Supreme Court expands definition of ordinary wage

The Supreme Court en banc has overturned a long-standing precedent, ruling that "conditional bonus payments" guaranteed based on whether an employee is actively working on specific dates or during certain periods should be included in ordinary wage calculations. This marks a significant departure from the previous "constancy" standard, which limited ordinary wages to predetermined and fixed payments. The Court declared that the older standard had “unfairly narrowed the scope of ordinary wage,” effectively abolishing it after 11 years. The ruling has broad implications, as ordinary wage serves as the basis for calculating allowances and severance pay. Business owners are concerned about the potential rise in personnel costs, while the labor sector has welcomed the decision as a step toward fairer wage practices.

The unanimous ruling came in a final appellate trial involving lawsuits filed by former and current Hanwha Life Insurance and Hyundai Motor employees. The Court ruled that even if bonus payments are conditional on factors such as continued employment or a specific number of working days, they should still be considered part of ordinary wage if paid regularly and uniformly. For instance, bonuses provided only to employees actively working at the time of payment qualify as ordinary wages if they meet these criteria.

Labor organizations expressed strong support for the decision. The Federation of Korean Trade Unions stated, “We welcome the Supreme Court’s decision to end the controversy over ordinary wage by repealing the unjustified ‘constancy requirement,’ though it comes belatedly.” The Korean Confederation of Trade Unions called the ruling “a desirable correction to the longstanding confusion and complications surrounding ordinary wage.”


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