Newsletter | December 2013
	LABOR & EMPLOYMENT
	Supreme Court Defines the Scope of Ordinary Wage
	Ordinary wage, the standard in assessing compensation for overtime, nighttime and holiday work and unused annual leaves, refers to any money paid regularly, uniformly and on a fixed basis. On December 18, 2013, the Supreme Court rendered two full bench decisions on the scope of ordinary wage. Kim & Chang represented the Defendant-Appellant Kabul Autotech in both cases, in which the Supreme Court vacated the judgment of the lower courts in favor of the Defendant-Appellant and remanded the cases.
	Traditionally, many Korean companies have been implementing “fixed bonus” schemes whereby certain money is paid regularly but at intervals exceeding a one-month period. The Supreme Court held that such fixed bonus should be included in the calculation of ordinary wage, regardless of payment terms (i.e., even if it is paid at intervals exceeding a one-month period).
	However, the Supreme Court further held that employers may be exempt from liabilities for unpaid compensation (e.g., overtime, nighttime and holiday work and unused annual leaves) that otherwise should have been paid, if (i) labor and management have entered into agreements (express, implied or customary practice) under good faith to exclude fixed bonus from ordinary wage based on such agreements of which the overall wage increase rates or other compensation/benefits terms have been determined and (ii) holding the employers liable for such unpaid compensation would result in “unexpected new financial burden which would cause serious business difficulties for the company or threaten continued existence of the company.”
	With regard to other various allowances, the Supreme Court held that if an allowance is paid only to those employees who are employed at the date of payment (and not to those employees who have departed prior thereto), such allowance should not be included in the calculation of ordinary wage because it does not satisfy the “on a fixed basis” element.
	In light of these Supreme Court decisions, companies will need to analyze risks on past obligations and, if necessary, reform the current compensation and benefits schemes to reduce future additional cost obligations.
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	If you have any questions regarding this article, please contact below:
	Weon Jung Kim wjkim@kimchang.com Hyun Jae Park hyunjae.park@kimchang.com
	For more information, please visit our website:
	www.kimchang.com Labor & Employment Practice Group