We need a monthly salary only

The dispute over ordinary wages is getting louder. The clash between the judiciary and administration has spilled over to the legislature. No other labor-management concerns have generated such huge repercussions across the board. Companies are at a loss amid labor-sector pressure, lawsuit threats and government discord.

Because of a lack of specific statutory terms on standard wages, labor and management have entirely relied on the administrative act and guidelines. They have negotiated and settled wages based on the customary practice of excluding fixed bonuses from ordinary wages. The courts over the years made concordant interpretations. The Supreme Court in March last year delivered a bombshell ruling that reversed the customary practice and confidence in the wage system, roiling the entire industry sector. Workers and labor unions rushed to the court demanding unpaid salaries and benefits in retirement.

The court also ruled that the voluntary agreements between labor and management in calculating ordinary wages are invalid. But since the ordinary wage is not necessarily the exact payment, but a base to calculate other compensation, the labor and management should have room to negotiate the terms. The British and Germans also respect labor-management independent bargaining on wages.

The dispute over ordinary wages goes beyond legal confusion, but also can have an impact on overall economic activities, jobs and social polarization. According to our survey, companies may have to put up with at least 38 trillion won ($34.3 billion) extra cost to comply with the Supreme Court ruling. The extra employment costs could take away corporate investment plans as well as over 400,000 jobs. Of salary turnover, 13.6 percent of fixed bonuses go to workers on permanent payroll. The nonpermanent and part-time workers receive just 2.7 percent. The bigger compensation package therefore would largely benefit the workers on permanent payroll backed by strong unions in large companies.

The controversial ruling of the Supreme Court was delivered without unanimous consensus. It also did not offer comprehensible reasoning for its judgment. It remains unclear whether the justices thought through the ramifications of their decision. The highest court has also been criticized for overstepping into legislative jurisdiction. The Supreme Court should deliver unanimous and clear legal judgment on the scope of standard wage. It should respect the norms and practices of labor and management in their decision.

The government also must contribute an active role as it provided the main reason for today’s confusion. It must clearly define what wages are in its administrative act. It could be true to the term of ordinary wage by clarifying that it is payment for labor within a month of calculation. Japan, which has similar wage system with ours, also reins in potential wage-related conflict by providing a clear definition.

Some say the problem should be settled through public disputes. But companies cannot afford to waste more time on this issue. Korean companies are quickly losing competitiveness due to Japan’s weak yen policy and external uncertainties. The risk for the corporate sector will get bigger if the government drags its feet on this issue. We expect the government will come up with wise and responsible decision as soon as possible.

Translation by the Korea JoongAng Daily staff.

*The author is a managing director of the Korea Employers Federation.

By Lee Dong-eung