A recent Supreme Court en banc decision found that welfare points do not constitute ordinary wage. 

On August 22, 2019, the Supreme Court ruled that the welfare points provided by Seoul Medical Center to its employees did not constitute wages and thus died not constitute ordinary wage, as the points were not provided as consideration for labor.* 

The welfare points provided by Seoul Medical Center in the above case are similar to the welfare point systems of many other companies in which the points are granted on January 1^st each year to employees who are then employed (including those on leaves of absence), who retired in the middle of a year, and/or who newly-joined the company (on a pro rata basis); the usage of the points is limited; and any unused points expire at the end of the year. 

The majority opinion in the en banc decision (by eight justices of the 14 justices) found that based on an overall consideration of the following factors, the welfare points did not constitute wages and thus did not constitute ordinary wage, as the points were not provided as consideration for labor: (i) the Framework Act on Labor Welfare, which provides the legal basis for selective welfare systems such as welfare points, expressly excludes wages from the concept of employee welfare; (ii) the selective welfare system was introduced to change the previous system focused on welfare allowances, which are based on wages, to an actual corporate welfare system by changing its format and contents; (iii) the usage of the welfare points is limited, any points unused within one year did not carry forward and instead expire, and the points are not transferable; (iv) the welfare points were granted at the beginning of each year to all employees regardless of whether they actually provided labor or not; and (v) most business places do not list welfare points as “compensation” or “wages” in their collective bargaining agreements, rules of employment, etc. 

Meanwhile, the dissenting opinion (by four justices) opined that the welfare points constituted wages and ordinary wage because the points should be viewed as being provided in consideration for employees’ labor since the points are granted on a continuous and regular basis and are calculated on a daily or monthly pro rata basis based on the length of service. 

The lower courts have previously rendered conflicting decisions on whether welfare points of public agencies or public/private companies constituted ordinary wage, but, pursuant to the Supreme Court’s en banc decision, it is expected that the lower courts will exclude welfare points from ordinary wage moving forward.