Employment Insurance System

of Korea
Dec. 2014

Dr. Sang Hyon Lee

Korea Employment Information Service (KEIS)

Job Matching Service Vocational Counseling,

Skill Development, Youth Employment Subsidy, Internship
University Job center, Job Success Package Program
2
<Provided by Employment Insurance>

Contents
I

Introduction

II Process of Introducing Korean EI

III Characteristics of Korean EI

I
Employment Insurance Programs
V
V Coverage and Financing
V
Delivery of EI Programs : PES
I
Lessons to Developing Countries

Introduction

(cont.)

1. Objectives of UI/EI
Objectives and Effects
- Maintain standard of living for the unemployed
- Social justice for vulnerable groups in the turbulent economy
- Provide time to find new jobs
- Assistant unemployed workers find jobs
- Stabilize economy during recession, bigger economy by providing
money to spend for the unemployed
- Decrease social costs of unemployment
- Promote better utilization of labor force
- Encourage employers to stabilize employment
- Help employers maintain a skilled work force
Give a chance to develop employment services and vocational traini
ng delivery system
4

I Introduction
2. Development of Unemployment Compensation
Voluntary Unemployment Funds (by trade unions and employers) : 19th century
Voluntary Unemployment Insurance : France(1905), Denmark(1907),
Norway(1909), Netherlands(1916), Finland(1917), Sweden(1934), etc.
Compulsory Unemployment Insurance (social insurance system): U.K.(1911),
Austria(1920), Germany(1927), etc.
Transition from voluntary to compulsory unemployment insurance : since 1920s
Unemployment Insurance + Unemployment Assistance (dual system) : in
European countries after the World War II (welfare states)
Employment Insurance : Germany(1969), Japan(1975), Austria(1977), Korea
(1995), Canada(1996)
Unemployment Insurance : focusing on the Unemployment Benefit (UB)
Employment Insurance : UB + Active Labor Market Programs
One-stop service 2001 UK, 2008 France, 2009 Netherland, 2013 Ireland
5

Introduction

(cont.)

3. Types of Social Safety Nets for the Unemployed

Type : UB (UI/EI) (extended UB) Public Assistance (PA)
U.S.A., Korea, Canada, Japan, Denmark, Belgium, Bulgaria, Luxembourg, Poland,
Russia, China, etc.

Type II : UB (UI/EI) Unemployment Assistance (UA) PA

U.K., Germany, France, Spain, Italia, Austria, Sweden, Finland, etc.

Type III : UA PA
Australia, New Zealand, etc.

Type IV : Unemployment Insurance Savings Account (UISA) PA

Chile, Brazil, Colombia, Ecuador, Panama, Peru, etc.

Introduction

(cont.)

3. Comparison of Unemployment Compensation Programs

UI/EI

UA

UISA

PA

Coverage

Employees

All People

Employees

All People

Financing

Contributions

Tax revenue

Savings

Tax revenue

Level of benefit

Relatively high

Relatively low

Depends on
amount of savings

Low

Duration of
benefit

Relatively short

Long

Short

Long

Eligibility

Work-test

Income-test
& work-test

Balance of
UISA

Income-test

Work
Disincentive

Weak

Strong

None

Strong

Introduction

(cont.)

5. Coverage of UI/EI
Employees
Issues of Exclusions
- Employees in very small firms : employment/wage record keeping
- Self employment : moral hazard, employment/wage record keeping
- Agricultural labor and domestic services : moral hazard, employmen
t/wage record keeping
- Public servants : legal employment protection
- Daily workers : moral hazard, employment/wage record keeping
- Part-time workers : employment/wage record keeping
- Migrant workers : little chance of benefits

 Businesses and workers excluded from coverage of Korea

- Unincorporated businesses with four or fewer ordinarily

employed workers in the agricultural, forestry, fishing or
hunting industries
- Construction work carried out by those other than housing
constructors, whose total cost is less than 20 million KRW or a
total floor area of 100m2
- Domestic service(housekeeper, maid)
- Age of 65 or over (except for employment security and
vocational skills development programs)
- Monthly working hours are less than 60 hours (including
those whose weekly working hours are less than 15 hours)
- Public officials and those subject to the Private School Teachers
Pension Act (Optional coverage for special public officials)
- Special postal workers
- EI (unemployment benefits) for self-employed people took
effect on January 22, 2012.

