The business community expressed concerns following the Supreme Court's ruling that regular bonuses must be included in ordinary wages.
The Korea Enterprises Federation (KEF) issued a statement shortly after the Supreme Court's ruling on the 19th, saying, "The decision invalidates the agreement between labor and management not to include bonuses with certain conditions attached, such as tied to current employees, in ordinary wages, based on trust in the 2013 Supreme Court ruling, undermining legal stability in the field and causing confusion, including potential lawsuits in the future."
On that day, the Supreme Court ruled in a case related to ordinary wages involving current and former employees of Hanwha Life Insurance and Hyundai Motors that if corporations stipulate that regular bonuses are to be paid only to current employees and meet certain conditions, those regular bonuses qualify as ordinary wages, provided they are paid regularly and uniformly. This overturns an 11-year-old precedent set by the 2013 Supreme Court ruling.
KEF emphasized, "In a situation where the management environment of corporations is unfavorable due to recent political turmoil, sluggish domestic demand, and decreasing export growth, this ruling will impose unexpected financial burdens, further deteriorating the management environment for corporations."
KEF stated, "If all regular bonuses are included in ordinary wages, the burden of labor costs will inevitably increase continuously in the future. Thus, it is necessary to simplify the current complex wage system by restructuring regular bonuses into a portion to be included in the base salary and variable pay reflecting performance through agreements between labor and management."
Previously, KEF analyzed in a report released last month that if conditional regular bonuses are included in ordinary wages, corporations would have to bear an additional expense of approximately 6.8 trillion won. KEF explained that this amount corresponds to the labor costs capable of employing over 92,000 people annually.
The Korea Chamber of Commerce and Industry also noted, "It is anticipated that the labor cost burden on corporations will increase, and combined with the uncertain management conditions domestically and internationally, it raises concerns that it may negatively impact our economy." They stressed that this ruling prompts serious consideration for fundamental improvements to shift the seniority-based wage system in our country to a job-based compensation system.