation and lodging costs. The search must be initiated at the recommendation of the public employment office, and claimants must satisfy all of the following eligibility requirements.

The job-seeking activities must commence at the recom-mend-ation of the public employment office.

The waiting period for JSA must have expired prior to the nationwide job search.

The prospective employer either has no intention of financing the charges incurred, or pays an amount less than the total cost.

The distance between the insured job-seeker's residence and the prospective employer's business location must exceed 50 kilo-meters.

The allowance comprises charges for transportation via railroad, automobile and ship, as well as lodging charges. If the prospective employer finances the cost, the insured job seeker must report any such earnings and receives an allowance equivalent to the amount not covered by the prospective employer.

3.4. Moving Allowance

The Moving Allowance subsidizes the moving costs incurred during relocation for new employment or vocational training. To receive the Moving Allowance, i) the period of employment must exceed one year, ii) the waiting period must have expired prior to reemployment or vocational training, and iii) the public employment office approved the necessity to move.

The amount of allowance is equivalent to moving subsidies for government officials. The qualifying applicant must report any subsidy or reimbursement from the prospective employer, and in such cases he/she receives an allowance equivalent to the difference.

Ⅵ

Maternity Leave Benefits and Childcare Leave Benefits

1. Overview

2. Maternity Leave Benefits

3. Childcare Leave Benefits

1

Overview

	Ⅵ. Maternity Leave Benefits and Childcare Leave Benefits

1. Overview

In Korea, employers have certain obligations in relation to pregnancy and childbirth of their female employees.

First, an employer is obligated to give his/her pregnant employee at least 90 days in maternity leave around the time of delivery. Maternity leave should include at least 45 days of the post-natal period. Furthermore, in case a pregnant worker has a miscarriage or gives a stillbirth when she is 16 weeks or longer pregnant, she may, at her request, get a protection leave of 30~90 days that depends on the duration of pregnancy and starts from the date of such miscarriage or stillbirth. The first 60 days of the leave shall be with pay (Article 72 of the Labor Standards Act).

Second, an employer is obligated to give up to 1 year in childcare leave to his/her employee who has applied for such leave to take care of a child under 1 years (3 years, starting from 2008) (Article 19 of the Equal Employment Act). In addition to these two kinds of leave, the Employment Insurance System (EIS) provides maternity leave benefits and childcare leave benefits, both of which are the subsidies directed to employers to ease their burden of employing female workers and share the costs of maternity protection.

More specifically, maternity leave benefits is intended to ensure a minimum level of protection for pregnant workers before and after child delivery (including miscarriage and stillbirth) and to support employment stability of women workers by funding employee wages during the leave and thereby relieving their employers of a financial burden. Childcare leave benefits is to fund employee wages while a working father or mother is on leave to take care of his/her child, in order to ensure that the employee sustains employment while being absent from work for a parenting purpose.

2

Maternity Leave Benefits

2. Maternity Leave Benefits

The following requirements should be met to claim maternity leave benefits:

The insured female employee has been given the maternity leave or protection leave (in case of miscarriage or stillbirth) under the provision of Article 72 of the Labor Standards Act;

She has been insured for 180 days or longer before the end of the maternity leave; and

She applied for the benefit between 1 month after the start of the leave and 12 months after the end of the leave.

The subsidy for maternity leave benefit corresponds to the normal wage as defined in the Labor Standards Act, as of the first day of the maternity leave concerned. The benefit duration is 90 days for the employees of priority companies, and 30 days for the employees of large companies.

3

Childcare Leave Benefits

1. Background

The following requirements should be met to claim childcare leave benefits:

The insured male or female employee has been given the childcare leave of 30 days or longer under the Equal Employment Act;

He/she has been insured for 180 days or longer before the start of the childcare leave;

His/her insured spouse has not been given the childcare leave of 30 days or longer for the same child; and

He/she applied for the benefit between 1 month after the start of the childcare leave and 12 months after the end of the leave.

The subsidy for childcare benefits is a flat rate of 400,000 won per month per person.

Ⅶ

Financing

1. Financing Principle

2. Contribution Rate

3. Employment Insurance Fund

1

Financing Principle

	Ⅰ. Introduction

1. Financing Principle

Insured workers get unemployment benefits when they are laid-off, but employers are usually responsible when their workers become unemployed. So the insurance costs for Unemployment Benefits are financed by equal contributions from both covered employees and employers.

Employers get direct benefits from the Employment Stabilization Program and Skills Development Program. Therefore, employers are responsible for financing the costs of both the Employment Stabilization Program and Skills Development Program, and pay the entire cost of both programs.

The government is responsible for keeping a sound employment situation and developing EIS. So the government finances the administrative costs of EIS.

2

Contribution Rate

	Ⅶ. Financing

2. Contribution Rate

Each program in Korea's EIS has its own rate of contribution. The sum of contribution rates in each program cannot exceed 3.0 percent of the total payroll. The contribution rate of each program is determined within the limit of contributions considering the financial situation of the Employment Insurance Fund and the prospects of economic and labor market situations.

