News

Home > Policy > News > News

Unemployment benefit scheme to be greatly revamped for first time in 22 years since its introduction in 1995

Download  Attachment Download

Dec. 28, 2017

 

On December 28th (Thu.) the Ministry of Employment and Labor (MOEL) preliminarily announced amendments to the Employment Insurance Act, the Act on the Collection, etc., of Premiums for Employment Insurance and Industrial Accident Compensation Insurance (hereinafter referred to as "Insurance Premium Collection Act") and their Enforcement Decrees which would greatly improve the level and duration of unemployment benefits.

 

The amendment bills preliminarily announced this time were approved after deliberation by the Employment Insurance Committee (Chairperson: Vice Minister of Employment and Labor) on December 19th (Wed.). Their main contents are as follows.

 

* The Employment Insurance Committee is a deliberative body on the employment insurance system, which is composed of 17 members, including those from workers' and employers' organizations and the government and public interest members, pursuant to the Employment Insurance Act.

 

<Enhancing the income security function of unemployment benefits>

 

According to the amendment bills, the level of unemployment benefits will be raised from 50% of the ordinary wage to 60% for the first time in 22 years since the introduction of the employment insurance system in 1995. The improved level of unemployment benefits - 60% of a worker's ordinary wage - is on a par with that of Germany.

 

The duration of unemployment benefits will be extended by 30 days for the first time in 17 years since 2000. As a result, jobless people will be able to receive unemployment benefits, which have been paid for 90~240 days based on age and insured period, for 120~270 days.

 

In addition, the distinction in terms of benefit duration between jobless people under the age of 30 and those aged 30 and over will be abolished. The former's benefit duration has been at least 30 days shorter than the latter's. As a result of the abolition, the benefit duration of jobless people aged under 30 will increase by a maximum of 60 days from 90~180 days to 120~240 days.

 

* Of all unemployment benefit recipients in 2016, 193,000 or 15.1% were under 30.

 

Moreover, the unemployment benefit scheme for self-employed people will be revamped for the first time since its introduction in 2011. The level of unemployment benefits for self-employed people will be raised by 10%p from 50% of the standard wage to 60%, and the duration will be extended by 30 days from 90~180 days to 120~210 days.

 

<Making improvements to address problems found so far>

 

The unemployment benefit eligibility requirements for short-time workers who work less than 15 hours a week will be improved.

 

Currently, to be eligible for unemployment benefits, workers must have at least 180 days of paid work in the 18 months before unemployment. So workers who work no more than two days or less than 15 hours a week have been unable to receive unemployment benefits because their maximum number of days of paid work during an 18-month period is just 156 days.

 

From now on, however, such short-time workers will be able to receive unemployment benefits if they have at least 180 days of paid work in the 24 months (not 18 months) before unemployment.

 

The payment of unemployment benefits to senior citizens aged 65 and over will be expanded in phases, too.

 

Currently, if a senior citizen has not been employed by the same employer since before the age of 65, he/she cannot receive unemployment benefits even when he/she loses his/her job after the age of 65. For example, a janitor who has worked since before the age of 65 but whose employer changed cannot receive unemployment benefits if he/she loses his/her job after the age of 65.

 

From now on, however, elderly workers who have worked since before the age of 65 but whose employer changes after the age of 65 will be able to receive unemployment benefits. If the amendment comes into effect, it would benefit more than 100,000 such senior citizens.

 

The minimum unemployment benefit amount will be improved, too.

 

* At present, the minimum unemployment benefit amount is set at 90% of the minimum wage. This means that jobless people can get an unemployment benefit amounting to 90% of the minimum wage no matter how small an amount equivalent to 50% of their ordinary wage is.

 

The minimum unemployment benefit amount did not exist when the unemployment benefit scheme was introduced in 1995, but during the foreign reserve crisis of 1998, it was introduced as a temporary measure to ensure livelihood security for low-income workers.

 

The minimum amount, at 70% of the minimum wage in 1998, was raised to 90% of the minimum wage in April 2000 to support the livelihoods of workers who lost their jobs due to mass layoffs.

 

It has recently been adjusted downward from 90% of the minimum wage to 80% to reflect the continuing increase in the minimum wage.  However, despite this adjustment, 90% of the minimum wage will be paid in 2018.

 

The Korea Labor Institute predicted that the reforms would require additional spending of two trillion won or more per year.

 

Hence, on December 19th, the Employment Insurance Committee decided to raise the insurance premium rate for unemployment benefits by 0.3%p (0.15%p increase for workers and employers, respectively) from 1.3% to 1.6% to financially back the institutional reforms.

 

* According to the Insurance Premium Collection Act, the employment insurance premium rate should be adjusted after deliberation by the Employment Insurance Committee.

 

Currently, the premium rate for unemployment benefits is shared equally between workers and employers. The increase would result in workers and employers  paying 41,000 won and 428,000 won more each year, respectively.

 

* In 2016 the government's unemployment benefit-related expenditure was 5.8557 trillion won, of which 4.8921 trillion won was spent on paying unemployment benefits.

 

A consensus to promptly push ahead with the amendment bills was created through the 'employment insurance reform task force' involving labor circles, business circles, experts, etc., which has operated for three months since last September.

 

To begin with, the amendments to the Employment Insurance Act and the Insurance Premium Collection Act which would enhance the income security function of unemployment benefits, improve the eligibility requirements for short-time workers and expand the payment of unemployment benefits to peopled aged 65 and over will be submitted to the National Assembly in March 2018. They will be effective from July 1st, 2018 at the earliest once the National Assembly's revision process is completed.

 

However, the adjustments to the minimum unemployment benefit amount and insurance premium rate will come into effect on January 1st, 2019 considering the related burden on workers and employers.

 

Moreover, the government will have discussions with labor and business circles about such issues as allowing people in special forms of employment and artists to join employment insurance and paying unemployment benefits to long-term unemployed people who left their jobs voluntarily, in the first half of 2018 to make further improvements.

 

Vice Minister of Employment and Labor Yi Sung-ki said, "The amendments are the result of consensus-building between labor and business circles on the improvement of our country's employment safety net and will enable the unemployment benefit scheme to give more help to our people."

 

He also said, "With regard to employment insurance coverage for people in special forms of employment and other tasks that have to be implemented next year, the government will promptly pursue rational improvements after public discussions involving labor, management and experts."

Last Modifide Date   :   Fri February 2, 2018
Back to top