Ordinary Wage in Korea: Criteria, Included Items, Calculation & Key Court Rulings

What Is Ordinary Wage?

Ordinary wage (통상임금) is the benchmark wage used to calculate various statutory allowances — including overtime, night-shift, and holiday work premiums — as well as severance pay (퇴직금) and maternity leave benefits. Article 6 of the Enforcement Decree of the Labor Standards Act (근로기준법 시행령 제6조) defines ordinary wage as "the hourly, daily, weekly, monthly, or piece-rate amount agreed to be paid to a worker regularly and uniformly for the prescribed work or total work performed."

Following the Supreme Court en banc ruling of December 2024, the key criterion under current standards is whether the payment is "compensation for prescribed work" (소정근로의 대가). "Fixed-ness" (고정성), which earlier case law treated as a separate requirement, is no longer recognised as an independent criterion for determining ordinary wage. The word "fixed" does not appear in Article 6 of the Enforcement Decree either.

Items Included in and Excluded from Ordinary Wage

Included (examples)
- Base salary
- Fixed allowances related to job duties or position (직무수당·직책수당)
- The guaranteed minimum portion of performance pay where a minimum is assured
- Regular bonuses (상여금) paid regularly and uniformly

Excluded (examples)
- Expense reimbursements (실비변상적 금품) such as business-trip allowances and actual meal cost reimbursements: In ruling 97다18936 (20 January 1998), the Supreme Court held that business-trip meal allowances and work-trip expenses paid to a driver were expense reimbursements in nature and therefore not wages.
- Welfare points (복지포인트): In ruling 2016다48785 (22 August 2019), the Supreme Court held that welfare points granted under a flexible welfare programme are not compensation for work and denied their wage status entirely.
- Performance pay that varies entirely according to work results (though any guaranteed minimum portion may be included)

Note for foreign workers: Your employment contract may specify allowances differently from the statutory minimum. Always check whether your contract terms meet or exceed the legal standards described here.

Ordinary-Wage Status of Performance Pay — Latest Court Standard

In ruling 2023다216777 (14 August 2025), the Supreme Court set out an important standard:

Performance pay granted according to work results is in principle not ordinary wage; however, if a guaranteed minimum amount is assured, that minimum portion qualifies as ordinary wage. Even if payment is conditioned on being employed at a specific point in time, that fact alone does not negate ordinary-wage status.

In other words, if a company's performance-pay structure guarantees "at least ○○ won," that guaranteed amount must be treated as ordinary wage. For performance pay based on the prior year's results, whether a guaranteed minimum exists is assessed by reference to the prior year — the period to which the pay relates.

How to Calculate the Monthly Standard Hours for Ordinary Wage

Converting an hourly ordinary wage to a monthly figure, or a monthly salary to an hourly rate, requires the monthly standard hours for ordinary wage calculation.

According to the Ministry of Employment and Labor administrative interpretation (고용노동부 행정해석, 13 March 2023), the monthly standard hours for all workers — including shift workers — are calculated as follows:

Monthly standard hours = (Weekly prescribed working hours + Weekly paid hours) × 52 weeks ÷ 12 months

For example, with a 40-hour work week and 8 paid weekly holiday hours: (40 + 8) × 52 ÷ 12 = 208 hours (commonly written as 209 hours due to rounding differences). These standard hours are fixed and do not change based on the actual hours worked in a given month.

A separate administrative interpretation (28 February 2022) also confirms that setting the monthly standard hours at 243 hours is permissible, but any change to the standard hours must go through the work-rules amendment procedure (취업규칙 개정 절차).

Can Labor and Management Agree to Reduce the Standard Hours?

Even if a collective agreement sets the ordinary-wage standard hours lower than actual working hours, the agreement is void if the resulting ordinary wage falls below the ordinary wage calculated under Article 6 of the Enforcement Decree of the Labor Standards Act (근로기준법 시행령 제6조) (Ministry of Employment and Labor administrative interpretation, 30 December 2022). The principle that any agreement disadvantageous to workers has no legal effect applies here.

Practical Checklist

1. Confirm whether each allowance paid is "compensation for prescribed work."
2. Check whether performance pay includes a guaranteed minimum → if so, that amount must be included in ordinary wage.
3. Verify that the monthly standard hours are correctly stated in the work rules and collective agreement.
4. Review whether any standard hours agreed upon by labor and management fall below the legally required standard.

If ordinary wage calculations feel complicated, try the salary take-home pay calculator at Workbear (workbear.kr). You can easily check your actual take-home pay including various allowances, and use the AI search feature to find labor law information tailored to your situation.

This article is for informational purposes only and does not constitute legal advice. For specific cases, consult a certified labor attorney (노무사) or lawyer.