Weekly Contributions

Criteria for Determining Ordinary Wages and Calculating Additional Pay

- Changes and Practical Issues Following the 2024 Supreme Court En Banc Decisions-

Bongsoo Jung, Labor Attorney / KangNam Labor Law Firm

I. Introduction

Ordinary wages serve as the reference wage for calculating various statutory payments under the Labor Standards Act, including overtime, night-work and holiday-work premiums, annual paid leave allowance, and dismissal notice allowance. Accordingly, whether a particular wage item is included in ordinary wages directly affects a company’s wage structure and labor costs and, for employees, determines the level of statutory allowances they receive.

For many years, the legal doctrine on ordinary wages was based on the requirements of “regularity, uniformity, and fixedness,” following the Supreme Court’s 2013 en banc decision. In particular, wages subject to conditions such as being employed on the payment date or satisfying a specified number of working days were often excluded from ordinary wages on the ground that they lacked “fixedness.”

However, in its en banc decisions of December 19, 2024, the Supreme Court removed “fixedness” from the conceptual requirements for ordinary wages and redefined ordinary wages as “wages predetermined to be paid regularly and uniformly as remuneration for prescribed work.” Subsequent decisions concerning bonuses subject to continued-employment conditions, attendance-rate or working-day conditions, and performance-based pay have further developed this new doctrine. This article examines the new criteria under recent Supreme Court precedents and the practical issues involved in calculating premium pay for overtime, night work, and holiday work.

 

II. Changes in the Criteria for Determining Ordinary Wages

 

1. Legal Concept of Ordinary Wages

Article 6(1) of the Enforcement Decree of the Labor Standards Act defines ordinary wages as wages “predetermined to be paid regularly and uniformly to an employee for prescribed work or total work.” In its 2024 en banc decisions, the Supreme Court interpreted this wording in light of the function of ordinary wages and held that ordinary wages are wages predetermined to be paid regularly and uniformly as remuneration for prescribed work.

The key question is not how much the employee actually received or whether a payment condition was actually satisfied, but whether the wage was objectively predetermined as remuneration to be paid if the employee fully performs the agreed prescribed work. The Court emphasized that ordinary wages are not wages that retrospectively assess actual work performance; rather, they are a reference wage used to evaluate the value of prescribed work before overtime, night work, or holiday work is performed.

 

2. Abolition of the “Fixedness” Requirement

Under the previous precedents, fixedness was treated as an independent requirement for ordinary wages, together with regularity and uniformity. Consequently, where wages were subject to a continued-employment condition on the payment date, a certain attendance-rate condition, or a working-day condition, ordinary-wage status was often denied because payment was not predetermined with certainty.

The Supreme Court’s en banc decision of December 19, 2024, Case No. 2020Da247190, and the en banc decision issued the same day in Case No. 2023Da302838 changed this doctrine of fixedness. The mere existence of a condition attached to a wage, or uncertainty as to whether that condition will be satisfied, does not by itself negate ordinary-wage status. The condition may, however, be considered as one factor in determining whether the wage is actually remuneration for prescribed work and whether it satisfies the requirements of regularity and uniformity.

 

3. Scope of Application of the New Precedent

Considering the impact of the change in precedent on wage systems and collective labor relations, the Supreme Court held that, as a general rule, the new doctrine applies to calculations of ordinary wages from December 19, 2024 onward. Accordingly, statutory premiums for overtime, night work, holiday work, and similar work performed on or after December 19, 2024 should, in principle, be calculated based on the new scope of ordinary wages.

However, the new doctrine applies retroactively to the cases before the Supreme Court and related cases that were already pending when the en banc decisions were issued, where the changed doctrine was a premise of the adjudication and the ordinary-wage status of the relevant wage items was in dispute. Therefore, the fact that the statute of limitations for wage claims is three years does not mean that all employees must automatically receive recalculations for periods before December 19, 2024. Whether past periods require recalculation must be determined by examining the specific circumstances, including whether litigation was pending and which wage items formed the basis of the claim.

 

III. Recent Supreme Court Precedents on Major Wage Items

 

1. Regular Bonuses Subject to a Continued-Employment Condition

A continued-employment condition means a condition under which a bonus is paid only to employees who remain employed on the bonus payment date. Under the previous doctrine, bonuses subject to such a condition were sometimes denied ordinary-wage status on the ground that they lacked fixedness because employees who left before the payment date did not receive the bonus.

