Legal experts say the ruling could become a central issue in wage negotiations this year and may trigger a wave of latent litigation. (Image created by AI/ChatGPT)
SEOUL, April 1 (Korea Bizwire) — A recent South Korean Supreme Court ruling requiring companies to include conditional regular bonuses in base wages is placing significant financial pressure on employers, particularly smaller firms, according to a new survey released Sunday by the Korea Chamber of Commerce and Industry (KCCI).
The emergency survey, conducted 100 days after the December 2024 ruling, gathered responses from more than 170 companies offering conditional bonuses. It found that 63.5 percent of respondents reported experiencing or expecting serious financial strain as a result of the decision.
In the wake of the ruling, which eliminated the “fixedness” requirement from the long-standing criteria used to determine ordinary wages, bonuses with conditions tied to attendance or workdays must now be factored into base pay. This change has significant ripple effects on overtime, severance, and other wage-linked costs.
Large firms expect average wage increases of more than 5 percent in 55.3 percent of cases, while 23.1 percent project increases of up to 2.5 percent. However, the pressure is more acute among small and medium-sized enterprises (SMEs), with 25 percent anticipating a wage increase of over 5 percent and 43.4 percent expecting rises of up to 2.5 percent. The KCCI warned this trend could widen the wage gap between large and small businesses.
A scene from the Supreme Court en banc ruling delivered on December 19 last year (Yonhap)
In response, companies are considering a variety of cost-containment strategies. The most common measures include minimizing wage increases (32.7 percent), reducing or restructuring bonus schemes (24.5 percent), cutting overtime hours (23.9 percent), and reducing new hires (18.9 percent).
Legal experts say the ruling could become a central issue in wage negotiations this year and may trigger a wave of latent litigation. “This ruling exposes companies to significant legal and financial risks,” said Kim Dong-wook, an attorney at law firm Sejong. “To mitigate those risks, many employers will need to overhaul their wage structures.”
Lee Jong-myung, head of the Industrial Innovation Division at the KCCI, urged the government to consider legal and institutional reforms. “At a time when companies, especially SMEs, are under immense pressure to innovate amid shifting global dynamics, they’re now having to seek consulting just to manage wage compliance,” he said. “Decisions on working conditions must be grounded in labor-management consensus, and legislative clarity is needed to support that.”
M. H. Lee (mhlee@koreabizwire.com)