Employment Insurance Coverage

Business

Insured
Gender

2004

Total

Created

Loss

Total

1,002,638

472,19
0

310,41
8

Aquisition

Loss

2,524,33
4

3,734,93
7

3,334,90
9

Male

Female

7,481,618

4,957,284

2005

1,148,474

607,76
6

417,03
3

7,965,597

5,241,103

2,724,49
4

4,232,22
8

3,685,37
8

2006

1,176,462

689,73
4

659,59
3

8,436,408

5,510,717

2,925,69
1

4,397,63
2

3,860,13
9

8,941,639

5,773,949

3,167,69
0

4,609,51
2

4,025,28
5

3,334,75
1

4,802,26
6

4,409,95
0

2007

1,288,138

778,96
7

652,45
6

2008

1,424,330

874,19
9

757,31
7

2009

1,385,298

826,90
7

880,93
0

9,653,678

6,083,853

3,569,82
5

5,177,05
0

4,722,91
5

2010

1,408,061

811,23
1

807,48
7

10,131,058

6,310,423

3,820,63
5

5,601,39
3

5,112,33
6

2011

1,508,669

874,44
3

803,53
6

10,675,437

6,569,800

4,105,63
7

5,946,96
0

5,392,16
9

957,42 891,16
4,367,65
50,000,000,
No 11,152,354
of Employed6,784,700
25,979,000,
0
1
4
No of Unemployed 912,000

6,045,98
6

5,590,64
2

6,075,72
8

5,616,44
5

9,271,701

5,936,950

Total 1,610,713
Population
2012
2013

1,747,928

975,72
4

872,90
1

10
11,571,213

6,971,699

4,599,51
4

Introduction

(cont.)

6. Eligibility of Unemployment Benefit

Employment requirements
- Base period :18 months
- Insured employment : 180 days
Waiting period
Be able to work and be available for work
Actively seek work
Be free of any disqualifications : For how long suspension?
- Voluntary leaving work without good causes
- Discharge for misconduct
- Refusal of suitable work without good causes
- Refusal of suitable job placement services, vocational training arran
gement, job consulting services, etc. without good cause
11

Introduction

(cont.)

7. Amount and Duration of Unemployment Benefit

Replacement rate:
- Usually 50-80% of previous earnings with minimum and maximum
- Fixed amount in UK
Duration of UB: usually 6~12 months
Extended UB
- For high unemployment rate period (nation wide and/or regional basi
s)
- For encourage vocational training
- For considering individual circumstances
12

Introduction

(cont.)

8. Financing of UI/EI
Contribution : Employers, employees, or both; and/or government
Contribution rate of each EI program :
equilibrium contribution rate + (how much?)
Optimal amount of reserved EI Fund :
prepare for a period of great recession and high unemployment rate
Experience rating system

13

Premium rates
- EI premium rates are divided into the rate for
employment security and vocational skills development
programs and the rate for
unemployment benefits.
- In July 2013, the rate for unemployment benefits was
raised from 1.10% (0.55%, each from employer and
employee) to 1.30% (0.65% each from employer and
employee).

14

Introduction

(cont.)

9. Administration of UI/EI : PES

Organization of Public Employment Service (PES)
- Centralized vs decentralized
- Governmental vs Non-governmental public organization
- Partnership with other ministries and municipal governments
- Tripartites
One-stop service Employment Insurance and EI
No of officers for administration
Service Manuals and IT systems
15

Introduction

(cont.)

10. Preventing Frauds of UI/EI Benefits

Government policies on EI programs and preventing frauds
Infrastructure for finding frauds and incorrect payment :
Fraud Investigation System, data-matching system, development of risk profiling
to identify the types of people, accurate measurement of fraud amount, etc.

Fraud Reducing System within EIS : experiencing rating system

Level of Sanction on the Frauds
Culture and peoples attitude toward frauds
Professionalism of PES staffs
Location of Fraud Investigation Offices : within PES office or
outside of PES office
16

II Process of Introducing Korean EI

1. Attempt to introduce UI in 1982
In 1982, the Ministry of Labor asked the Economic Planning Board to
introduce UI(unemployment insurance).
Situation
High unemployment rate after the second oil shock and political turmoil after
assassination of President Park in 1979. (unemployment rate : 6.5% in 1981)
low income level (PCI : $1,824 in 1982)

A special report on UI to the minister of EPB in 1982

It is not a time to introduce UI.
When Korea introduces UI in the future, it would be better to combine
active labor market programs with unemployment benefit.
Employment Insurance (EI) System
17

II Process of Introducing Korean EI (cont.)

2. Attempt to introduce EI in early 1990s
In 1991, when Korean government designed the 7th Five-Year Economic and
Social Development Plan(1992-1996), the Ministry of Labor, Trade Unions,
and some scholars asked to introduce EI.
Situation
Democratization of Korea by 6.29 Declaration in 1987.
Expulsion of welfare demand and trade unions asked to introduce EI.
PCI:$5,886 in 1990

Pros for EI
It is time to harmonize economic development and social development.
If Korea designs its EI carefully, it is possible to minimize the side effects of UB.
It is wise to prepare the social safety net for unemployment when unemployment rate
is low. Korea may experience unemployment probrem in the near future.
18

II Process of Introducing Korean EI (cont.)

