Ordinary Wage
Ordinary Wage
What is ordinary wage?
- The reference amount for calculating premium pay
- Judged by regularity and uniformity, not by name
- The more you split items up, the greater the risk
Ordinary wage is not a line item on the payslip. It is the calculation engine behind the other numbers on it. First you get the ordinary hourly wage by dividing by 209 scheduled monthly working hours. The 50% premium for overtime, night, and holiday work is added on top of that, and unused annual leave pay and 30 days of dismissal notice pay start from the same figure. So when a single allowance of KRW 200,000 (≈ US$150) a month is added to the ordinary wage, the added labor cost is not KRW 200,000 (≈ US$150) but every bit of premium pay that allowance pushes up. The effect is bigger in manufacturing and logistics organizations with heavy shift work and overtime.
The most common mix-up in practice is with average wage. Severance pay, business suspension allowance, and industrial accident compensation are based on the average wage, which is total wages over the previous 3 months divided by the total number of days in that period. Overtime, night, and holiday premium pay and annual leave pay are based on the ordinary wage. However, if the average wage works out lower than the ordinary wage, the ordinary wage is treated as the average wage. A surprising number of companies use the same value for both standards in one Excel sheet.
The test is the payment conditions, not the name. What matters is whether the payment is compensation for scheduled work, and whether it is paid on a regular cycle to all employees or to all employees who meet a set condition. Recent case law holds that a payment is not excluded from ordinary wages just because it requires continued employment or a minimum number of workdays. Pay structures that rely on a single “current employees only” clause for protection most urgently need a second look.
Two things tend to go wrong in practice. One is the claim that “labor and management agreed on the scope of ordinary wages.” The ordinary wage rules are mandatory, so such an agreement is void to the extent it falls short. The other is the hope that renaming an allowance as a performance bonus or incentive will take it out. It does not work, because actual payment practice and conditions are what count. The statute of limitations on wage claims is 3 years, so once a problem is confirmed, it brings 3 years of premium pay differences, late-payment interest, and a recalculation of retirees’ severance pay all at once. How each item is classified varies by case, so we recommend having a labor law expert review it at the design stage.
Hwi KimCEO of HRDIST & talent development systems consultant
Kyungtae KimHR expert · Organizational culture and HR strategy consultantThe Enforcement Decree of the Labor Standards Act defines ordinary wage as the amount set to be paid to employees regularly and uniformly for scheduled work or total work. Supreme Court en banc rulings have established the criteria for deciding whether regular bonuses and similar payments count as ordinary wages.
Company A makes auto parts, with 340 employees and annual revenue of KRW 120 (≈ US$1) billion, and runs two shifts. It paid a regular bonus of 600% of monthly base pay a year, 100% in each even-numbered month, “for employees on the payroll on the payment date only.” Then the union sent a formal letter demanding that “bonuses be included in ordinary wages and 3 years be paid retroactively,” and a 3-month review began. (Hypothetical case)
- An HR manager opened the payroll ledger for the past 12 months and counted 23 allowance items. Only 9 of them had their payment conditions written out in the wage rules.
- The labor law firm advising them said, “Even with a current-employees-only condition attached, regular bonuses are very likely to be treated as ordinary wages,” and Company A recalculated the ordinary hourly wage to include the 600% bonus.
- When the finance manager ran the simulation, the ordinary hourly wage rose 30%, from KRW 11,200 (≈ US$8) to KRW 14,600 (≈ US$11), and the annual premium pay burden grew by KRW 600 (≈ US$1) million, from KRW 2.1 billion (≈ US$1,571,200) to KRW 2.7 billion (≈ US$2,020,100).
- The head of Management Support met with the union branch chief four times and proposed, “We’ll recognize the back pay, but let’s switch bonuses to monthly payments and cut fixed overtime from 32 hours a month to 20.”
- Six months later, the company cut its allowances from 23 items to 11 and agreed to pay the KRW 1.4 billion (≈ US$1,047,400) in back pay in installments over 2 years. In exchange, the annual increase in labor costs came down from KRW 600 million (≈ US$448,900) to KRW 240 million (≈ US$179,600), and the lawsuit that had been filed was withdrawn.