International Labor & Employment Law Committee Newsletter

Issue: May 2012

Editor: Tim Darby | European Editor: Paul Callaghan |Canada Editor: Gilles Touchette |Asia and Oceania Editor: Ute Krudewagen

South Korea

Fixed Bonus to Be Included in Ordinary Wage, Supreme Court Rules

K.Y. Kim, Kim & Chang, Seoul

"Fixed bonuses" should be included for purposes of calculation of "ordinary wages," the Korean Supreme Court ruled March 29, 2012, which is in contradiction to previous court cases as well as the Ministry of Employment and Labor's position. Therefore, if a company's compensation structure includes elements other than the base salary (such as fixed bonuses), the company may need to revisit its current practices to confirm whether or not the new Supreme Court case will result in unanticipated higher employment costs.

Since the statute of limitations on a wage claim is three years, it is possible that employees may file a suit claiming their unpaid statutory benefits unpaid for those past three years.

The term "ordinary wages" means hourly wages, daily wages, weekly wagers or monthly wages which are determined to be paid periodically and uniformly to a worker for his/her labor. According to the Court's rationale, (i) the fact that the fixed bonus was being paid every quarter alone does not automatically exclude it from ordinary wages and (ii) if the collective bargaining agreement intended to give pro-rata payment to the employees who leave the company during employment, the payment was a fixed wage which was determined to be paid periodically and uniformly and may be included in ordinary wages. In previous court cases, bonuses involving very similar features were deemed not to be included in ordinary wages.

It seems that the court is looking to expand the scope of the ordinary wage, which will directly impact calculation of other statutory benefits such as compensation for overtime work (including nighttime work and work during days off) and compensation for unused annual paid leave. It will also impact calculations for retirement benefits under the Employee Retirement Benefit Security Act.

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New Legislation Passed Protecting Older Employees in Corporate Reorganizations | National Regulations Push for "Democratic Management" of All Enterprises | Continued Work after Termination Deemed by Shanghai Court as New Employment | Requiring a Non-Workman to Perform Certain Duties of a Workman Does Not Amount to Unfair Labor Practice, Supreme Court Holds | Supreme Court Rules against Deemed Confirmation of Employment of a Probationary Employee | Establishments Are not to be Grouped Together for Retirement Provident Fund Purposes Merely Because Different Family Members Own Them All, Court Holds | Allowances to all Employees Are to Be Included in Calculating Provident Fund Retirement Plan Contributions, Court Holds | Backpay Agreed on In Settlement is to Be Paid Without Employee Proof He Did Not Obtain Further Employment Following Termination, Supreme Court Rules | Proposed Law on Sexual Harassment at Workplace Delayed | Employee Consent Is Pre-Requisite to Business Transfer Deals | Rules for Issuance of Employment Permits to Foreign Nationals Amended | Fixed Bonus to Be Included in Ordinary Wage, Supreme Court Rules | Amendments to Labor Code Proposed Reducing Some Employee Protections and Increasing Some Employee Benefits

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