Some companies require workers to clock in at fixed hours and take supervisors' directions as if they were employees, yet label them on paper as freelancers to avoid paying severance.
Other employers cut base pay and assert that overtime is already included in salaries, effectively forcing employees into unpaid late-night work. The government is finally moving to confront these entrenched labor-market abuses.
On May 7, the Ministry of Employment and Labor convened a \"Task Force for Normalizing Employment and Labor\" in Yeouido, Seoul, launching a broad reform effort to root out illegal and deceptive practices that undermine workers' rights.
They clock in like employees but are treated like freelancers — inside the fake \"3.3\" contracts
At the meeting, officials singled out so-called \"fake 3.3\" contracts as a top priority.
The 3.3% withholding tax is intended for independent sole proprietors and genuine freelancers. Some companies have exploited it by disguising employees as sole proprietors to reduce labor costs.
Under the Labor Standards Act, employers who hire employees must shoulder half of the four major social insurance contributions, provide severance pay, compensate for annual leave and overtime, and cannot dismiss staff arbitrarily.
By labeling workers as freelancers on paper, companies evade these obligations. The ministry plans to assess \"substantial employee\" status based on the actual nature of the work rather than contractual titles, and to restore rights lost to sham contracts.
Protections will also be strengthened for workers who have fallen outside industrial safety nets — including delivery couriers, driving-for-hire workers and subcontracted labor.
Even when these workers face high accident risks, employers have often shirked responsibility by pointing to their \"freelancer\" paperwork. The government says it will hold employers meaningfully accountable.
'It's a lump-sum salary, so no overtime pay?' — crackdown on unpaid overtime
Officials also identified abusive use of lump-sum salary schemes — a modern form of unpaid labor — as a priority for enforcement.
The lump-sum salary system was designed for special roles where calculating hours is genuinely difficult. But some unscrupulous employers have twisted it into an excuse to say overtime is already included in monthly pay and deny extra compensation.
To stop the practice of employees working late-night hours without additional pay, the government plans to reform rules so employers compensate precisely for hours worked. Because lump-sum salary abuse often leads to wage arrears, enforcement and penalties will be significantly tightened.
Authorities will also raise penalties for misleading job postings that deceive job seekers.
They plan to curb bait-and-switch hiring practices in which ads promise a monthly salary of 3,000,000 KRW (about $2,250), a five-day workweek and full-time status, only to slash base pay or demand freelance contracts after hiring.
The measures discussed will be reviewed in consultation with relevant ministries, including the Office for Government Policy Coordination, and finalized later this month.
Labor Minister Kim Young-hoon said, \"Workplaces — where people should find happiness — must not become sites of misery caused by loopholes and unfair practices.\" He pledged proactive legal amendments and institutional reforms.