2. Attempt to introduce EI in early 1990s (cont.)
Cons against EI
Unemployment benefit could reduce work incentive of the employed and thereby
increase the unemployment rate.
Korea still has to concentrate its energy on economic development.
Giving cash benefits to the unemployed could reduce dynamic energy of Korean
economy and could result in disease of advanced countries.

On August 23, 1991, Korean government decided to introduce EI during

the period of the 7th Five-Year Economic and Social Development
Plan(1992-1996).
In general election in April 1992 and presidential election in December
1992, each political party and presidential candidate promised to introduce
EI.
In 1993, new president Kim Young-Sam promised to introduce EI in 1995
in his Five-Year Plan for New Economy.
19

II Process of Introducing Korean EI (cont.)

3. Designing Korean EI
On March 9, 1992, Korean government decided to ask Korea Labor
Institute (KLI) to design the Employment Insurance model for Korea.
Launching the Employment Insurance Research Commission (EIRC)
To design Korean EI, KLI launched EIRC, composed of 30 scholars,
in May 18, 1992.
Representatives of employers, employees, and government participated
in the meetings of EIRC as observers.

EIRC held workshops and seminars more than 40 times and published
9 reports.
On May 18, 1993, EIRC submitted its final report to the government.
A proposed EIS for Korea
20

II Process of Introducing Korean EI (cont.)

4. Legislation of the Employment Insurance Act
Ministry of Labor made out a draft of Employment Insurance Bill in
June 1993 based on the final report of the EIRC.
The draft was amended through public hearings.
Government submitted the Employment Insurance Bill to the National
Assembly in October 1993.
The National Assembly passed the bill unanimously on December 1,
1993.
Korean Employment Insurance Act was enforced from July, 1, 1995.
21

II Process of Introducing Korean EI (cont.)

5. Hot Issues in Designing Korean EIS
1) Unemployment Insurance or Employment Insurance?
Some scholars urged a traditional UI system.
Majority of EIRC members, the government, labor and management
agreed that EI will be the right direction for minimizing the side effects
of UB and for coping with risks in labor market transition.

EI = UI + ALMP (Active Labor Market Programs)

EIRC recommended EI, instead of UI.

Korean government and the National Assembly chose EI.
22

II Process of Introducing Korean EI (cont.)

5. Hot Issues in Designing Korean EIS (cont.)
2) Coverage
EIRC : employees in enterprises with 10 employees or more in 1995,
and all the employees regardless of firm size from 2000.
Ministry of Commerce and Industry : 150 employees or more
Joint recommendation of the representatives of employers and
employees in April 1994 : 30 employees or more
Coordination by Economic Planning Board : 30 employees or
more for UB (10 from Jan 1, 1998) and 70 employees or more for the
active labor market programs (50 from Jan. 1, 1998)
23

II Process of Introducing Korean EI (cont.)

5. Hot Issues in Designing Korean EIS (cont.)
3) Relationship between the Job Skill Development
Program and the Training Levy System (TLS)
Abolish the TLS
and introduce
training incentive
system within
the framework
of EI

EIRC and Employers

Continue to keep
the TLS
even after
introducing EI

Ministry of Labor

Keep the TLS

only in the enterprises
with 1,000 employees
or more

Coordination by EPB

TLS was implemented for the enterprises from 1975 with 150 employees or
more and was abolished from Jan. 1, 1999.
24

II Process of Introducing Korean EI (cont.)

5. Hot Issues in Designing Korean EIS (cont.)
4) UB and the Legal Severance Payment System

Abolish
the legal severance
payment system
when Korea
introduces EIS

EIRC and Employers

Keep
the legal severance
payment system
regardless of EIS

Ministry of Labor,
Trade Union
25

Continue
to study for reforming
the legal severance
payment system

Coordination by EPB

II Process of Introducing Korean EI (cont.)

5. Hot Issues in Designing Korean EIS (cont.)
5) Administration Body
a semi-autonomous public
employment agency for
administration of EI programs and
development of PES

Local labor offices (46) should administer EI

programs after expanding them.

EIRC

Ministry of Labor(MOL)

EPB

Expanding government organization and its staffs is against national policy for the
small government. A public employment agency for EI and PES may be possible.

EPB and MOL agreed to transfer the administration of the Industrial

Accident Compensation Insurance(IACI) to the Workers Welfare
Agency, and to utilize the staffs of IACI for implementing EI.
26

II Process of Introducing Korean EI (cont.)

5. Hot Issues in Designing Korean EIS (cont.)
6) Financing of EI administration costs and PES
- Direct program expense
: EI contributions by
employees and employers
- Administrative expense
: government

EIRC

Government cannot support

the administrative expense.
Costs for development
of infrastructure of EI
should be financed by
EI contributions.

EPB

All of the
administrative expense
should be financed by
general budget.

