Ordinary Wage Lawsuits: Claims for Conditional Bonuses and Allowances

The New Test for Ordinary Wage

Article 6(1) of the Enforcement Decree of the Labor Standards Act (근로기준법 시행령) defines ordinary wage as the amount fixed to be paid to a worker regularly and uniformly for prescribed work or total work. Staying faithful to this definition, the Supreme Court restated ordinary wage as wages fixed to be paid regularly and uniformly as compensation for prescribed work (Supreme Court en banc decision of 2024. 12. 19., Case Nos. 2020Da247190, 2023Da302838).

If a wage is set to be paid when the worker fully performs prescribed work, it is ordinary wage regardless of whether any condition is attached to it or whether the condition can be met. Conversely, a wage paid only when the worker works more days than the prescribed working days is compensation for additional work and is not ordinary wage.

What Changes in Money When Ordinary Wage Changes

Ordinary wage is the basis for calculating several statutory allowances. When a bonus is included in ordinary wage, the hourly ordinary wage rises, and the allowances below increase accordingly.

• Overtime and night work: premium of at least 50% of ordinary wage (Labor Standards Act (근로기준법) Article 56(1) and (3))
• Holiday work: 50% premium for up to 8 hours, 100% premium for hours beyond 8 (Article 56(2))
• Dismissal notice allowance (해고예고수당): at least 30 days' ordinary wage (Article 26)
• Allowance for unused annual leave and other allowances based on ordinary wage

Severance pay is based on average wage, but if the average wage is less than the ordinary wage, the ordinary wage is treated as the average wage (Article 2(2)). If overtime allowances increase, the wages for the 3 months before retirement also increase, which may affect severance pay.

From When Does the New Principle Apply?

For reasons of legal stability and protection of reliance, the Supreme Court ruled that the changed principle applies from the calculation of ordinary wage after the date of the ruling, December 19, 2024. As a rule, allowances for earlier periods are judged under the previous principle.

As an exception, the new principle applies retroactively to the case at hand and to parallel cases that were pending in court on the same issue at the time of the ruling. In effect, whether you were already in litigation before the ruling determines the scope of your claim.

The en banc court's position is that ordinary wage is a mandatory concept, so labor and management cannot freely narrow its scope by agreement. Even if a collective agreement or the rules of employment (취업규칙) state that a bonus is excluded from ordinary wage, that alone does not decide the outcome.

How to Claim and Time Limits

Unpaid allowances can be claimed by filing a complaint with the Regional Employment and Labor Office (노동청) or by a civil lawsuit. Many workers are often subject to the same wage structure, so joint lawsuits are common.

Wage claims expire after 3 years (Labor Standards Act (근로기준법) Article 49). The limitation period runs separately for each month's allowance, so the later a claim is made, the shorter the period for which you can recover.

What Employers Should Check First

• List the bonuses and allowances that carry an attendance or working-day condition.
• Include them in ordinary wage for amounts calculated after December 19, 2024, and recalculate overtime, night and holiday allowances.
• Check the payment criteria: whether the wage is conditioned on working days beyond the prescribed working days, or is a performance bonus based on work performance.
• To change the wage structure, review the procedure for changes to the rules of employment that are disadvantageous to workers (consent of a majority of workers).

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