A Seoul court ruled Tuesday that regular bonuses should be regarded as part of ordinary wages if they are paid out periodically, clarifying that employers are obligated to raise the amount on an on-year basis.
The verdict from the Seoul Central District Court came during the litigation filed by 4,509 workers of the Korea Land & Housing Corp. against the state-run agency. The workers demanded payment of combined 2.3 billion won ($2 million) in reflection of yearly growth in monthly wages.
The court said regular bonuses and a variety of allowances ― which were paid by KLHC over the past few years ― have the function of periodicity with a fixed amount. “So it is believed to belong to ordinary wages.”
Even though the payment cycle for the regular bonuses exceeded one month, unlike the monthly salary, it should be considered periodical, as the labor and management had already agreed on an installment-based payment over the year, according to the ruling.
The court ordered the KLHC to recalculate the overtime pay allowance for the 4,509 employees between August 2011 and July 2014 based on the yearly growth rate of the ordinary wage.
It also downplayed the defendant’s argument that some allowances do not belong to normal wages as they were paid not monthly but yearly.
Judges distinguished the extraordinary bonus, which is an occasional payment, from regularly paid fixed bonuses. Their ruling, which is in line with an earlier ruling for a similar case at the Supreme Court, is expected to draw more attention to similar trials including the suit raised by unionized workers of Hyundai Motor.
Earlier this year, a foreign-controlled automaker suggested that it would count fixed bonuses as normal wages, as part of its measures to strike a deal with unionized workers threatening to go on strike over salaries.
The company said the decision was aimed at preventing disruption of the firm’s revitalization. But company spokespeople refused to elaborate on the estimated size of the extra spending, citing the sensitivity of the issue.
The union has demanded fixed bonuses be counted as ordinary wages in respect of a Supreme Court verdict in 2013. Workers demanded that their new contract comply with the top court’s ruling because it would increase various statutory benefits, such as overtime allowances and severance pay, which are adjusted in proportion to the base wage.