In its decision of January 23, 2025, Case No. 2019Da204876, the Supreme Court held that a regular bonus subject to a continued-employment condition may constitute ordinary wages if it is paid regularly and uniformly as remuneration for prescribed work, such as where a fixed amount linked to base salary is paid at regular intervals. In particular, the validity of the continued-employment condition itself must be distinguished from whether the bonus constitutes ordinary wages. Even if the continued-employment condition is valid, its existence alone does not negate the ordinary-wage status of a regular bonus.

Accordingly, a company cannot exclude a bonus from ordinary wages merely because its rules of employment or collective agreement states that the bonus is “payable only to employees employed on the payment date.” The actual determination requires a comprehensive review of the payment cycle, calculation criteria, eligible employees, and the relationship between the payment and prescribed work.

 

2. Bonuses Subject to Attendance-Rate or Working-Day Conditions

In its en banc decision of December 19, 2024, Case No. 2023Da302838, the Supreme Court held that, even where a wage is payable only upon completion of a certain number of working days, such a condition does not by itself negate ordinary-wage status if the required number of working days is within the range that an employee who fully performs prescribed work can satisfy?that is, if the condition does not exceed the prescribed working days.

This doctrine was reaffirmed in the Supreme Court decision of February 20, 2025, Case No. 2021Da216957. Even if a bonus calculated by reference to base salary and paid in a fixed amount at regular intervals is subject to an attendance-rate or continued-employment condition, it constitutes ordinary wages if it is paid regularly and uniformly as remuneration for prescribed work. Even where an employee’s actual attendance rate is low and the employee therefore does not receive the full bonus, that circumstance alone does not necessarily eliminate the bonus’s character as ordinary wages serving as the reference wage.

By contrast, if the payment condition requires additional work beyond the scope of prescribed work or achievement of a separate performance target, the character of the payment as remuneration for prescribed work may differ and requires separate analysis. Accordingly, a categorical approach that “all conditional payments are ordinary wages” or that “no conditional payments are ordinary wages” is inappropriate.

 

3. Performance-Based Pay and Guaranteed Minimum Payments

Performance-based pay has become a particularly important area in recent precedent. In its decision of August 14, 2025, Case No. 2023Da216777, the Supreme Court held that performance-based pay in the pure sense?where entitlement to payment or the payment rate is determined by the employee’s actual work performance or evaluation results?generally does not constitute ordinary wages because it is difficult to regard it as remuneration for prescribed work.

However, if a certain minimum amount is predetermined to be paid regardless of performance, that guaranteed minimum may constitute ordinary wages because it can be regarded as remuneration for prescribed work. Even where performance-based pay is paid in the following year based on the previous year’s work performance, whether a guaranteed minimum exists is determined by reference to the period for which the performance payment is attributable, rather than the date on which it is actually paid.

This doctrine was reaffirmed in the Supreme Court decision of April 16, 2026, Case No. 2024Da316599. In that case, the Supreme Court stated that the lower court had improperly assessed whether the self-evaluation payment constituted ordinary wages on the premise of fixedness, but nevertheless upheld the conclusion denying ordinary-wage status because it was difficult to find that a guaranteed minimum payment had been assured at the time the work was performed. In other words, the key question is not the label attached to performance-based pay, but whether “any portion is guaranteed simply by providing prescribed work.”

 

4. Allowances with Welfare-Related Labels

Whether meal allowances, transportation subsidies, holiday allowances, welfare allowances, and similar payments constitute ordinary wages is not determined by their labels alone. A payment is not automatically excluded from ordinary wages merely because it is intended as a welfare benefit, nor does it automatically become ordinary wages merely because it is paid monthly or at regular intervals. The substance of the payment must be examined to determine whether it is a wage paid as remuneration for prescribed work, whether the eligible recipients are uniformly determined according to objective criteria, and whether the payment is made regularly.

Accordingly, various welfare-related allowances that were described in previous precedents as “regular, uniform, and fixed” must now be reassessed by removing “fixedness” as an independent requirement and focusing instead on whether they are remuneration for prescribed work and satisfy regularity and uniformity.

 

IV. Calculation of Premium Pay for Overtime, Night Work, and Holiday Work

 

1. Premium Rates under Article 56 of the Labor Standards Act

Article 56 of the Labor Standards Act requires an additional payment of at least 50% of ordinary wages for overtime work. For holiday work, at least 50% of ordinary wages must be added for up to eight hours, and at least 100% must be added for hours exceeding eight. Night work (from 10:00 p.m. to 6:00 a.m. the following day) also requires an additional payment of at least 50% of ordinary wages.

 

2. Overlapping Premiums

Where overtime work and night work overlap, each ground for premium pay applies independently. Thus, the normal 100% wage is combined with a 50% overtime premium and a 50% night-work premium, resulting in a typical total payment level of 200%. Where night work overlaps with holiday work of up to eight hours, the typical total payment level is also 200%. Where night work overlaps with holiday work exceeding eight hours, the 100% holiday-work premium and the 50% night-work premium are added, resulting in a typical total payment level of 250%.

