Limitations and Exceptions to the Employment Period of Fixed-Term Employees

Bongsoo Jung, Korean Labor Attorney / KangNam Labor Law Firm

I. Introduction

In 2026, Company A had a fixed-term employee who had entered into two consecutive one-year employment contracts. As the expiration date of the second contract approached, the company intended to notify the employee that “the employment relationship will terminate because the contract period has expired.” The HR manager believed there would be no problem because the termination date was clearly stated in the contract. However, the situation is different if the employee is to continue working beyond two years. Unless a statutory exception under the Fixed-Term Employees Act applies, the employee is deemed, from the point at which the two-year period is exceeded, to have entered into an employment contract with no fixed term.

The key practical issue in fixed-term employment is not simply whether the contract states a term of “one year” or “two years.” Three matters must be examined together: first, whether the employee is subject to the two-year limit under the Fixed-Term Employees Act; second, whether the employee falls within an exception prescribed by the Act or its Enforcement Decree; and third, whether, independently of the expiration of the contract term, a legitimate expectation of renewal or conversion to an indefinite-term contract has arisen.

When the Act on the Protection, etc. of Fixed-Term and Part-Time Employees (hereinafter the “Fixed-Term Employees Act”) came fully into force in July 2007, the employment period of fixed-term employees was, in principle, limited to two years. The basic framework was the same when this article was first written in 2011. Since then, however, accumulated case law has made it much clearer that many issues cannot be resolved merely by looking at the number “two years.”

II. General Rule: The Employment Period of a Fixed-Term Employee Is Limited to Two Years

Article 4(1) of the Fixed-Term Employees Act permits an employer to employ a fixed-term employee for a period not exceeding two years. Even where a contract has been repeatedly renewed, the two-year period is calculated on the basis of the total period of continuous employment. If an employer continues to employ a fixed-term employee beyond two years when no statutory exception applies, or after the reason for an exception has ceased to exist, Article 4(2) provides that the employee is deemed, from the point at which the two-year period is exceeded, to have entered into an employment contract with no fixed term.[1]

Accordingly, it is incorrect to assume that “the contract automatically terminates on the date the employee reaches two years of service.” If the employee has already worked beyond two years and no exception applies, terminating the employment relationship solely on the ground that the stated contract term has expired may, in substance, raise an issue of dismissal. The Fixed-Term Employees Act imposes the two-year limit in order to prevent abuse of fixed-term employment contracts and promote employment security.

III. Major Exceptions Permitting Employment Beyond Two Years

1. Completion of a Project or a Specific Task

Suppose, for example, that a company carries out a specific factory construction project from 2024 to 2027 and hires an employee to perform on-site work until the project is completed. If the beginning and end of the project are objectively identifiable and the employee works exclusively for the completion of that project, an exception may apply even if the contract exceeds two years. Merely describing the employee in the contract as a “project-based employee,” however, is insufficient. The work must, in principle, be temporary and non-recurring, such as a construction project or development of a specific software program, with a clearly identifiable beginning and end. If an employee performs ordinary, permanent and continuous work and the employer merely labels the position as a project, the exception is unlikely to apply.

2. Replacement of an Employee Absent Due to Leave, Assignment, etc.

A typical example is where a regular employee, B, takes childcare leave, medical leave, or a long-term assignment, and the company hires C to perform B’s duties until B returns. In such a case, the employment contract may be set for the period during which the need for replacement exists. It must be objectively identifiable whose vacancy is being filled, why the replacement is necessary, and how the returning employee’s expected return date is linked to the termination of the replacement employee’s contract.

3. Period Required for Academic Study or Vocational Training

An exception may also apply where the term of an employment contract is determined by the period required for an employee to complete academic study or vocational training. There must be a substantive relationship between the objective circumstances of the study or training and the duration of the employment contract.

4. Older Persons Aged 55 or Above

Under the Act on Prohibition of Age Discrimination in Employment and Elderly Employment Promotion, an “older person” for this purpose is a person aged 55 or above. When a fixed-term employment contract is entered into with such a person, an exception to the two-year limit applies.

Care must nevertheless be taken with the timing of the execution or renewal of the contract. If the employee has already exceeded two years without satisfying the requirements for an exception and has therefore been deemed to have an indefinite-term employment contract, the employment relationship does not revert to fixed-term status merely because the employee subsequently reaches age 55.

5. Use of Professional Knowledge and Skills

The Enforcement Decree provides exceptions for persons who hold a doctoral degree and work in the relevant field, persons who hold a Professional Engineer-level national technical qualification and work in the relevant field, and persons who hold a professional qualification listed in Appendix 2 of the Enforcement Decree and work in the relevant field.

