Ⅳ. Average Wage

1. Concept

Article 2 of the LSA (Definition of Average Wage)
① The term “average wage” means the amount calculated by dividing the total amount of wage paid to the relevant worker during three calendar months prior to the date of calculation by the total number of calendar days during those three calendar months. This shall apply to all employment including that of less than three months.
② If the amount calculated pursuant to the provisions of paragraph (1) is lower than the ordinary wage of the worker concerned, the amount of the ordinary wage shall be deemed average wage.

Enforcement Decree to the LSA, Article 2 (Period and wage Excluded from the Calculation of Average Wage)
① In cases where the period of calculating average wage, as provided in Article 2 of the Act, includes the period falling under any of the following subparagraphs, the period and wage paid for that period shall be deducted respectively from a basis period for the calculation of average wage and the total amount of average wage:
1. A probationary period within 3 months;
2. A period of shutdown due to a cause attributable to the employer as prescribed in Article 46 of the Act;
3. A period of maternity leave as prescribed in Article 74 of the Act;
4. A period of suspension of work for medical treatment due to occupational injury or disease as prescribed in Article 78 of the Act;
5. A period of childcare leave as prescribed in Article 19 of the Act on Equal Employment for Worker-Family Reconciliation;
6. A period of strike as prescribed in subparagraph 6 of Article 2 of the Trade Union and Labor Relations Adjustment Act;
7. A period of suspension of service or of non-work owing to performance of duties as prescribed in the Military Service Act, the Establishment of Homeland Reserve Forces Act, or the Framework Act on Civil Defense; provided that the same shall not apply in cases where wage are paid during that period; and
8. A period of suspension of work with approval from the employer caused by non- occupational injury, disease, or other reasons.

2. Methods for Calculating Average Wage

(1) General calculation

Average wage mean the actual wage paid for actual work provided and calculated into the daily wage rate. Average wage is the amount calculated by dividing the total amount of wage paid to the relevant worker during three calendar months prior to the date of calculation by the total number of calendar days during those three calendar months.

Average Wage＝        Total amount of wage paid for the last three calendar months
         Total number of calendar days in the last three calendar months(89-92 days)

1) The total amount of wage paid for the last three calendar months
The total amount of wage includes all wage under the Labor Standards Act excluding other forms of payment. In determining whether individual items of pay may be identified as wage reflected into the calculation of average wage, the following criteria shall be considered: ① the items are paid regularly and periodically; ② they are mandated by the employer according to collective bargaining, rules of employment, salary regulations, the labor contract, or habitual practice; or ③ employees identified under general conditions are paid uniformly. If individual items of pay meet any of these criteria, the items of pay shall be considered wage regardless of their titles.
In cases where bonuses are paid once per annum and paid for periods exceeding one month, the total monetary value of the bonus paid for a certain month shall not be included into the calculation of average wage. The bonuses shall be calculated by dividing the total monetary value of bonuses paid to a relevant employee(during the twelve calendar months before the day on which cause for calculating their average wage occurs) by the total number of calendar months, which is 3/12 times the total monetary value of bonuses paid per year.

2) Total number of calendar days in the last three calendar months prior to the occurrence date
The date on which the event occurred or the incident which necessitates such calculation means, in the event of resignation, the day in which the employer accepts the letter of resignation submitted by the employee. In the event of an industrial accident, it is the day on which the injury occurred, or the day when the disease is confirmed by diagnosis. However, the periods excluded from calculation are periods of shutdown on account of the employer, periods of maternity leave, periods of suspension from work for medical treatment owing to occupational injury or disease, periods of childcare leave, periods of strike, periods of approved suspension from work, and periods of suspension of service owing to performance of duties.
The period of three months does not signify 90 days, but three(3) calendar months(89~92 days) from the occurrence date. For employment of less than three months, the actual period served is calculated.