 

3. Classification of Saturday Work

Work performed on a Saturday is not always holiday work merely because it occurs on Saturday. It must first be determined whether Saturday is designated as a holiday under a collective agreement or rules of employment, or whether it is merely an unpaid non-working day. Even if Saturday is an unpaid non-working day, where an employee has already worked 40 hours from Monday through Friday and then performs additional work on Saturday, those hours constitute overtime exceeding the 40-hour workweek and trigger overtime premium pay. Conversely, if the employee’s actual weekly working hours do not exceed 40 hours, Saturday work does not automatically constitute overtime merely because it is performed on Saturday.

 

4. Recalculation of Ordinary Wages and Agreements on Guaranteed Hours

When the scope of ordinary wages expands, an issue arises as to calculating the difference between the overtime and night-work premiums previously paid and the amounts due after recalculation. In its decision of April 30, 2026, Case Nos. 2025Da219757 (main action) and 2025Da219758 (counterclaim), the Supreme Court held that where labor and management agreed to guarantee allowances by deeming a fixed number of hours to be overtime or night-work hours regardless of the actual hours worked, the allowances, when recalculated to include bonuses in ordinary wages, may not be calculated solely on the basis of actual hours merely because the actual hours were less than the guaranteed hours. Thus, not only the scope of ordinary wages but also the guaranteed hours and calculation structure under the existing wage agreement must be examined.

 

V. Matters Companies Should Review in Practice

 

? First, each wage item should be reviewed according to the objective nature of the payment rather than its label. Companies should examine, item by item, whether the payment is linked to base salary, its payment cycle, the range of eligible employees, continued-employment or attendance-rate conditions, and the structure of any performance evaluation.

? Second, a payment cannot be excluded from ordinary wages merely because the relevant provision states “only for current employees” or requires “an attendance rate of at least a certain level.” Even where such a condition exists, the payment may constitute ordinary wages if it is paid regularly and uniformly as remuneration for prescribed work.

? Third, for performance-based pay, the existence of a guaranteed minimum payment must be confirmed. If a minimum amount is guaranteed regardless of evaluation results, that portion is likely to be included in ordinary wages.

? Fourth, the applicable periods before and after December 19, 2024 must be distinguished. As a general rule, the new precedent applies to calculations of ordinary wages from that date onward, but it may exceptionally apply retroactively to cases that were already pending before the courts at the time and in which ordinary-wage status was already at issue.

? Fifth, when ordinary wages change, companies should examine not only overtime, night-work, and holiday-work premiums, but also the indirect impact on other statutory payments calculated by reference to ordinary wages, such as annual paid leave allowance and dismissal notice allowance, as well as on average wages and severance pay. Whether severance pay must be recalculated, however, depends on the specific circumstances, including whether the relevant statutory payments are actually reflected in the average-wage calculation period.

? Sixth, labor and management cannot reduce the statutory scope of ordinary wages by agreement. Ordinary wages are a mandatory statutory reference wage. Therefore, even if a wage agreement or rules of employment purports to exclude a particular wage item from ordinary wages, the exclusion agreement alone is ineffective if the item legally qualifies as ordinary wages.

 

VI. Conclusion

The Supreme Court’s en banc decisions of December 19, 2024 abolished “fixedness,” which had served for more than a decade as a core criterion for determining ordinary wages, and returned the concept to its statutory foundation: wages predetermined to be paid regularly and uniformly as remuneration for prescribed work. As a result, regular bonuses subject to a continued-employment condition or to a working-day condition within the prescribed working days can no longer be excluded from ordinary wages solely because of such conditions.

This does not mean, however, that every bonus or performance-based payment constitutes ordinary wages. Pure performance-based pay, for which entitlement and amount are determined by actual performance, generally lacks the character of remuneration for prescribed work. By contrast, a guaranteed minimum payable regardless of performance may constitute ordinary wages. Recent precedents therefore focus on the substantive question of whether a payment is “predetermined to be paid regularly and uniformly as remuneration for providing prescribed work,” rather than on the formal label or attached payment conditions.

Accordingly, employers should not simply maintain wage systems designed under the former fixedness requirement, but should reexamine the basis and nature of each wage item and revise their methods for calculating statutory allowances under the new ordinary-wage standard. Employees likewise should not determine ordinary-wage status solely from the conditions attached to a wage item, but should assess their rights under the current criteria of remuneration for prescribed work, regularity, and uniformity.