Amendment to the Minimum Wage Act (effective from January 1, 2019)
May 30, 2018 | Labor
An amendment to the Minimum Wage Act was passed by the National Assembly on May 28, 2018. The amendment will become effective from January 1, 2019 and the details are as follows.
1. Expansion of the Scope of Minimum Wage (Article 6, Paragraph 4)
Under the amended Minimum Wage Act, bonuses and welfare benefits such as meals, lodging and transportation allowances paid regularly to employees at least once a month will be counted when calculating each employee’s wages in determining violation of legal minimum wage.
Specifically, monthly bonuses exceeding 25% and monthly welfare benefits surpassing 7% of the monthly legal minimum wage are considered as wages in calculating minimum wage of each employee. The thresholds will be progressively lowered every year until 2024 as shown in the table below.
(1) Threshold for bonuses
(2) Threshold for welfare benefits
(a) The legal minimum wage per hour in 2018 is KRW 7,530.
(b) If monthly contractual working hour is assumed as 209 hours, the monthly legal minimum wage is KRW 1,573,770.
(c) If monthly bonuses is KRW 500,000 in 2018, the portion of the bonuses over 25% of KRW 1,573,770 (i.e., KRW 106,557) is considered as wages in calculating minimum wage.
2. Procedures for changing rules of employment (Article 6-2)
Bonuses can be counted when calculating minimum wage by changing the pay period (e.g. from quarterly pay to monthly pay) without a change in total amount. Generally, a change in rules of employment which is unfavorable to employees would require an employer to obtain prior consent of a majority of employees or labor union. However, under the amendments, an employer may change the pay period to meet the minimum wage requirements by only listening to the opinions of a majority of employees or labor union.