Chief Justice Cho Hee-dae of the Supreme Court speaks ahead of the full bench ruling in the Supreme Court courtroom in Seocho-gu, Seoul, on the afternoon of December 19. The court delivered verdicts on key cases, including whether regular bonuses paid only to current employees qualify as ordinary wages, state responsibility for neglecting disability access rights, and issues related to the Pro-Japanese Property Act. (Image courtesy of Yonhap)
SEOUL, Dec. 20 (Korea Bizwire) – South Korea’s Supreme Court ruled on December 19 that conditional regular bonuses, tied to employment status or minimum workdays, must be included in the calculation of ordinary wages.
This landmark decision overturns a 2013 precedent that required bonuses to meet strict “fixed” payment criteria to qualify, sparking significant debate across business and labor sectors.
The court argued that requiring “fixed” payments as a criterion for ordinary wages unfairly limited the scope of compensation. The ruling is expected to impact companies across industries by increasing costs related to overtime, holiday, and other wage-linked allowances.
Business Sector Expresses Concern Over Rising Costs
The Korea Enterprises Federation (KEF) estimated that 26.7% of South Korean companies would be affected, with an additional KRW 6.8 trillion ($4.7 billion) in annual labor costs.
Business organizations, including the Korea Chamber of Commerce and Industry, warned that the ruling could exacerbate management risks amid economic challenges such as weak domestic demand, slowing exports, and political uncertainty.
Major groups called for structural reforms to shift from seniority-based pay systems to performance-based models, arguing that the current system is unsustainable. Critics also expressed concerns that the decision could create unnecessary disputes in labor relations and widen wage disparities between large corporations and smaller firms.
Small and medium-sized enterprises (SMEs) voiced alarm over potential liquidity issues, with some warning of reduced hiring and investment as a result of rising labor costs.
Labor Unions Welcome Ruling but Cite Limitations
Labor organizations, including the Federation of Korean Trade Unions and the Korean Confederation of Trade Unions, welcomed the ruling for clarifying the legal interpretation of ordinary wages. However, they criticized the lack of retroactive application, which they argue limits workers’ rightful claims.
Unions also called on the government to amend laws to align with the new legal framework and simplify wage definitions to reduce confusion in future labor disputes.
Impact Varies Across Companies
While many companies face significant adjustments, some—like HD Hyundai—remain unaffected due to pre-existing agreements. HD Hyundai, for instance, restructured its wage system after losing a decade-long lawsuit over similar issues.
As the ruling reshapes labor cost structures in South Korea, it highlights a broader challenge: balancing workers’ rights with the financial sustainability of businesses in an increasingly uncertain economic environment.
M. H. Lee (mhlee@koreabizwire.com)
