Minister of Employment and Labor Phang Ha-nam has proposed tripartite talks among labor, management and the government to resolve the continuing controversy over the scope of “ordinary wages.”
The controversy revolves around whether quarterly bonuses constitute part of workers’ ordinary wages.
The ordinary wage matters because it is used to calculate various allowances, including those for extended, night or holiday work and retirement.
Yet the relevant law does not clearly define it. According to the Enforcement Decree of the Labor Standards Act, the ordinary wage is the “hourly wage, daily wage, weekly wage, monthly wage or contract amount paid to a worker on a regular and flat basis.”
The problem is that the definition does not make it clear whether quarterly bonuses are included or not.
The government’s interpretation over the past 30 years has been that they should be excluded because they are not paid on a monthly basis. Domestic companies have relied on this narrow interpretation in calculating the ordinary wages of their employees.
But the court’s interpretation is different. It views any wage paid “on a regular and flat basis” as part of the ordinary wage, regardless of the payment interval. Based on this broad interpretation, the court has handed down rulings that gradually expanded the scope of ordinary wage.
The latest controversy was sparked by a ruling in March last year, which regarded quarterly bonuses as part of the ordinary wage. This has triggered an avalanche of lawsuits. According to reports, some 100 suits have since been filed by trade unions to demand that companies pay additional allowances to their members.
Phang’s call for tripartite talks is aimed at getting labor and management to resolve the conundrum through compromise instead of lawsuits. He also wants them to make joint efforts to simplify their complicated wage systems.
The government has a quick fix for the problem ― to define ordinary wage in more detail in the enforcement decree and thereby eliminate the room for differences in interpretation.
Rewriting the enforcement decree is easy as it does not require approval from the National Assembly. Yet the problem is that trade unions are certain to defy any solution prepared unilaterally by the government. Furthermore, it would leave the current wage system intact.
In this regard, it was right for the minister to seek to find a solution through tripartite talks. Otherwise, he cannot expect his efforts to resolve the problem to gain legitimacy.
Yet it won’t be easy to get the talks started as labor is not interested in dialogue on the issue. Rejecting the minister’s offer for talks, trade unions are demanding that the government respect the court’s latest ruling.
Labor’s attitude is not reasonable in light of the huge financial burden that corporations have to shoulder due to a problem not of their own making. They have simply followed the government’s guideline.
One estimate puts the additional costs stemming from the latest court verdict at 8.9 trillion won a year, excluding the retroactive allowance payments amounting to 30 trillion won.
Labor should accept Phang’s proposal for tripartite talks and compromise on the issue. It also needs to be open to an overhaul of the current wage structure to facilitate the implementation of the government’s plan to extend the retirement wage to 60 starting 2016.
The extended retirement age could increase labor costs of corporations if it is not accompanied by a wage peak system.
