"Expansion of Ordinary Wage Scope, Corporate Wage System Reform Inevitable"…Discussion on Supreme Court Ruling Impact

KCCI and Law Firm Hold 'Explanation Session on the Significance and Response Strategies for the Ordinary Wage Ruling'

Recently, following a Supreme Court plenary session ruling that significantly expanded the scope of ordinary wages used as the basis for calculating allowances and severance pay, claims have been raised for the need to reform wage systems in response.

On the 27th, the Korea Chamber of Commerce and Industry (KCCI), in collaboration with the law firm Sejong, held a webinar titled "The Meaning of the Supreme Court Plenary Session Ruling on Ordinary Wages and Response Measures." KCCI explained, "As the requirements for ordinary wages established by the 2013 Supreme Court plenary session ruling have been overturned by this recent ruling, causing concerns about confusion in the industrial field, this briefing session was urgently organized to support corporate responses."

On the 19th, the Supreme Court clearly stated in its plenary session ruling, "Wages regularly and uniformly paid as compensation when a worker fully provides the prescribed labor shall be considered ordinary wages regardless of employment status or the number of working days."

At the briefing, attorney Yoon Hye-young explained, "Previously, regularity, uniformity, and fixity were the criteria for calculating ordinary wages, but this ruling abolished the fixity requirement," adding, "Wage items that had conditions such as employment status to eliminate fixity will inevitably be included in ordinary wages."

Attorney Yoon stated, "Wage items such as regular bonuses, which are regularly and uniformly paid as compensation for fully provided prescribed labor, are recognized as ordinary wages regardless of employment status or achievement of working days."

However, she noted, "Although the payment criteria such as employment status or achievement of working days have lost their effect as criteria for determining ordinary wages, this does not mean that the payment criteria for regular bonuses themselves have been invalidated," adding, "Therefore, this ruling does not create a new obligation to pay unpaid regular bonuses." She also explained that conditional allowances unrelated to prescribed labor, such as performance bonuses based on work results, temporary or variable payments, and accident-free driving allowances, may still not be recognized as ordinary wages.

Attorney Kim Jong-su presented step-by-step response measures that companies should prepare, including ▲re-examining ordinary wages for wage items ▲directions for wage system reform ▲and establishing wage negotiation strategies with labor unions.

Attorney Kim said, "The Supreme Court decided not to apply the new ordinary wage judgment principles retroactively but to apply them from the calculation of ordinary wages after the ruling," adding, "Companies should review current wage items to minimize factors that increase statutory allowances such as overtime, night, holiday work, and annual leave to reduce labor cost burdens." He continued, "It is necessary to explore wage system reforms that change wage items to those not recognized as compensation for prescribed labor, such as performance bonuses that are not guaranteed in advance."

Attorney Kim also emphasized, "Since wage system reform ultimately requires agreement with labor unions or employee representatives, strategies for labor-management consultations or wage negotiations for the next year should be established in advance."

Kang Seok-gu, head of the KCCI Research Department, said, "This ruling will significantly increase the financial burden on companies struggling with cash flow, which will negatively impact employment, including a reduction in new jobs," adding, "The ultimate solution is to simplify complex wage items and increase the proportion of performance bonuses in the wage system reform."

The webinar was broadcast live on YouTube, and the presentation can be rewatched on the Korea Chamber of Commerce and Industry website under 'Online Seminars.'

This content was produced with the assistance of AI translation services.