By Nam Hyun-woo
Deputy Prime Minister Kim Dong-yeon pledged Friday a prompt revision of the Labor Standards Act in order to clarify the legal definition of “base wage” after a court ruling in favor of Kia Motors’ labor union.
“To resolve problems more fundamentally, the government will push for a prompt law revision to make the legal boundaries of base wage clearer,” Kim said during a meeting with other ministers. “Also, the government will strengthen its monitoring on businesses to prevent unnecessary labor-management conflict.”
A day earlier, the Seoul Central District Court ordered Kia Motors to pay 422.3 billion won ($370 million) to its employees, ruling that regular bonuses should count as part of the base wage.
It was ruling on a 2011 suit filed by 27,424 union members calling for the company to recognize regular bonuses, meal allowances and daily expenses as part of the base wage, which is used as a basis for calculating compensation, severance pay and retirement benefits.
Kia Motors said it estimates the verdict will cost it up to 1 trillion won in additional personnel costs.
The court decision is significant because not only the carmaker but also 115 other companies are engaged in similar legal disputes at district courts nationwide. The Korea Employers Federation said companies may have to pay between 20 trillion and 38 trillion won in unpaid wages.
However, the Labor Standards Act clause on the base wage has caused confusion among workers and employers. For example, management and trade unions have had different ideas over whether lump-sum bonuses paid regularly -- but not every month -- should be included.
In 2013, the Supreme Court ruled that salaries which are paid “regularly, uniformly and permanently” can be included in base wage.
Currently, two bills are pending at the National Assembly and both are more favorable to workers than employers in defining the base wage. If one of the two bills passes the Assembly, employers are expected to face further costs.
Kim fell short of elaborating on what revision he is planning.