Ministry of Labor

The debate on financing EI administration costs and PES has delayed the
development of PES until now.
27

II
Characteristics of Korean EIS
I
1. EI : Combination of Active Labor Market Programs
and Unemployment Benefit (UB) Scheme
Institutionalization of preventive measures against unemployment and
diverse risks in labor market transition.
: Employment Stabilizing Program, Job Skill Development Program

Employment Insurance System (EIS)

2. Built-in Mechanism for Minimizing the Side-effects of UB

Tight requirements for UB : No UB for the voluntarily unemployed
Relatively low replacement rate (50%)
Relatively short period of UB (90~240 days)

28

II
Characteristics of Korean EIS (cont.)
I
3. Built-in Mechanism for Activating UB Recipients
Incentives for active job search
Early Reemployment Allowance
Nationwide Job-seeking Allowance
Moving Allowance

Incentives for active participation in vocational training for the unemployed

Assistance for vocational training the unemployed
Extended Training Allowance : Extend UB for 2 years
Vocational Training Promotion Allowance for the UB recipients

Sanctions on lazy job search

Fixed-term duration of UB after layoff : 12 months
Suspension of UB on refusal of suitable job placement service,
vocational training order, etc.
29

I
Employment Insurance Programs
V
The purpose of employment insurance is to seek
to prevent unemployment, promote employment
and develop and improve the vocational skills of workers,
to strengthen the nations vocational guidance
and job placement capacity and to stabilize the livelihood of workers
and promote their job-seeking activities by granting necessary benefits
when they are out of work,
thereby contributing to the economic and social development of the nation.
(Employment Insurance Act, Article 1)

30

- Four main programs of EI

- Employment Security Program
- Vocational Skill Development Program
- Unemployment Benefits
- Job Matching Services and Career
Counseling

31

Income and Expenditure of Employment Insurance

(thousand USD)

2013
Income

2014

9,541,136

11,291,046

Employment Policy

4,244,996

4,520,566

Skill Development

1,340,463

1,458,823

866,337

958,608

3,000

2,850

104,342

107,299

Reservation Fund

2,981,998

4,242,900

Expenditure Total

9,541,136

1,1291,046

Expenditure

Employment Equality
Disability Employment Promotion
Administration

32

Reservation Fund Employment Insurance

(Million USD)

2008

2009

2010

2011

2012

Reservation
Fund

82,11
3

62,46
4

50,17
4

46,81
6

53,07
8

Earnings
rates

2.02%

14.80
%

9.36%

1.20%

4.91%

33

I
Employment Insurance Programs (cont.)
V
1. Employment Stabilization Program (ESP)
Objectives of ESP : Encourage enterprises

to create more and better jobs,

to minimize unemployment in the business restructuring process,

to hire more vulnerable groups, and

to improve better and quick job matching

ESP is composed of five sub-programs:

1) Employment Creation Assistance
2) Employment Adjustment Assistance
3) Regional Employment Stimulation Grants
4) Employment Promotion Assistance
5) Labor Market Information and Job Placement Services
34

Employment Security Programs

(thousand USD)

Employer subsidies
Employment
Adjustment
Subsidy
Employment

Stimulation

Subsidy
Employment

Creation

subsidy

Employment

Security

Subsidy

Construction

worker

subsidy
SME Youth Internship
Occupational Information
Labor market information
Employment Projection
Employment Systems

12

13 Plan

14 Plan

33,643

53,243

49,998

47,892

39,057

30,487

22,091

47,662

113,203

15,024

11,414

1,000

17,033

21,885

14,283

63,082
5,805
2,867
1,286
27,589

87,385
6,024
3,566
1,286
35
37,957

108,441
5,941
2,962
1,566
30,379

I
Employment Insurance Programs (cont.)
V
1. Employment Security Program (ESP)
1.1. Employment Creation Assistance
To encourage firms to create more jobs, this program subsidizes employers
who have increased the number of employees by reducing working hours and
sharing jobs, reforming shift system, improving working conditions, creating
part-time jobs, etc.

1.2. Employment Adjustment Assistance

To minimize unemployment, this program subsidizes employers who maintain
employment in spite of temporary managerial difficulties by taking proper
measures for employment maintenance such as a partial suspension of
business, a leave of absence, job transition training, relocation of employees
and supplying outplacement services in an effort to minimize unemployment
and help people to find new jobs.
36

Employment Creation Assistance

The program subsidizes employers who have increased the number of
employees by reducing working hours, reforming shift system,
improving working conditions, hiring highly skilled workers.
(thousand USD)

Total

Work

2012

together

Subsidy
Venture Subsidy
Hiring professional
Employment
environment
Improvement
others

2013 Plan
2014 Plan
Plan
Addition

22,091

47,662

47,662

113,203

2,789

12,888

12,888

78,316

1,523

3,030

3,030

3,650

2,975

7,387

7,387

3,823

12,756

22,685

22,685

25,788

2,228

1,672

1,672

1,626

37

Employment Adjustment Assistance

The Employment Adjustment Assistance program is intended to
minimize unemployment by subsidizing employers who make efforts to
maintain employment in spite of temporary managerial difficulties
Employment
Subsidy level
Limit
Upper limit of subsidy
Duration
Criterion Time
Stock of
production
Production
Reason
ing for
Adjust
ment

