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Wage calculation for 2019 satisfies neither side

Dec 26,2018
The government is under intense pressure from both businesses and labor unions over the way it plans to calculate wages next year.

The business community claims that a government move to include resting hours in wage calculations would result in increased labor costs and could lead to many smaller companies violating the minimum wage regulations.

Unions say the calculation is less than was promised to them.

On Christmas Eve, a cabinet meeting decided to come up with a revised plan regarding paid holidays and make a final decision at its next meeting on Dec. 31.

The government said it will be excluding pay for non-legal holidays when calculating the hourly pay. These are holidays individual companies and their unions have agreed to give workers, such as a company’s founding day.

However, it will continue the custom of companies paying extra wages worth a day’s work for legal holidays, like Sundays.

If an employee worked eight hours a day from Monday through Friday, that employee has worked 40 hours a week. But under the current custom, the employee is paid for another eight hours of work for Sunday. The amount of hours the employee worked that week must exceed 15.

Considering that, on average, there are 4.345 weeks in a month, an employee that works 40 hours a week works 174 hours a month. After adding the additional eight-hour payment made for legal holidays, such as Sundays, employees on paper work for 209 hours.

The increase in the hours that the employee has worked in a month could result in the company violating the minimum wage regulations.

Let’s say an employee gets 1.70 million won ($1,510) a month. Under the 40-hour rule, the employee receives 9,770 won per hour, which is above the 8,350 won minimum wage for next year.

But when the working hours bump ups to 209 hours a month, the hourly pay drops to 8,133 won, below the minimum wage.

Violating the minimum wage could put an employee into jail for three years or less or make him liable for a fine of 20 million won or less.

According to a statement released by the government on Monday, the purpose of the revision of the minimum wage law was to make the calculation on the minimum wage clearer and not to increase the burden on businesses.

“Under the current minimum wage legislation, monthly wages are calculated by the number of labor hours, but there have been some difference in interpretation by the court and the Labor Ministry,” the statement said. “In order to prevent confusion, we have decided to include the number of hours on paid [legal] holidays.”

It added that it decided not to include holidays agreed to by companies and their unions because it would be costly for companies.

“There have been concerns that when including the non-legal holidays, it could add labor costs,” said Labor Minister Lee Jae-kap.

Initially, the government was planning to include the non-legal holidays when calculating the hourly rate. But this would boost the number of companies in violation of the law.

It decided to step back after it was pointed out that the increase in working hours to more than 209 hours a month would result in people earning more than 50 million won a year technically being under the minimum wage.

The government also decided to extend another three months its investigation of businesses violating the minimum wage.

“The business community is disappointed with the revised plan and even feels wronged,” the Korea Employers Federation, a leading business lobbying group, said in a statement released Monday.

The Korea Federation of SMEs also said it was regretful that the government has decided to include the legal holiday pay in the minimum wage.

“The fundamental solution in solving the various problems [with the minimum wage] is to come up with valid legislation and abolish the legal off-day pay, which can’t be found in any other country,” the SME lobby group stated.

Political parties are also joining the fight with the conservative Liberty Korea Party and the Bareunmirae Party, both stating that the new plan isn’t a move forward and only further confuses the situation.

Organized labor said the decision to exclude the non-legal holidays in the minimum wage was a step back from the labor policy promised by the government and claimed that the Finance Ministry was bending to the will of the business community.

“The government trying to overturn an issue, which it already has announced of implementing [earlier] is a serious problem,” the Federation of Korean Trade Union said in a statement. “Finance Minister Hong Nam-ki should apologize to the 20 million workers.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]