The professional qualifications include architect, certified public labor attorney, certified public accountant, customs broker, patent attorney, attorney-at-law, actuary, loss adjuster, certified appraiser, veterinarian, certified tax accountant, pharmacist, physician, dentist, Korean medicine doctor, management consultant, technology consultant, and certain aviation-related professional qualifications. Merely holding the qualification is not sufficient; the employee must actually work in a field related to that qualification.[2]

6. Jobs Created under Government Welfare Policies, Unemployment Measures, etc.

An exception may apply where jobs are provided under other statutes, including the Framework Act on Employment Policy and the Employment Insurance Act, for purposes such as vocational skills development, employment promotion, or the provision of socially necessary services. This category also includes certain jobs intended to promote the employment and livelihood stability of discharged service members and certain welfare-support personnel for persons eligible for national veterans benefits.

However, a project does not automatically qualify for an exception merely because it is carried out by a public institution or local government. The project’s statutory basis, background, purpose and nature, and whether it is temporary or capable of continuing must be considered comprehensively.

7. Other Reasonable Grounds

Exceptions under the Enforcement Decree may also apply where another statute prescribes a different period for fixed-term employment, to certain specialized work relating to the military, national security, diplomacy, or unification, and to work performed by university lecturers, teaching assistants, adjunct faculty, emeritus professors, visiting professors, and similar personnel.

Other exceptions may include employees in certain managerial or professional occupations whose average annual earned income over the preceding two years meets the threshold announced by the Ministry of Employment and Labor for the top 25 percent of earned income in the relevant occupational group; employees whose prescribed weekly working hours average less than 15 hours over a four-week period; athletes and sports instructors under the National Sports Promotion Act; and employees engaged in research work or work directly supporting research at certain research institutions. Because the applicable income threshold changes over time, the latest official notice should be checked as of the date the contract is executed.[3]

IV. The “Two-Year Exception” and a “Legitimate Expectation of Renewal” Are Separate Issues

Even if an employee falls within an exception to the two-year employment limit, this does not mean that the employer may freely terminate the employment relationship at any time solely because the stated contract term has expired. The Supreme Court recognizes a “legitimate expectation of renewal” where the employment contract, rules of employment, or collective agreement contains provisions on renewal, or, even in the absence of an express provision, where a legitimate expectation that the contract will be renewed upon satisfaction of certain conditions has arisen after considering such factors as the circumstances surrounding execution of the contract, the practice of repeated renewals, renewal procedures and evaluation criteria, the nature of the work, and the trust established between the parties. In such a case, if the employer refuses renewal without reasonable grounds, the refusal may be invalid in the same manner as an unfair dismissal.[4]

In particular, the Supreme Court has held that even an employee rehired on a fixed-term basis after reaching retirement age may have a legitimate expectation of renewal or reemployment depending on the employer’s reemployment practices and the actual pattern of contract renewals. Accordingly, even where an older employee qualifies for an exception to the two-year limit, that fact does not automatically resolve the separate issue of whether termination of the contract is justified. When ending a fixed-term employment relationship, it is advisable to review the issues in the following order: (1) whether the two-year limit applies → (2) whether an exception exists → (3) whether there is a legitimate expectation of renewal or conversion → (4) whether there are objective and reasonable grounds and appropriate procedures for refusing renewal.[5]

V. Conclusion

When explaining the Fixed-Term Employees Act in 2011, the most important question was, “Does an employee become an indefinite-term employee after working for more than two years?” That question remains relevant in 2026, but the analysis must now go one step further. It is necessary to examine both whether an exception to the employment-period limit actually applies to the employee’s duties and contractual relationship, and whether a legitimate expectation of renewal or reemployment has arisen through a long-standing pattern of repeated renewals.

The exceptions under the Fixed-Term Employees Act are not a blanket license for long-term fixed-term employment. The specific requirements for each exception must be satisfied, including the temporary nature of a project, the need to replace an absent employee, the employee’s age, the relationship between a professional qualification and the employee’s actual duties, and the statutory basis for a government-supported job. From the contract formation stage, employers should clearly identify and document the applicable exception and should establish objective evaluation criteria and procedures when deciding whether to renew a contract.

To reconcile the statutory objective of protecting the employment security of fixed-term employees with an employer’s legitimate need for flexible workforce management, the better approach is not to interpret the exceptions broadly, but to verify precisely whether the statutory requirements are met and to respect the trust that has developed in the actual employment relationship.