Ministry of Employment and Labor: Employers Must Pay Fixed Overtime Shortfall
The Ministry of Employment and Labor (MOEL) has released its first official guidelines aimed at eradicating the practice of 'unpaid work'. The 'Guidance Directive on Preventing Misuse of Comprehensive Wage Systems to Eradicate Unpaid Work' will take effect on April 9. The core message is that even if fixed overtime pay (fixed OT) is agreed upon in advance, employers must pay the difference if the statutory allowance calculated based on actual working hours is greater. It also clarifies that violations can lead to penalties for unpaid wages.
The comprehensive wage system, which pays employees a predetermined amount regardless of actual working hours, has been widely used in practice. Previous efforts to reform the system in 2017 were abandoned due to opposition from both labor and management.
Employers are now required to itemize base salary and allowances for extended, night, and holiday work separately in wage ledgers and wage statements, ensuring accurate calculation and payment of allowances corresponding to the hours actually worked by employees. The introduction of fixed pay systems that do not distinguish between base salary and allowances, or fixed allowance systems that bundle various allowances, is also prohibited.
The management and supervision system to support the implementation of these guidelines has also been strengthened. Labor inspectors will directly verify on-site whether employers are properly preparing wage ledgers and wage statements. For workplaces where calculating working hours is difficult, the guidelines recommend the active use of special systems under current law, such as deemed working hours outside the workplace or discretionary working hours, rather than maintaining comprehensive wage systems. An anonymous reporting center for the misuse of comprehensive wage systems and fixed OT will also operate, and businesses that receive reports will be subject to regular or planned supervision.
Minister of Employment and Labor Kim Young-joo stated, "The unfair practice of not paying employees for the hours they worked simply because a comprehensive wage agreement was signed still persists in the field and requires urgent improvement." He emphasized, "Under current law, it is the employer's fundamental duty to pay workers the fair compensation for their labor based on their actual working hours." Minister Kim added, "We will actively support the swift passage of the related bill through the National Assembly."
These guidelines are a follow-up measure to an agreement reached in December of last year by the 'Roadmap Promotion Group for Reducing Actual Working Hours,' comprised of labor, management, government, and experts, to improve the practice of misusing comprehensive wage systems. Reflecting this agreement, Representative Kim Ju-young of the Democratic Party of Korea has put forth a related bill, which is currently under review in the National Assembly. Labor, management, and the government have agreed to establish immediately applicable standards based on existing laws and precedents, even before the bill is passed.