The full bench of the Supreme Court on the 19th delivered a ruling expanding the scope of ordinary wages, affecting severance pay, overtime, night, holiday work allowances, and annual paid leave allowances, all of which are determined based on ordinary wages.
On the 20th, ChosunBiz asked Kim Ki-duk, an attorney representing the workers in the Supreme Court case at Law Office Saenal, and Son Ik-chan, a labor law and industrial accident specialist lawyer, about potential changes using hypothetical scenarios.
The hypothetical scenario is as follows: Mr. A is an employee earning 3 million won per month, with an annual salary of 36 million won. At Mr. A's company, the year-end bonus is only given to employees who are employed at the payment time, not to retirees. The year-end bonus is distributed in two parts. All employees receive a basic bonus of 3 million won equally, but additional bonuses are given based on performance. Mr. A received a basic bonus of 3 million won and an additional bonus of 2 million won, totaling 5 million won.
Q. How does the Supreme Court's ruling affect Mr. A's ordinary wage?
A. According to past Supreme Court rulings, bonuses conditioned on employment status, like at Mr. A's company, were not recognized as ordinary wages. By this standard, Mr. A's ordinary wage is seen as 3 million won based on his salary.
However, under the new Supreme Court ruling, Mr. A could recognize both the 36 million won annual salary and the basic year-end bonus of 3 million won as ordinary wages, totaling 39 million won. When converted to a monthly salary basis, this amounts to 3.25 million won.
Q. Why isn't the 2 million won performance-based part of the year-end bonus included as ordinary wages?
A. The Supreme Court determined in the new ruling that performance bonuses based on work results are not compensation for agreed working hours between labor and management, so they do not qualify as ordinary wages.
Q. What allowances are linked to ordinary wages?
A. Extensions, night, holiday, work allowances, annual paid leave allowances, parental leave pay, pre- and postnatal leave pay, and severance pay are representative examples.
Q. How do wages change if Mr. A works overtime or on holidays?
A. In the hypothetical case of Mr. A with an ordinary wage of 3 million won resting both Saturday and Sunday, the daily wage is roughly 130,000 won. According to the new Supreme Court ruling, the daily wage based on ordinary wages will increase to approximately 140,000 won. Calculating the hourly rate for an eight-hour workday increases it from 16,000 won to 17,500 won.
For weekday overtime work, 1.5 times the ordinary wage is received. When Mr. A works three hours overtime on weekdays, previously receiving 72,000 won, this amount will increase to 78,750 won.
When working within 8 hours on holidays, 1.5 times the ordinary wage is paid. For hours exceeding 8, 2 times the ordinary wage is given. If Mr. A works 10 hours on a holiday, the payment will increase from 320,000 won to 350,000 won.
Q. Employers must pay annual paid leave allowances based on either ordinary or average wages. How will the ruling affect this?
A. The average wage usually includes salaries, various allowances, and bonuses, often making it higher than ordinary wages. If ordinary wages increase, employers may reconsider the basis for paying annual paid leave allowances. However, experts believe the likelihood of ordinary wages surpassing the average wage is low.
Q. Parental leave pay has set minimum and maximum limits.
A. Parental leave pay is set at 80% of ordinary wages per month. However, if this amount exceeds 1.5 million won, it is capped at 1.5 million won, and if it's less than 700,000 won, it is set at 700,000 won. Experts believe the new Supreme Court ruling will have little effect here.