Sales

sustain
2/3(priority )or 1/2
of wage
No limitation
40,000 won/day
180 days per year
1 month before
Increased more
than 50%
Decreased more
than 15%
Decreased more
than 15%

Temporary shutdown subsidy

Lower than 50% of wage
Committee decide
40,000 won/day
180 days per year
1 month before
Increased more than 50%
Decreased more than 30%
Decreased more than 30%

Trend of sales and

production and

Keep declining

Keep declining

(more than 20%)

sales
Local market condition

Decided by PES

Decided by PES officer

officer

(Shut down) Approved by labor committee

Pre requirement

Non

(Vacation)
shutdown

More

than

38

months

of

I
Employment Insurance Programs (cont.)
V
1.3. Employment Promotion Assistance
To promote employment of the vulnerable groups, this program offers wage
subsidies to employers who have hired the vulnerable unemployed, such as
the long-term unemployed youth, the old, handicapped.
This program also offers wage subsidies to employers who continue to
employ or re-employ workers after reaching their mandatory retirement age,
and employers who extend the mandatory retirement age of the company to
longer than age 57 and continue to employ workers beyond the mandatory
retirement age.
To stabilize employment by flexible wage system, this program offers wage
compensation to employees who have accepted the Wage Peak System.

39

I
Employment Insurance Programs (cont.)
V
1.4. Regional Employment Stimulation Grant
This program is intended to expand employment opportunities by subsidizing
employers who created employment in the designated regions where
employment conditions are extremely serious.

1.5. Labor Market Information and Job Placement Services

Employment information on job offers, job seekers, training, etc., offering
vocational guidance including vocational and training counseling, etc., providing
job placement services, building the foundation for employment security and
vocational skills development and assigning professional manpower needed.

40

I
Employment Insurance Programs (cont.)
V
2. Job Skill Development Program (JSDP)
The JSDP 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, employment stability,
marketability of workers and firms competitiveness.
JSDP is composed of three major sub-programs:
1) Vocational Training Assistance to Employers
2) Vocational Training Assistance to Employees
3) Vocational Training Assistance to the Unemployed
41

Skill development
Vocational skills development
program
Training for
the employed
(upgrade training)

Employer
Subsidy
Training

1. Employer subsidy Training

2. SME Target subsidy
- National Consortium
Training
- SME Core competency
- Learning organization
- Systemic OJT

Employee
Subsidy
Training

1. Individual Training
Account
2. Study and training
loan

Training for the

unemployed
(initial training)

Training for
national key
& strategic
industries

Vocational
training for
job
seekers

Local
Governments
Vocational
training
for the
unemployed
in farming &
fishing
communities

Public
vocational
training
(Polytechnic
colleges/KUT
E)
(training for
industrial
workforce)

- Budget for skill development in 2014 is 1.4 billion USD

12

13 Plan

14 Plan

1,079,823

1,340,463

1,458,823

Employer subsidy

325,459

348,914

399,554

Employee and unemployed

217,236

277,930

285,719

167,735

200,748

211,487

109,800

201,878

239,670

4,932

8,014

8,184

33,004

63,691

129,781

102,600

106,388

113,748

Korea Tech University

30,653

33,769

33,537

Study and training loan

87,973

96,550

35,643

431

2,581

1,500

Total

National

key

&strategic

industries
SME skill development subsidy
other subsidy
HRD Korea
Polytech University

Self-employed subsidy

Employer subsidy
2009

2010

2011

2012

Total

50.7

41.9

31.3

31.0

Less than 300

27.2

25.3

21.1

18.8

More than 300

115.1

87.0

59.5

62.0

87.9

61.7

38.4

43.2

GAP(B-A)

- Support for training of prospective and incumbent employees

The government supports 'initial training' for prospective employees
and 'upgrade training', 'training on paid leave' and 'job skills upgrade
training' for incumbent employees. Large corporations take 62% of
training subsidy
- Irregular workers are 32.3% of total workers, however, participation
of employer subsidy training is 1-2%

Total (a)
Irregular (b)

Portion (b/a)

08

09

10

11

12

3,663

4,516

3,775

3,015

3,190

38

60

77

54

44

1.0

1.3

2.0

1.7

1.3

2009

2010

2011

2012

136,521

209,647

137,235

84,508

Irregular
workers
Participants

- Need to develop proper policies to support for the participation

of training program of irregular workers
- Contracting out training programs
Type
Public training providers

Public organizations(35)

Polytech(34), KUT(1)

Local government(5)
Government agencies(36)
Private training providers
(7,014)

Training corporations(55)
Private training
institute(2,655)
Providers designated by
MOEL(874)
Others(3,430)

