The Supreme Court of Korea declared that annual performance-based bonus wages that are given monthly are included in the definition of ordinary wages, because they are regular and fixed incentives. This case will affect a lot of businesses.
Some companies in Korea give monthly bonus wages based on the performance of the employee in the previous year. The first department of the Supreme Court ruled that these bonus wages are included in ordinary wages in the case that 1,025 clerical workers of GM Korea sued the company. However, extra expenses for going home on the holidays, vacation bonuses, insurance fees for personal pensions, and group insurance fees for a company are excluded from ordinary wages, returning the case to Seoul High Court as remand after reversal.
The justice department judged that “If annual specific wages or actual amounts paid are decided by the previous year’s work records, because annual wages are definite as to whether they will be paid or actual amounts paid, those are fixed wages.” It added that “Fixedness is not acknowledged if wages, which were supposed to be paid in the previous year, were only delayed to be paid.”
Bonus wages will be included in ordinary wages because once they are settled, they will be paid constantly and at a fixed amount.
However, because some fees such as extra expenses for going home in holidays, vacation bonus, insurance fees for personal pension, and group insurance fees for a company are not fixed wages, they are not considered to be ordinary wages, because employees who do not work for a period of time will not be paid.