This article was displayed on the ChosunBiz RM Report site at 3:20 p.m. on Apr. 20, 2026.
The Supreme Court reached different conclusions three years apart on whether "internal evaluation pay," a type of performance bonus received by local public enterprise employees, can be reflected in severance pay. Both cases sought to have "performance bonuses included in the severance pay calculation," but the outcomes diverged depending on the legal theory argued during litigation.
◇ Seoul Facilities Corporation employees ultimately lose after arguing "ordinary wage"
According to legal sources on the 20th, the Supreme Court's First Division (Presiding Justice Shin Sook-hee) on the 16th finalized a ruling against the plaintiff in a wage lawsuit filed by a person surnamed Jeon, an employee of Seoul Facilities Corporation, against the corporation.
Initially, 2,163 former and current employees of Seoul Facilities Corporation took part in the lawsuit. But after consecutive losses in the first and second instances, only Jeon, the union representative, filed the appeal as the representative.
They argued that among the performance bonuses paid by the corporation in 2022, the "internal evaluation pay" qualifies as ordinary wage, and demanded that overtime, night, and holiday allowances, as well as severance pay, be recalculated and additionally paid on that basis.
Performance bonuses at local public enterprises are generally divided into "incentive evaluation pay" and "internal evaluation pay." Incentive evaluation pay is differentially paid based on the Ministry of the Interior and Safety's management evaluation results and individual work performance. In contrast, internal evaluation pay is paid according to internal institutional standards, and the payout rate is not fixed in work rules or similar regulations.
Seoul Facilities Corporation, a public enterprise under the Seoul Metropolitan Government, has paid internal evaluation pay to employees at either 75% or 100% of one month's salary, depending on the city's management evaluation results and budget allocation standards.
Both the first and second instance courts found that internal evaluation pay does not constitute ordinary wage. The appellate court said, "It cannot be viewed that, at the time of providing labor, the payment of internal evaluation pay to be made the following year was fixed," and determined that it does not meet the requirements for ordinary wage.
The Supreme Court maintained the same view. The bench found that "the internal evaluation pay rate is determined by local government budget allocation standards, which can change annually, and by the decision of the head of the organization (the corporation's president)," and therefore cannot be regarded as ordinary wage.
◇ Seoul Metro employees switch to "average wage" on appeal and win
By contrast, employees of Seoul Metro, another public enterprise under the Seoul Metropolitan Government, had already succeeded in 2023 in having internal evaluation pay reflected in severance pay.
A total of 3,676 former and current Seoul Metro employees filed a wage lawsuit against the company in 2018. They argued that long-service allowance, preferential treatment allowance, position duty allowance, meal subsidy, adjustment allowance, work support allowance, technical allowance, train crew support pay, job allowance, and internal evaluation pay qualify as ordinary wage, and sought unpaid allowances and severance pay.
The court of first instance recognized most of the allowances as ordinary wage but excluded internal evaluation pay. It reasoned that there was no set minimum payout rate and that a 0% payment was possible for the lowest-rated employees.
The employees then changed their strategy on appeal. They argued that even if internal evaluation pay is not ordinary wage, it is included in "average wage."
Average wage is calculated based on the total amount of wages received in the three months immediately before retirement and serves as the basis for severance pay. If it is lower than ordinary wage, severance pay is calculated based on ordinary wage.
The appellate court sided with the employees. It found that internal evaluation pay, as wages paid in return for labor, is included in average wage.
In Nov. 2023, the Supreme Court dismissed Seoul Metro's appeal without a hearing, and the ruling was finalized as is. Seoul Metro paid additional severance to the 3,676 employees who took part in the lawsuit.
A company official said, "The employees who filed the lawsuit belong to the second union under the Federation of Korean Trade Unions," and added, "Similar lawsuits filed by the first union under the Korean Confederation of Trade Unions (KCTU) and the third union, which has no parent organization, are underway."
An attorney said, "This is a case that shows that even the same performance bonus can yield different results depending on which legal theory you use."