Ministry of Justice(36)

I
Employment Insurance Programs (cont.)
V
2.1. Vocational Training Assistance to Employers
Vocational training assistance to employers encourages employers to
train their employees by subsidizing training costs.
The amount of training subsidy depends on firm size, types of training such
as off-JT, OJT, e-learning, blended learning, etc. and occupations of
training.
The training for atypical workers such as daily workers, agent workers,
part-time workers and fixed-term employees shorter than one year is
applied to prime rate of training subsidy to employers.
An employer or an association of employers that install vocational training
facilities or purchase training equipment may loan up to 90 percent of the
total investment amount for vocational training facilities and equipment with
a ceiling of 6 billion Korean won as a Loan for Training Facilities.
46

I
Employment Insurance Programs (cont.)
V
2.2. Vocational Training Assistance to Employees
This is direct supporting program to employees who participate in training
programs.
Insured employees in SMEs, and fixed-term employees, part-time
workers, agent workers and daily workers are entitled to award vocational
training costs when they take vocational training programs to improve
their job competency with their own expenses. (ceiling : 1 m.
won/person/year)
When insured employees take a vocational training with their own
expenses, they may loan training fees up to 3 million Korean won.
Insured fixed-term employees, part-time workers, agent workers and daily
workers may take free vocational training programs with a Individual
Training Account.
47

I
Employment Insurance Programs (cont.)
V
2.3. Vocational Training Assistance to the Unemployed
When training institutions train young unemployed persons for key
industries and national strategic occupations, they are awarded training
costs, and the trainees are awarded training allowances.
Korea introduced the Individual Training Account system in 2009.
This system issues training account to the unemployed after job and
training counseling, then the unemployed persons with training accounts
may choose training institutions suitable to their training purposes.
The maximum amount of each training account is two million Korean won.
The trainees have to pay 20~40% of the total training costs, and other
costs are paid by the training account.
48

I
Employment Insurance Programs (cont.)
V
3. Unemployment Benefits
Unemployment Benefits are composed with a Job-seeking Allowance
(JSA) and Employment Promotion Allowance (EPA).

3.1 Job-seeking Allowance (JSA)

Qualifications for JSA
1) The claimant's insured employment period should be at least 180 days out of
the 18-month base period before the day of job loss.
2) The reasons of separation should be eligible for the JSA
3) The claimant must register at the public employment office as a job seeker.
4) The claimant is out of work but remains willing to and able to work, and is
actively seeking new employment.
5) The reasons for separation should not disqualify the claimant from receiving
unemployment benefit, such as voluntarily leaving a job without good cause,
discharge for misconduct, etc.
49

I
Employment Insurance Programs (cont.)
V
3.1 Job-seeking Allowance (JSA) (cont.)
Ristrictions on JSA
1) A claimant who voluntarily leaves his/her job without good cause is disqualified
from JSA. Good cause includes health conditions, working conditions,
employment terms, managerial situation in the company or other similar
circumstances.
2) A claimant who lost his/her job owing to serious misconduct on the job is
disqualified from JSA.
3) If a claimant has refused, without good cause, to apply for suitable
employment or refused job placement services offered by the public
employment office, he/she is to be suspended from receiving JSA for two
weeks.
4) If a claimant has, without good cause, refused or failed to avail himself/herself
of a reasonable opportunity to receive vocational training suggested by the
public employment office, JSA is suspended for four weeks.
50

I
Employment Insurance Programs (cont.)
V
3.1 Job-seeking Allowance (JSA) (cont.)
Waiting period of JSA : 7 days
Replacement Rate of JSA : 50% of Previouse wage
- max/day : 40,000 KRW(40 USD)
- min/day : 90 % of the hourly minimum wage 5,210 KRW(5 USD)

