Inclusive Wage-related Lawsuits Loom Large

With Korea Aerospace Industries (KAI) facing more than 18.8 billion won in damages after inclusive wage application to its office employees, similar cases are likely to follow one after another in a large number of South Korean companies.

At present, almost all of the top 10 South Korean business groups are applying inclusive wages to their employees. The inclusive wage can be defined as one paid based on predicted overtime work when it is difficult to accurately calculate extended work hours, night work hours, or holiday work hours. In a related survey of the Korea Economic Research Institute, which has 600 member companies, close to 60 percent of 195 member companies answered in February last year that they were applying inclusive wages mainly to office workers.

The problem is that office workers’ working hours can be easily calculated in many cases and, as such, the application to them is leading to an increasing number of legal disputes. “Office employees’ night work allowances have been paid in the form of inclusive wages and this has been like an established practice in many companies whereas production workers’ allowances are additionally calculated based on labor-management agreements,” said a union executive, adding, “We are planning to call that practice into question in that it has led to certain employees’ pecuniary losses.”

Experts point out that employees are likely to win such lawsuits in many cases as seen in the recent case of KAI. The company has paid inclusive wages since 1996 and 1,428 employees recently won the first trial. “The office employees’ working hours can be easily calculated, their inclusive wages are invalid, and the company must pay them 18.8 billion won, including unpaid overtime wages,” the court ruled.

With disputes arising in more and more companies, the Ministry of Employment and Labor has failed to release guidelines for no less than 33 months. “We are gathering opinions from various industries before improving the inclusive wage system,” the ministry explained, adding, “We are trying to be as prudent as possible in that any change will have a huge impact across industries.”