Executive summary
The lack of statutory social protection for sick workers is the last major gap in Korea’s welfare system. Most Korean workers experiencing temporary sickness have no or limited job and income protection. The importance of comprehensive sickness programmes in simultaneously protecting workers’ jobs, their incomes, and their (and their co-workers’) health became very apparent during the COVID-19 pandemic, when Korea had to introduce ad hoc measures to fill part of the gap.
The introduction of sickness benefits would reduce existing labour market inequalities. Currently, only few workers in Korea have sickness protection (e.g. public employees) or benefit from voluntary sick pay by their employer (e.g. in some large companies). A statutory sickness programme would remove these large difference across workers in rights and entitlements. It would also improve job quality by helping to reduce the cultural stigma of taking leave for reasons of sickness and lower unhealthy presenteeism where workers continue to work even when sick.
There is significant political momentum for change. The Korean government is determined to close this welfare gap. However, the ongoing sickness benefit pilots to test alternative models for a new system of social protection for sick workers could be strengthened to ensure that Korea can take advantage of its position as a relative latecomer in this policy field to obtain an optimal system right from the start.
Evidence from other countries and research provides a good yardstick for the right characteristics of an effective, adequate, and equitable system of social protection for sick workers. A comprehensive system would ideally fulfil the following criteria:
Cover all workers against all diseases that can cause temporary sickness. Sickness protection should cover all types of workers; this is especially important in a country like Korea where the labour market is dominated by very small firms and a large share of workers are self-employed or in non-standard work. Sickness protection should also cover all types of health issues, including mental health issues, and all degrees of illness severity. A system limiting access to social protection to hospitalised workers, as in one of the pilots in Korea, would be insufficient.
Provide adequate income support while limiting undue absenteeism. Adequate income support is important to allow sick workers to stay home to recover, whereas full income replacement for an unlimited period may augment unnecessary absenteeism and hamper return to work. The long waiting periods and low flat-rate payments in Korea’s pilots prevent any system misuse but are not in line with the principles laid down in the ILO convention on sickness benefits nor with other parts of Korea’s social protection system.
Combine sickness benefits with a robust return-to-work component. An effective social protection scheme for sick workers promotes recovery and return to work of partially recovered workers early during a sickness spell. Effective principles include a focus on gradual return to work as soon as possible and on accommodating workplaces and work of returning workers. In this regard, Korea could draw from experiences with its own successful workers’ compensation system.
Design sustainable payments involving employer-provided sick pay. Out of the 36 OECD countries with statutory social protection for sick workers, 30 require employers to carry part of the risk associated with temporary sickness. Such financial liability gives employers strong incentives to prevent sickness absence and promote return to work, and rewards good employers.
Korea should not delay the implementation of social protection for temporarily sick workers. Apart from most states in the United States, Korea is currently the only OECD country without statutory social protection for sick workers. This gap in social protection also means that temporary sickness can easily lead to job loss – there is no protection against dismissal for sick workers although there have been court decisions that a dismissal can be unjustifiable – which is not only unfair for sick workers but also inefficient for the Korean labour market and economy.
Korea should also pilot-test the introduction of statutory employer-provided sick pay. In most OECD countries, sick pay and sickness benefits are two parts of one system. In Korea, the issue of employer-provided sick pay is disconnected from the discussion on sickness benefits. This is unfortunate, given the important advantages of a period of employer liability during the initial phase of sickness. Actively involving social partners in the design can help facilitating dialogue and implementation later on.
Korea should keep equity issues in mind when introducing a new system. The parameters in Korea’s sickness benefit pilots are much less generous than those in the statutory system for Korean government officials, with full wage replacement without any waiting period for up to 60 days per year. Such a large difference will reinforce Korea’s already segmented labour market. Instead, Korea should seize this opportunity to implement adequate sick leave for all to reduce labour market duality.
Korea should consider making sickness benefits dependent on previous earnings, especially if funding will come from insurance contributions. Korea is considering social insurance funding to pay for sickness benefits, as it does for other parts of its social protection system. Contributions for these insurances depend on earnings. Coupling funding to earnings but offering earnings-independent benefits would reduce the legitimacy of the new programme.
Korea should pay attention to the take up of sickness benefit entitlements. Korea’s strong business culture often prevents workers from fully taking up their entitlements to leave – whether annual leave, sick leave, or any other leave. Sickness benefit programmes can only be effective if sick workers use the scheme to stay home and recover. The Korean government can take several measures to stimulate a cultural shift in leave-taking behaviour.
Make entitlements mandatory. A statutory entitlement to equitable and adequate sickness benefits is an essential condition to normalise taking leave because of temporary sickness.
Address widespread labour market duality. The impact of sickness benefits will be stronger if Korea also makes further efforts to address labour market duality and job insecurity, e.g. by eliminating incentives to hire workers on non-regular contracts or engage dependent self-employed workers.
Improve enforcement of labour legislation. Compliance with labour legislation is weak in Korea, as reflected in a high occurrence of unpaid overtime work and payment below the minimum wage. Increasing the number of labour inspectors and enhancing their skills will be important.
Learn from the lessons of the COVID-19 pandemic. Academic evidence for the United States shows that the introduction of statutory social protection for sick workers decreased the spread of COVID-19 and thereby contributed to lower overall sickness absence.
Consider adopting additional measures to facilitate staying at home when sick. Workers could have a statutory entitlement to remote working, to facilitate working with partial capacity while preventing undue presenteeism. In addition, forcing sick workers to come to work could be made illegal.
Provoke a cultural shift towards valuing efficient output rather than office hours. Korea should promote the spread of high-performance work practices that emphasise the importance of good working conditions for high worker productivity and firm profitability.