On February 6, 2025, the Ministry of Employment and Labor (“MOEL”) released updated labor-management guidance on ordinary wage (the “Guidance”) in response to the recent Supreme Court en banc decisions overruling its previous position on ordinary wage. The Guidance aims to clarify the newly established legal principle on ordinary wage and mitigate potential disputes and confusion surrounding its application.
To facilitate the seamless application of the new legal principle and the updated guidelines under the Guidance, the MOEL announced that it will (i) conduct labor-management explanatory sessions and meetings, (ii) provide guidance on updating collective bargaining agreements, rules of employment, and employment agreements, and (iii) assist businesses in restructuring their compensation structures.
The Guidance also summarizes the MOEL’s response to some of the most frequently raised questions surrounding the Supreme Court’s en banc decisions in a Q&A format. We highlight some of the key clarifications below.
|
No. |
Question |
Response |
|
1 |
Does a wage that is conditioned on current employment (i.e., employed on the day of payment) constitute ordinary wage? |
If the wage is pre-determined in consideration for the prescribed work and is paid on a “regular” and “uniform” basis, it will fall under the scope of ordinary wage even if it is conditioned on current employment. Case example: Regular bonuses paid quarterly to current employees constitute ordinary wage. |
|
2 |
For a new employee who has not yet become eligible to receive regular bonus due to short tenure, would the regular bonus still fall under ordinary wage? |
If the regular bonus meets the requisite criteria and is thus treated as ordinary wage, it should be included in the calculation of ordinary wage even if the employee has not yet become eligible to receive it. Case example: Even if an employee joins the company after the bonus payment date and is thus not yet eligible to receive the bonus, the annual regular bonus should nonetheless be included in the ordinary wage for the calculation of overtime work allowance. |
|
3 |
How should regular bonus be factored into the calculation of ordinary wage? |
Pursuant to Article 6, Paragraph 2, Items 5 and 7 of the Enforcement Decree of the Labor Standards Act, ordinary hourly wage shall be calculated by dividing the annual aggregate regular bonus by annual total hours for the calculation of ordinary wage. |
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4 |
Should wages conditioned on “current employment” or “number of completed working days” be paid in proportion to the completed service period? |
In line with the Supreme Court decision, the validity of the conditions attached to the “payment” of regular bonus, etc., should be reviewed separately from the question of whether it should be included in ordinary wage. Therefore, unless there is a reason to determine otherwise, such “payment” conditions are valid and employers are not obliged to pay such regular bonus if its conditions are not satisfied. |
