South Korean court ruling could lead to bigger wages in the auto industry image

South Korean businesses – automotive included – may face an increase in labor costs after the country’s Supreme Court ruled on Wednesday that fixed bonuses should be included in the calculation of regular wages.

The decision could affect a series of other lawsuits filed by workers at major manufacturers like Hyundai Motor and General Motors, which demand changes to their wage schemes.

“We acknowledge that the ruling will have a significant impact on South Korea’s labour relations and business activities,” said Chief Justice Yang Sung-tae, expressing hopes that the decision would help resolve other legal disputes regarding so-called “ordinary wages”.

He said ordinary wages referred to a fixed sum paid periodically and uniformly, and therefore regular bonuses should be recognized as part of ordinary wages.

The ruling threatens to increase various statutory benefits, such as overtime allowance and severance pay, which are adjusted in proportion to ordinary wages, and will cost Korean businesses 13.8 trillion Korean won in the first year, and 8.9 trillion won annually after that, according to a business lobby group.

Some workers at automakers and shipbuilders, which rely heavily on overtime work, have already lodged separate lawsuits related to ordinary wages, demanding changes in their wage plans. About 150 cases have been filed regarding ordinary wages as of the end of September, according to estimates by labor organizations.

Also, according to media reports GM chief executive Dan Akerson told South Korean President Park Geun-hye in August that the ongoing wage case was a major barrier to maintaining operations in South Korea.

Via Reuters