Payday is often on the 25th or 10th
Difference in payment methods... Post-payment or advance payment?
There is a day that every office worker eagerly awaits. It is the "payday." Payday serves as a driving force for performing company tasks and plays an important role in establishing personal financial plans. Nowadays, payday varies, such as the 10th, 17th, or 20th of the month, but in the past, most companies adopted the 25th as payday. What is the secret behind the payday date?
The Reason Behind Office Workers' Payday on the '25th'
To understand why the 25th became established as payday, we need to go back to the 1800s. In 1899, Emperor Gojong established Daehan Cheonil Bank, the predecessor of Woori Bank, which paid its employees on the 25th of every month. This was because Japanese banks had set the 25th as payday. Japanese banks accumulated cash by the 25th to pay their bank employees. Since payday was considered on the date when banks had the most cash, companies began to set the 25th as payday.
So why did Japanese banks designate the 25th as payday? It was for easier calculations. Nowadays, salaries are deposited into accounts, but in the past, without computer systems, cash had to be paid in envelopes. Banks manually calculated incoming and outgoing money using abacuses. Since dates containing 0 or 5 made calculations easier, it was common to finish the previous month’s settlement by the 10th. Banks then spent 10 days calculating employees’ salaries and the last 5 days reviewing and correcting before paying salaries on the 25th. However, in the early 1980s, as banks began adopting online computer systems, salary envelopes disappeared into memory, and payday dates gradually started to change.
Differences Between Payday on the '25th' and the '10th'
Nevertheless, quite a few companies still designate payday as the 25th or the 10th. What are the differences between these two dates? When payday is on the 25th, it follows a "post-payment + pre-payment" method. That is, the company pays employees for the 25 days they worked after the fact and advances payment for the remaining 5 days. This payment method is often adopted by large companies with ample funds.
Then, does payday on the 10th mean paying post-payment for 10 days of work and pre-payment for the remaining 20 days? Not exactly. Payday on the 10th means a "post-payment" method. It means paying the monthly salary 10 days into the following month, effectively delaying salary payment by 10 days. Small and medium-sized enterprises (SMEs) mainly adopt this post-payment method because they do not receive immediate payment from large companies after selling goods. Since payment settlements take at least a month, they have no choice but to delay salary payments. Additionally, some choose the post-payment method to invest the temporarily available funds or repay loans to reduce interest.
However, for public officials, payday varies by job category, unlike regular company employees. Military personnel receive pay on the 10th, education officials on the 17th, administrative officials on the 20th, and other government agency officials on the 25th. The reason for the varied payday dates is to prevent a large outflow of government funds at once during times when the national treasury was not abundant.
Unused Annual Leave Allowance Often Paid Together with January Salary
January salary holds special significance. It is common for the January paycheck to include Lunar New Year bonuses or unused annual leave allowances. Annual leave grants 15 days of paid leave to employees who have attended work at least 80% of the year. For employees who have worked continuously for more than three years, an additional paid leave day is granted for every two years beyond the first year. However, the total number of leave days is capped at 25.
Annual leave is generated and expires on a yearly basis, and employees must use all their leave before expiration at their preferred time. Accordingly, companies have an obligation to encourage employees to use their annual leave. However, if the employer does not promote leave usage or if employees cannot use all their leave due to company reasons, the unused leave must be compensated as an allowance, called "annual leave allowance." According to Article 60, Paragraph 5 of the Labor Standards Act, annual leave is paid leave, so employees must be paid their ordinary or average wages. The annual leave allowance paid for unused leave is the same.
Meanwhile, in the United States, wages are usually paid weekly rather than monthly. There are two methods for weekly pay: Bi-Weekly and Bi-Monthly. Bi-Weekly means paying wages 26 times a year, while Bi-Monthly means paying wages 24 times a year. In the Bi-Monthly method, although it varies by company, wages are usually paid on the 1st and 15th or the 15th and 30th of each month. However, professionals, executives, and supervisors often have annual salary systems. Their annual salary, determined based on job evaluation, is divided into 12 months and paid monthly, similar to Korea. Besides the U.S., countries like Australia and New Zealand also adopt weekly pay systems. In Korea, weekly pay is mainly used for production and field labor jobs.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