Duration of JSA
(Unit: days)
Insured Employment Period

Age

Less than
1 year

1-3 years

Less than 30 years

90

90

90

150

180

30-50 years

90

120

150

180

210

50 years or older, or
disabled

120

150

180

210

240

51

3-5 years 5-10 years

10 years or
more

3.1 Job-seeking Allowance

(thousand USD)
EI Benefit

Applied
Qualified

Total
Payment

No

2004

471,542

467,730

707,432

2005

565,753

562,524

812,768

2006

612,667

609,691

943,542

1,448,30
6
1,751,97
4
2,074,00
4

1,009,18

2,434,03

1,162,53

2,865,25

Payment

No
619,420
706,645
816,692

2007

687,765

2008

838,783

2009

1,073,989

1,068,389

1,528,40
7

4,116,40
4

1,299,56
7

2010

978,575

973,026

1,336,43
9

3,686,53
0

1,278,10

3,561,35

2011
2012

906,422
901,588

685,024
835,140

902,362
898,054

6
1,267,42
7
1,290,68

ERB

JSA

3
3,676,66
6
3,883,50

855,749

1,327,38
4
1,602,87
5
1,834,03
9
2,117,16

Sick Leave
Payment

No

81,419

114,859

6,340

6,025

99,925

143,209

5,801

5,839

121,232

234,116

5,179

5,785

No

Payment

147,688

310,475

5,307

6,326

174,403

391,613

5,436

6,867

3,589,87
2

221,389

517,083

6,585

8,921

1,236,98
5

3,477,98
7

91,864

198,663

6,864

9,386

1,163,73

3,337,08

107,472

214,555

6,353

9,296

114,006

234,374

6,816

10,429

981,985

2
1,146,10
6
52
1,162,38

8
2,466,52
1

0
3,431,42
4
3,611,41

I
Employment Insurance Programs (cont.)
V
3.1 Job-seeking Allowance (JSA) (cont.)
Extension of JSA
Training Extended Benefit
When a claimant receives vocational training, as ordered by the PES office, the
duration of JSA can be extended up to 2 years for the training period.
The daily amount of the Training Extended Benefit is equal to JSA.

Individual Extended Benefit

When the PES office recognizes that it is extremely difficult for a claimant to be
reemployed within a short period of time, and the claimant has difficulties in
maintaining livelihood, the duration of JSA can be extended up to 60 days.
The daily amount of the Individual Extended Benefit is 70 percent of JSA.

Special Extended Benefit

Special Extended Benefit is enforced only when the unemployment rate of the last three
months is very high (greater than 6.0%).
The duration of JSA for all claimants is extended for 60 days during the specified period.
The daily amount of the Special Extended Benefit is 70 percent of JSA.
53

(thousand USD)
2010
No

2011

Amount

No

2012

Amount

No

Amount

Training Extended
Benefit

40

118

23

77

19

70

Individual Extended
Benefit

4,615

6,816

2,671

4,066

1,575

2,496

54

I
Employment Insurance Programs (cont.)
V
3.2 Employment Promotion Allowance (EPA)
1) Early Re-employment Allowance (ERA)
The ERA is a bonus system to encourage JSA claimants speedy reemployment in stable jobs.
1) The claimant must find new job before his/her remaining duration of JSA is shorter than 30 days.
2) The claimant must be reemployed in the new job for more than six months.
3) The new job must not be related with the previous employer or anyone closely related to
the previous employer.
4) The claimant must not have received ERA during the recent two years prior to the first day
of new employment.

The amount of ERA is 50% of the claimant's remaining amount of JSA.

(For those whose age are 55 or older and for the handicapped persons, the amount of
ERA is 2/3 of the claimant's remaining amount of JSA.)
55

I
Employment Insurance Programs (cont.)
V
3.2 Employment Promotion Allowance (cont.)
2) Vocational Training Promotion Allowance (VTPA)
The VTPA is a supplement to JSA to facilitate taking vocational training of
JSA recipients.

3) Nationwide Job-seeking Allowance (NJSA)

The NJSA assists extensive nationwide job search efforts of JSA recipients
by subsidizing transportation and lodging costs for job interviews.

4) Moving Allowance (MA)

The MA subsidizes the moving costs incurred during relocation for new
employment or vocational training.
56

3.2 Employment Promotion Allowance (cont.)

(thousand USD)
2011

2012

No

Amount

No

Amount

Early Reemployment
Allowance

107,471

214,555

114,006

234,374

Skill Development
Allowance

14

12

Nation Wide Job

Searching Allowance

23

0.4

Moving Allowance

226

203

212

255

57

I
Employment Insurance Programs (cont.)
V
4. Maternity & Parental Leave Benefits
1) Maternity Leave Benefit
The salary during the maternity leave (90 days) is paid for 90 days for
employees in SMEs and 30 days for employees in large companies as a
Maternity Leave Benefit.
The maximum amount is 1,350 thousand won per month and the minimum is
equivalent to minimum wage.

2) Parental Leave Benefit

Parental Leave Benefit, 50% of wage, is paid for workers who temporarily
leave their jobs to take care of children aged one or under.
To the employers, the Grant for Child Care Leave is awarded to
employers who have granted such a leave for more than 30 days.
58

2) Maternity Leave Benefit

(thousand USD)
No

Amount

2003

32,133

33,522

2004

38,541

41,610

2005

41,104

46,041

2006

48,972

90,886

2007

58,368

132,412

2008

68,526

166,631

2009

70,560

178,477

2010

75,742

192,564

2011

90,290

232,915

2012

93,394

241,900

59

2) Parental Leave Benefit

Number
Total

Female

Male

Amount
(1000 USD)

