63.5% of Companies: "100 Days After Ordinary Wage Ruling, Management Pressure Mounts"
Large Corporations Prepare for Retiree Lawsuits
SMEs Busy Adjusting Bonuses
Wage Increase Rate: 55% for Large Corporations vs. 25% for SMEs
Half of Companies Say "Minimum Wage Increase Is the Biggest Concern"
#1. The HR team of a major corporation is struggling with how to respond to lawsuits regarding ordinary wages. The labor union has formed a lawsuit group claiming that bonuses were included in the ordinary wages that form the basis of severance pay for thousands of retirees, stating that "if you work for 20 years, the severance pay difference alone amounts to 10 million to 20 million won." A labor officer said, "We have to compete with China, where labor costs are relatively low, but our company is only creating conditions to raise wages."
#2. "Can we give gifts instead of cash for Lunar New Year?" Small and medium-sized manufacturer B has paid bonuses to employees every holiday. "This was a desperate measure because including regular bonuses in ordinary wages would increase additional overtime pay." The HR team of company C is also considering changing regular bonuses to meal or transportation allowances. A B company official said, "Manufacturing is basically an industry with many regular bonuses," adding, "HR teams are flustered about how to respond to sudden wage increases."
One hundred days have passed since the Supreme Court ruled last December that regular bonuses must be included in ordinary wages, plunging the industrial field into turmoil.
According to the "100-Day Impact and Response Emergency Survey on the Ordinary Wage Ruling" conducted by the Korea Chamber of Commerce and Industry on about 170 companies with conditional bonuses on the 30th, 63.5% of respondent companies said the shock of ordinary wages is a significant burden or causing a serious management crisis.
On December 19 last year, the Supreme Court plenary session abolished the fixedness requirement among the regularity, uniformity, and fixedness criteria that had been used as standards for about 11 years since the 2013 ordinary wage ruling, and ruled that various allowances, including regular bonuses with employment or working day conditions, must be included in ordinary wages.
One hundred days after the ruling, the labor market is in chaos. Large corporations are facing a series of lawsuits mainly from retirees, while small and medium-sized enterprises are struggling to find ways to reduce labor costs. In this process, the wage gap between large corporations and SMEs is also widening.
When asked about the wage increase rate after regular bonuses were included in ordinary wages, 55.3% of large corporations expected a "wage increase of 5% or more," and 23.1% said "an increase within 2.5%." In contrast, 25.0% of SMEs expected a "5% or more increase," and 43.4% expected "an increase within 2.5%."
The CEO of a small and medium-sized company manufacturing automobile parts said, "The Serious Accidents Punishment Act has turned entrepreneurs into potential criminals, and now the court is treating ordinary wages, which have been properly paid according to previous precedents, as unpaid wages for falling short of the law," adding, "There has never been a more difficult time to run a business than now."
Due to the increased labor cost burden, companies are seeking responses by minimizing wage increases, replacing regular bonuses, or reducing new hires.
When asked about corporate response measures, 32.7% chose "minimizing wage increases," followed by "reducing or replacing regular bonuses" at 24.5%, "reducing overtime hours" at 23.9%, "cutting new hires" at 18.9%, and "expanding performance bonuses not included in ordinary wages" at 17.0%. Companies that have not prepared any specific countermeasures accounted for 21.4%.
However, whether such responses are actually possible remains uncertain. The labor sector plans to make the scope of ordinary wage inclusion a major issue in this year's wage and collective bargaining guidelines, invalidate existing labor-management agreements, and push for renegotiations. The collective lawsuit movement by large corporation unions is also a variable.
Kim Dong-wook, a lawyer at Sejong Law Firm, said, "The core agenda of this year's wage negotiations is likely to be the scope of ordinary wage inclusion, and although it has not materialized yet, there will likely be a considerable number of latent lawsuits," adding, "Since companies are exposed to financial and legal risks due to this ruling, a comprehensive reform of the wage system is necessary."
Meanwhile, the most concerning labor market issue this year was cited by 47.2% of companies as "minimum wage increase." This was followed by "court rulings on serious accidents" at 35.2%, "working hour reductions such as a four-day workweek" at 34.0%, and both "employment extension for those over 60" and "union-centered labor legislation" at 19.5% each.
Lee Jong-myung, head of the Industrial Innovation Headquarters at the Korea Chamber of Commerce and Industry, said, "As the global industrial landscape is rapidly changing, SMEs lack the capacity to respond to the extent that they need consulting on ordinary wages," adding, "The determination of working conditions must be based on labor-management agreements, and legal and institutional improvements should be made together."
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