Ordinary Wages and Additional Allowances for Overtime, Night, and Holiday Work
Bongsoo Jung (Korean labor attorney, KangNam Labor Law Firm)

I. Introduction
“Ordinary wages” means wages which are determined to be paid periodically or in a lump sum to an employee for his/her prescribed work or whole work. This ordinary wage is used as the standard wage to calculate added allowance for overtime, night and holiday work, annual paid leave allowance, dismissal pay, and for paid leaves that employers have to provide under the Labor Standards Act. If this ordinary wage has not been calculated properly, it is not as simple as re-calculating and paying the correct amount from now on, but the employer shall recalculate all kinds of allowances such as overtime, night and holiday work, and other allowances that were paid over the past three years. Furthermore, the employer shall recalculate the severance pay for resigned/dismissed employees and pay the difference.
Accordingly, we will closely examine the scope of application of ordinary wage items and the additional allowances for overtime, night, and holiday work.

II. Scope of Application of Ordinary Wage Items
The major issues in calculating ordinary wages are related to determining payment period and items to be included in ordinary wages. Government guidelines stipulate that only one month periods shall be considered, whereas courts estimate it shall be decided whether the employer pays the wage to all employees regularly and uniformly. As for items to be included in ordinary wages, government guidelines judge whether those items are paid as remuneration for labor, whereas the courts look at whether the employer pays those items to all employees regularly and periodically.

1. Payments made regularly and uniformly
(1) Ordinary wages means wages that an employer pays to an employee as remuneration for his/her prescribed work or whole work, and those which are paid regularly and uniformly are considered ordinary wages in principle. In consideration of the purpose for legislating the Labor Standards Act and the function and necessity of ordinary wages, what should be included as ordinary wages shall be fixed wages paid regularly and uniformly, meaning non-fixed wages are not ordinary wages, as they are not paid regularly and uniformly and may or may not be paid, or the amount paid is according to actual work performance. Here, being paid ‘uniformly’ not only means payment is made to all employees, but also to all employees qualified according to certain conditions or criteria. Here, ‘certain criteria’ means ‘fixed conditions’ in considering the concept of ordinary wage that is designed to calculate ‘fixed and generally accepted regular wage.’ ;
(2) Even though a particular allowance or bonus, etc., may be paid for a period exceeding one month, if these are paid regularly and uniformly, these components can be included in ordinary wages.
(3) Mutual agreements between employer and employees that exclude a particular allowance considered ordinary wages according to the Labor Standards Act are null and void because such an agreement sets conditions lower than that of the Labor Standards Act.

2. Bonuses and related cases
(1) “As the regular bonus is paid regularly and uniformly (100% paid every even month) as fixed wages for labor service, it shall be considered ordinary wages stipulated in the Labor Standards Act.”
(2) The bonus in this case is only applicable to employees working for six months or more with a certain amount paid quarterly, and calculated according to the number of years of service. This bonus is paid every quarter, distinguishing it from annual salary divided into monthly payments, but this difference in payment time does not preclude it from being considered as ordinary wage. As the bonus in this case has been previously fixed, it shall be considered ordinary wage as it is a fixed wage paid regularly and uniformly.

3. Payments for an employee's living expenses or welfare, made regardless of working hours
(1) “Exercise and winter-preparation allowances that the Medical Insurance Union has promised to pay to all employees once every year is money to be paid for their prescribed work or whole work and shall be considered ordinary wages as fixed wages paid regularly and uniformly.”
(2) “Individual pension insurance premiums, summer vacation allowances, holiday travel allowances, gift allowances, etc. are closely related to employee provision of work. The individual pension premium has been paid every month by mutual agreement for the pension insurance, while summer vacation, holiday travel, and gift allowances have been paid around summer vacation and before the Lunar New Year and Chusok holidays every year according to the collective agreement. These allowances have been certain amounts paid regularly and uniformly to all employees who satisfy the payment conditions. Accordingly, as these allowances can be fixed wages paid regularly and uniformly as a reward for labor service, they shall be considered ordinary wages as stipulated in the Labor Standards Act.”
(3) “The company has paid all cleaning workers a fixed meal allowance, household subsidy, transportation subsidy, morning meal costs, sanitation allowance, and snack allowances as fixed amounts every month, all of which shall be considered ordinary wages to be paid regularly and uniformly as reward for labor service.”
(4) “Filial duty allowance, special year-end grants, and transportation subsidies are wages paid regularly, uniformly, and at a fixed rate as reward for labor service, and shall be considered ordinary wages.”
(5) “If a welfare allowance has been paid uniformly, regularly, and at a fixed rate to all employees of the same business according to the collective wage agreement, this is not money paid temporarily and according to favor for welfare, but wages paid as reward for labor service according to employment relations. In addition, this is not wages paid individually or at a variable rate, but fixed wages for ordinary working days and working hours, so shall be considered ordinary wage.”
(6) “If filial duty vacation allowances, winter preparation allowances and transportation allowances are paid to all employees regularly and uniformly, they shall be considered ordinary wages.”
(7) “Even though some employees with lower work attendance rates have been paid transportation and meal allowances differently than other workers, these allowances have been paid to all employees and shall be considered ordinary wages.”
(8) “Service allowances that have been paid every month without considering actual work performance, and household subsidies and traditional holiday allowances shall be considered ordinary wages.”
(9) “Even though a company enters into an agreement with employees that it will not calculate into ordinary wage the meal allowances that have been paid at a fixed rate to all employees, this shall be considered an illegal employment contract.”
(10) “Service allowances have accumulated according to the length of service for all cleaning workers employed for at least one year; meal, transportation, sanitation, and hazard allowances have been paid at a fixed rate every month to all cleaning workers. Quarterly, attendance, exercise, and traditional holiday allowances have been paid to all cleaning workers regularly and at a fixed rate if they meet certain criteria. As these allowances are fixed wages paid regularly and uniformly as reward for labor service, they shall be considered ordinary wages.”

III. Added Allowance for Overtime, Night, and Holiday Work
Article 56 of the Labor Standards Act stipulates, “Employers shall pay an additional fifty percent or more of the ordinary wages for extended work, night work (work provided from 10 p.m. to 6 a.m.) and holiday work.” That is, the employer shall add an allowance equal to 50% of ordinary wages for work exceeding 8 hours per day, and/or exceeding 40 hours per week, night work and holiday work. If the overtime exceeding 8 working hours is also between the hours of 10 p.m. and 6 a.m., an additional 50% of the ordinary wage shall be paid beyond the 50% already being paid for extended work.
Since all working hours on Saturday exceeding 40 hours per week constitute overtime work, employees are entitled to overtime pay, and 150% of wages are paid as compensation for actual work performed. However, in the case of weekly holidays or national holidays, wages are paid at 150%, which consists of 50% as holiday allowance and 100% as compensation for actual work. If holiday work exceeds 8 hours, an additional 50% is paid for the excess hours, resulting in payment at 200%.

IV. Conclusion
Recent judicial rulings have had a significant effect on employment relations. First, Korea’s salary structure has consisted of many complicated allowances, and so far, many companies have lowered ordinary wages and paid a minimum amount in wages for overtime, night, and holiday work, and thus maintained labor costs at an acceptable level. Recent judicial rulings have determined that fixed bonuses and various welfare allowances are considered ordinary wages. Accordingly, development of simpler wage structures is required, dividing fixed wages and performance based wages.
Calculation of ordinary wages as set out in government guidelines may be responsible for serious labor-management problems as recalculation of previously-paid allowances for overtime, night, and holiday work, and other allowances has been necessary. This may also necessitate recalculation of severance pay for those already resigned.