Benefit/M

2003
2004
2005
2006
2007
2008

6,816
9,303
10,700
13,670
21,185
29,145

6,712
9,122
10,492
13,440
20,875
28,790

104
181
208
230
310
355

10,576
20,803
28,242
34,521
60,989
98,431

300 USD
400 USD
400 USD
400 USD
500 USD
500 USD

2009

35,400

34,898

502

139,724

500 USD

2010

41,732

40,913

819

178,121

500 USD

2011

58,134

56,732

1,402

276,261

40% wage

2012

64,069

62,279

1,790

357,798

40% wage

60

V Coverage and Financing

1. Coverage Change
Unemployment

Employment Stabilization Program

Benefit

& Job Skill Development Program

From July 1, 1995

30 employees or more

70 employees or more

From January 1, 1998

10 employees or more

50 employees or more

From March 1, 1998

5 employees or more

50 employees or more

From July 1, 1998

5 employees or more

5 employees or more

From October 1, 1998

1 employee or more

1 employee or more

61

V
Delivery of EI Programs : PES
I
1. Public Employment Service Network of Korea

Regional Employment
and Labor Office (6)

Job Center (83)

Planning &
Management
Division

Employment
Support
Division I, II

Job Skills
Development
Division

Enterprise
Support
Division

Job matching,
Job counseling,
Unemployment
Benefits

Supporting
vocational training

Subsidies,
Employment
Permit for
migrant workers
62

Local
Cooperation
Division
Development of
local partnership

Benefit Fraud
Investigation
Division

Staffs of PES( 12)

Government Officers

Total

Sub
Total

4,916

3,068

Officers

Counselors

Statisticians

1,823

1,189

56

Sub
Total

537

Permanent Contractors

Contractors

Counselors

Officers

Counselors

339

198

1,311

* EI management approximately 1,000 vocational counselors are required

Efficiency of Korean PES

Officers

No of Job Placements

5,000

1.5 Million

Japan
Hellowork

28,000

1.9 Million

France
Pole Emploi

56,000

2.5 Million

Germany

110,000

2.5 Million

Korea
Goyong Center

Bundesagentur fur Arbeit

* Goyong means employment

64

Well Developed
Job Matching
Website
Makes PES
Efficient

V
Delivery of EI Programs : PES (cont.)
I
2. Reforming Public Employment Service
Korean government has reformed PES since 2005.
Basic Directions of PES Reform
Modernization of local job centers
Individualized tailored service for vulnerable groups : customer-focused,
case management approach, streamlining services through integration of
programs
Establishment of one-stop service delivery system, closer linkage between
employment services and welfare services
Development of local partnership in employment and welfare services
Strengthen infrastructure for better employment information services: KEIS
Activation for welfare recipients
Performance-based approach to services
65

 Lessons to Developing Countries

1. Prerequisites for Introducing EI
National consensus on the necessity of EI
Sound economic development and industrialization
Development of vocational training system
Development of public employment service
Research infrastructure on the labor market and EI

66

 Lessons to Developing Countries (cont.)

2. Lessons from Korean EI
Built-in measures to prevent the side effects of EI are important in
persuading people opposing EI and in successful development of EI.
Short period of UB (90~240 days), Early Reemployment
Allowance and low level of benefit
Financial stability of EI fund is important for overcoming
unexpected high unemployment, and unemployment benefit scheme
should be designed to guarantee financial stability of EI fund.
Development of labor market information system is essential
Coordination with Active Labor Market Programs is must
Record-keeping system of employment and wages is very
important for effective coverage.
Initiative body and strategy for introducing EI are important.
EI is not a perfect safety net for the unemployed. Complementary
67
systems are necessary.

 Lessons to Developing Countries (cont.)

3. Lessons from Korean PES
One-stop service center is effective in job matching and
activating people. Onestop service from the start : Combination
of Active Labor Market Programs(Employment Security Program,
Vocational Skill Development Program) and Unemployment
Benefit
Individualized tailored employment and welfare services are
useful.
Development of employment information service and integration
of on/off-line service institutions are essential. Exceptional IT
systems required (Universial Credit, Ohbama Care)
Central-central, central-local, public-private partnership is
important.
Profiling of job-seekers are necessary for focusing more
vulnerable groups.
68

2. Lessons from Korean EI

- Needs more public employment service capacity(activation)

Workfirst policy(5,000 > 20,000), Employment is the responsibility of

the society
- Budget balance more budget for the employment
service>training>employer subsidies
- Use employment security programs only for the crisis
(PLMP, Deadweight loss, substitute effect, Fraud)
- More involvement of trade unions in the decision making
- More partnership and contracting out

69

WAPES
WAPES (the World Association of Public Employment Services) i
s a global association of Public Employment Services.
100 Public Employment Services are members
http://www.wapes.org
Workshops on various PES subjects
Dynamic of Innovation and Idea Management in PES
PES and fight against poverty
Models of PES: Centralized and Decentralized
Youth & Social Entrepreneurship: the role of PES
Training Programs
Bilateral Cooperation
Thailand, Japan, Korea, Mongol, Viet Nam, Cambodia, Parkistan,
Australia, China, Philippines
70

Thank you
for your attention!

71