[Q&A] Will our company be affected by the change in the Supreme Court precedent on ordinary wages?

In December 2024, the Supreme Court's en banc ruling abolished the 'fixity' requirement for ordinary wages.

As a result, various allowances, such as regular bonuses and regular bonuses with conditions of employment or number of working days, which were previously excluded from ordinary wages, can now be included in ordinary wages, which is expected to have a significant impact on both employers and workers.

From the company's perspective, there was a burden to recalculate overtime, night, and holiday work allowances, annual leave allowances, etc. based on new standards, and the existing wage system had to be overhauled on a large scale.

In particular, industries with a high proportion of allowances, such as manufacturing and finance, are expected to see an increase in legal risks and labor cost burdens at the same time.

On the other hand, workers are expected to see wage increases in the short term, but may face new risks in the long term, such as job instability or a shift to a performance-based compensation structure.

The Chungcheong Newspaper met with Kim Jeong-beom, an attorney specializing in labor law at Daeryun Law Firm (Lihan)'s Daejeon branch office, and organized in a Q&A format everything from the basic concept of ordinary wages to the ramifications of changes in Supreme Court precedent and specific response measures that companies should take in practice.

Q. The terms ‘compensation for small-time work’ and ‘fixity’ are unfamiliar to me. What does it mean if you summarize it in an easy-to-understand way for the general public?

A. 'Prescribed work compensation' refers to the compensation workers receive for the hours they promise to work (prescribed working hours), that is, basic pay and regular allowances.

'Fixity' refers to an amount that has been determined in advance without any conditions, and with this ruling, this requirement has been excluded, allowing it to be included in ordinary wages even if employment conditions are attached.

Q. If the normal wage range is expanded, will it affect the minimum wage calculation?

A. There is no direct impact, but the wage items included when determining minimum wage compliance may change.

In the case of performance-based pay systems, whether or not ordinary wages are included varies depending on volatility and fixity, and the wage peak system may require recalculation of allowances based on reduced wages.

Q. Which industries will be most affected by this ruling?

A. This includes manufacturing, finance, transportation, and health care industries. These industries have a high proportion of regular bonuses and allowances and frequent shift work, so if the method of calculating normal wages is changed, the burden of increased labor costs is high.

Q. Does this precedent affect labor-management negotiations?

A. Of course. Reorganization of the basic salary-centered wage system, attempts to expand performance bonuses, and negotiations over past unpaid allowances may occur. Conflicts between labor and management over reorganization of wage items may also increase.

Q. Is this ruling unconditionally favorable to workers?

A. In the short term, it may be advantageous due to an increase in statutory allowances. However, if a company pursues a response strategy such as reducing overtime or converting to performance-based pay, long-term wage stability may decline.

Q. What countermeasures should companies consider first?

A. Check the wage system and reconsider whether allowances include regular wages

Recalculation of statutory allowances such as overtime and night allowances

Amendment of employment rules and collective agreement

Establishment of mid- to long-term wage structure reform strategy

Strengthening sufficient communication with workers

Q. What role does Daeryun Law Firm’s Normal Wage TF Team play?

A. The TF team, launched immediately after the ruling in December 2024, is comprised of labor lawyers and labor attorneys and is focusing on minimizing legal risks for companies.

We provide all-round support, including diagnosis of normal wages, advice on recalculation of statutory allowances, consulting on wage system reform, support for labor-management negotiations, and response to legal disputes.

Reporter Kim Mi-young (kmy@dailycc.net)

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