DP candidate's vow to abolish Korea’s lump-sum salary system underscores its flaws

Home > Business > Economy

DP candidate's vow to abolish Korea’s lump-sum salary system underscores its flaws

Published: 29 May. 2025, 14:46 Updated: 29 May. 2025, 15:02

Audio report: written by reporters, read by AI

Late-night workers are seen at an office in Seoul on Feb. 28, 2018. [YONHAP]

The Democratic Party's (DP) presidential candidate Lee Jae-myung vowed to abolish Korea's notorious “flat-sum” salary system. But can he?

The flat-sum wage system — referred to as the comprehensive salary system or the inclusive salary system in Korean — is not defined by law but has been conditionally recognized by the Supreme Court. It is a lump-sum salary system that allows employers to pay fixed overtime wages when it is difficult to track exact working hours.

In practice, however, it has often led to workers being forced to work extra hours without proper compensation.

“It’s common to work far beyond the 30 additional hours specified in the annual salary contract, but we don’t get paid for the extra overtime. It’s basically unpaid labor.”

“There’s no overtime pay for weekday night work. My friend often works until dawn. Even weekend pay is supposed to be based on regular wages, but the flat overtime rate is fixed.”

These are examples of wage abuse recorded by the Ministry of Employment and Labor's anonymous reporting center.

Both companies cited were found to be in violation of the Labor Standards Act. In the first case, approximately 100 million won ($73,000) in unpaid overtime wages were identified. In the second, 77 employees were affected by overtime violations, with a total of 88 million won in unpaid wages.

Democratic Party presidential candidate holds a campaign in eastern Seoul on May 28. [JOONGANG ILBO]

The DP's Lee has pledged to abolish the flat-sum wage system, reigniting concerns over unpaid overtime — often referred to as “free labor.”

The issue was first spotlighted in 2016 after a game developer died during an overnight work session. The government attempted to create official guidelines at the time, but they were never finalized. Amid this legal void, the practice continues to be widely abused.

According to data obtained Wednesday by DP lawmaker Rep. Park Hong-bae, the ministry’s reporting center received 695 reports of suspected abuse in 2023 and 241 reports in 2024. Nearly half — 388 cases in 2023 and 89 in 2024 — were deemed credible enough to warrant official investigations. These resulted in findings of wage violations affecting roughly 9,321 workers and 5.7 billion won in unpaid wages last year, and 2,884 workers and 1.1 billion won in 2024 thus far.

“Beyond these reported cases, the actual damage caused by flat-sum wage abuse in the workplace is likely far greater,” said a spokesperson for Park’s office. “‘Long working hours’ and ‘free labor’ are among the core issues weakening Korea’s labor market.”

Abuse of the system is most severe in the gaming industry, where the term “crunch mode” — referring to long hours in the lead-up to game launches — is common.

Bae Su-chan, head of the Nexon labor union, said that while the system has been eliminated at major gaming firms, it still exists in smaller companies and Nexon subsidiaries like Mintrocket in altered forms.

“Many workers don’t even have properly managed clock-in and clock-out records to prove they worked overtime,” he said.

Nexon headquarters in Gyeonggi [NEXON]

According to the Korea Creative Content Agency, 69.9 percent of game industry workers were under flat-sum wage contracts as of last year, and the rate exceeded 90 percent for small firms with fewer than 50 employees.

Several bills aiming to abolish the system have already been introduced in the National Assembly, including one led by Park. His proposed amendment to the Labor Standards Act would prohibit flat-sum contracts that fold overtime, night and holiday pay into the base salary, and would require that actual work hours be recorded in payroll documents for wage calculation. Fellow DP lawmakers have also submitted similar bills.

While most labor experts agree on the need for reform to prevent abuse, some caution against an outright ban.

Kwon Hyuk, a professor at Korea University’s Graduate School of Labor Studies, warned that excessively rigid oversight of working hours could backfire, inconveniencing workers and raising unnecessary monitoring costs.

“Even short breaks for smoking or coffee could become targets of enforcement,” he said. “Rather than a blanket ban, it would be better to legally clarify the valid conditions and scope of the flat-sum system, and require procedural safeguards such as labor union approval.”

“A more realistic approach would be to mandate strict record-keeping in workplaces where tracking work hours is feasible, while allowing limited exceptions in industries where it is not,” said Kwon Soon-won, a professor of business at Sookmyung Women’s University.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM YEON-JOO [[email protected]]