Table 6.1. Contribution Rate of Each Program

(in percent out of total payroll)

		July 1, 1995～1998		1999～2002		2003～2005
		employees	employers	employees	employers	employees	employers
Unemployment Benefits		0.3	0.3	0.5	0.5	0.45	0.45
Employment Stabilization Program		-	0.2	-	0.3	-	0.3
Skills Development Program	less than 150 employees	-	0.1	-	0.1	-	0.1
	150 or more employees (priority firms)	-	0.3	-	0.3	-	0.3
	150-999 employees (large firms)	-	0.5	-	0.5	-	0.5
	1,000 or more employees	-	0.5	-	0.7	-	0.7

When Korea introduced EIS on July 1, 1995, the contribution rate for the Unemployment Benefits was 0.6 percent (0.3 percent from employees and 0.3 percent from employers) of the total payroll, that for the Employment Stabilization Program was 0.2 percent, and the Skills Development Program has a differentiated rate based on the size of the firm between 0.1 percent and 0.5 percent.

However, the financial crisis of Korea in November 1997 resulted in a high unemployment rate and sharp increase in expenditures for unemployment benefits and active labor market programs. So Korea increased the contribution rate of each program from January 1, 1999. As of 1999, the contribution rate for the Unemployment Benefits is 1.0 percent (0.5 percent from employees and 0.5 percent from employ-ers), and that for the Employment Stabilization Program is 0.3 percent. The contribution rate for the Skills Development Program is between 0.1 percent and 0.7 percent of the total payroll depending on the size of the firm, as shown in Table 6.1.

The ESI contributions were lowered on Jan. 1, 2003 so as to make both employers and employees feel less burdened. The contribution rate for the Unemployment Benefits went down from previous 1.0 to 0.9 percent (0.45 percent from employees and 0.45 percent from employers); and the rate for the Employment Stabilization Program decreased from previous 0.3 to 0.15 percent. On Jan. 1, 2006, the contribution rates for the Employment Stabilization Program and the Skills Development Program were integrated into a single rate. Consequently, as of 2006, the integrated contribution rate is between 0.25 percent and 0.85 percent of the total payroll depending on the size of the firm.

3

Employment Insurance Fund

1. Background

In order to manage a sound EIS, all of the contributions for EIS are deposited into the Employment Insurance Fund (EIF), which is a  special account in the Bank of Korea. EIF is managed by the Minister of Labor. EIF has a separate account for each program of EIS: an account for the Employment Stabilization Program, an account for the Skills Development Program, and an account for Unemploy-ment Benefits.

Compared to other contingencies of the social insurance pro-grams, unemployment is subject to much greater uncertainty. Econo-mic circumstances can change quickly, severely and often unpredic-tably in many respects, thereby producing sharp fluctuations in the level of unemployment and, in turn, in the financial situation of EIF. Therefore, EIF should have a sufficient reserve fund in order to pay unemployment benefits and implement active labor market programs in the event of a serious economic downturn and high unemployment rate.

A major difficulty in managing a reserve fund is to maintain it at an optimum level - not so high as to require unnecessarily high contri-bu-tion rates, yet not so low as to risk depletion of the fund and default on benefit liabilities.

Ⅷ

Administration

1. Administrative Agencies

2. Appeal Process

1

Administrative Agencies

	Ⅷ. Administration

1. Administrative Agencies

The programs of Korea's EIS are closely related with the employ-ment policies of the government. Hence, the Minister of Labor is in charge of carrying out the programs in EIS. The Bureau of Employment Policy in the Ministry of Labor is in charge of EIS general policy and supervision of implementation of the Employment Insurance programs.

When Korea introduced EIS in July of 1999, 46 local labor offices were in charge of carrying out the Employment Insurance programs. With the expansion of coverage and rapid increase in the unemployment rate after the financial crisis in November 1997, Korea began to set up Employment Stabilization Centers from 1998. The Employment Stabilization Centers are special branches of the local labor offices for implementing the Employment Insurance programs.

Since the performance of Employment Stabilization Centers has been much better than that of the local labor offices in the implemen-ta-tion of Employment Insurance programs, the Korean government is separating services for EIS from the local labor offices and  specializing in Employment Stabilization Centers as the core public employment services. These Centers continued to grow in number, especially through the 1997-98 financial crisis, to peak at 168 in 2001. As of end-2005, they numbered 112.

Information on the labor market, insured employees, covered employers, and recipients of unemployment benefits are collected and distributed by the Korea Employment Information Service.

The local labor offices are also in charge of collecting EIS premiums, part of which is entrusted to the local offices of the Korea Labor Welfare Corporation. This organization operates the Workers' Compensation (for industrial accidents) Program in Korea.

2

Appeal Process

2. Appeal Process

Anybody who disagrees with the decisions of the public employ-bent offices on unemployment benefits and other related issues may appeal to the public employment office within 90 days of the announcement of the decision. The public employment office that receives the appeal should send it to a judge in the regional labor office within five days of the appeal. In each regional labor office, there is a judge to examine the decisions of the public employment offices on Employment Incur-anne. The judge reviews the appeal and makes a decision within 30 days after receiving the appeal, and notifies to both the demurrant and the public employment office which made the original decision. The public employment office must follow the decision of the judge.

If the demurrant still disagrees with the decision of the judge in the regional labor office, he/she may re-appeal to the Employment Insurance Appeal Committee within 90 days of the decision of the judge in the regional labor office. The Committee should review the case and make a decision within 50 days of the second appeal. If the demurrant disagrees with the decision of the Committee, he/she may file a suit with the court.