Going forward, corporations must list workers' base pay and overtime, night, and holiday premiums separately by item. Even if labor and management have a comprehensive wage agreement, if the amount paid is less than the premium due for the actual hours worked, the difference must be paid. Failure to pay the difference is considered wage arrears.
The Ministry of Employment and Labor (MOEL) said on the 8th that, based on discussions by the "task force to advance the roadmap to shorten actual working hours," which included labor, management, government, and experts, it prepared "guidance to prevent the misuse and abuse of comprehensive wages." The aim is to curb abuse of the comprehensive wage system and reduce "free labor."
This is the first time guidelines on comprehensive wages have been announced. In 2017, under the Moon Jae-in administration, authorities sought to prepare them and gathered opinions, but they were not released due to opposition from both labor and management.
The comprehensive wage system is a method of paying salaries without distinguishing base pay from overtime, night, and holiday work premiums. It has been used in a limited way in consideration of job characteristics where calculating working hours is difficult. However, there have been claims that some business sites exploit it as a means to avoid properly paying overtime premiums.
According to the ministry's guidance, employers must now separate base pay and various premiums in payroll ledgers and pay statements. A method that bundles and pays overtime, night, and holiday premiums is not allowed. Even if a fixed amount is paid by agreement between labor and management, if the actual working hours are greater, the difference must be paid.
Even when a "fixed OT agreement" (an agreement to pay fixed amounts by item for overtime, night work, or holiday work by separating them by item) is concluded, strict requirements such as labor-management agreement and compliance with the Labor Standards Act must be met. In this case, if the actual working hours are greater, additional premiums must be paid, and conversely, even if the working hours are fewer, the agreed amount must be paid as is.
The items included in this guidance clarify matters already regulated under current law. Under current law, authorities can impose penalties when wage arrears are found or when provisions such as recording and issuing payroll ledgers and pay statements are violated, but introducing fixed-salary or fixed-premium schemes lacks a legal basis, limiting enforcement.
Meanwhile, the guidance does not have legally binding force and will be used as a standard for on-site guidance and supervision. An official at the Ministry of Employment and Labor (MOEL) said, "While violations of current law, such as wage arrears or failure to prepare payroll ledgers, can be punished, violating the guidance itself does not result in penalties," adding, "A bill to amend the law to principally ban comprehensive wage agreements is currently under discussion in the National Assembly."