(2) Exceptional case: Calculation of average wages during periods of leave

1) “Average wage” where an employee came to resign after a period of leave from work that the employee took with approval from the employer due to non-occupational injury, illness or other reason shall be calculated as follows: “average wage” to calculate severance pay refer to the amount calculated by dividing the total amount of wage paid to the relevant employee during three calendar months prior to the date of calculation by the total number of calendar days during those three calendar months(Article 2 of the LSA). If the amount calculated by this method is lower than the ordinary wage of the employee concerned, the ordinary wage shall be deemed as average wage.
2) In cases where the period of calculating average wage includes the period falling under a period of leave from work with approval from the employer caused by nonoccupational injury, illness, or other reason, the period and wage paid for that period shall be deducted respectively from a basis period for the calculation of average wage and the total amount of average wage(Article 2 of the Enforcement Decree to the LSA). Therefore, in cases where an employee took a leave of absence for non-occupational injury, illness or other reason in accordance with Article 2(8) of the Enforcement Decree to the LSA(with approval from the employer), the remaining period and wage excluding the period mentioned above shall be used for the calculation of average wage. If the leave of absence exceeds three months, the first day of the leave of absence shall be the date for calculating average wage based on the previous three months. In any case, if the amount calculated above is lower than the ordinary wage of the employee concerned, the amount of the ordinary wage shall be deemed as average wage.
3) In cases where leave of absence is due to the employee’s choice or actions, this period shall be included in the standard period in calculating average wage. In cases where an employee could not provide labor service during the period required for calculating average wage due to the employee’s choice or actions, this period shall be included in the standard period in calculating average wage. On the other hand, in cases where an employee took a leave of absence with approval from the employer, caused by non-occupational injury, diseases or other reasons according to Article 2(8) of the Enforcement Decree to the LSA, the remaining period and wage excluding the period mentioned above shall be used for the calculation of average wage. If the leave of absence exceeded three months, the first day of the leave of absence shall be the date for calculating average wage based on the previous three months. In any case, if the amount calculated above is lower than the ordinary wage of the employee concerned, the ordinary wage shall be deemed average wage.

3. Adjustment of Average Wage

(1) Average wage in special cases (When to use special case for calculation of average wage)

1) When the period excluded from the calculation of average wage is 3 months or longer (Article 1)
If the period of time excluded from the calculation of average wage is at least three months(Article 2(1) of the Enforcement Decree to the LSA), the average wage shall be calculated based on the date on which the cause for calculating average wage occurs. The same shall apply mutatis mutandis to adjustment of average wage(Article 5 of the Enforcement Decree to the LSA). In this case, “the month when the injury or illness occurred” shall be deemed to be “the month of the first day of the period excluded from the calculation of average wage”.

2) If the reason for calculating the average wage occurred on the first day work is provided (Article 2)
If the reason for calculating the average wage occurs on the first day work is provided, the average wage is calculated from the average daily wage that was supposed to be paid to the worker.

3) When wage are paid collectively by two or more workers (Article 3)
In the event wage are paid collectively with two or more workers in one pair, the employee’s career, production performance, working days, technical skills, responsibilities, and distribution practices shall be taken into account, unless a pre-determined payment method is provided for individual workers. We estimate the wage per worker and use the amount to estimate the average wage.

4) If part of the total wage is not clear (Article 4)
If the period in which the average wage is included includes payment of an additional portion in the average wage, the average wage shall be deducted from the total amount of wage paid out of the extra period from the total number of days.

5) When the total amount of wage is not clear (Article 5)
If the average wage cannot be calculated in accordance with the provisions of Article 1 through Article 4 of the Special Notice on Calculation of Average Wage, the head of the regional Employment and Labor Office shall consider the average wage of the worker as deemed appropriate in consideration of the following:
1) Matters concerning wage level and inflation assessment in the area where the workplace is located;
2) Matters concerning the monthly salary, monthly income, and monthly average salary reported under the Income Tax Act, the National Pension Act, the National Health Insurance Act, and the Employment Insurance Act;
3) Matters concerning wage of workers engaged in the same occupation as the worker at workplaces of the same or similar size as the type of business in the area where the workplace is located;
4) Matters concerning documentary evidence, such as records held by the person or his / her family, etc.(in this case, only if the employer approves) of the money received during the period providing work at the workplace;
5) Matters concerning employment labor statistics, such as the “Report on Labor Status by Employment Type” and the “Labor Work Survey Report”, which are surveyed and published by the Minister of Employment and Labor.

(2) Adjustment of average wage in special cases (Article 5 of the Enforcement Decree to the LSA)

1) The average wage applicable to the calculation of compensation, etc. for the employee pursuant to accident compensation under the Labor Standards Act shall, when the average amount of monthly ordinary wage per employee(hereinafter referred to as the “average amount”) paid to employees in the same business category in the same business or workplace to which the relevant employee belongs has changed by at least five percent from the average amount paid in the month when an injury or a disease occurs, be such amount increased or decreased at the aforesaid rate of change, but such rate shall apply to the month immediately following the month of occurrence of grounds for change and the months subsequent thereto. Provided, that the second or latter adjustment of average wage shall be calculated based on the average amount of the month in which a cause for immediately preceding change occurred.
2) Where the business or workplace to which the relevant employee belongs is permanently closed down, the adjustment of average wage under paragraph(1) shall be based on a business or workplace of the same business type and scale as at the time when the employee received the occupational injury or was diagnosed with the occupational disease.
3) If there is no employee engaged in the same occupational category as the relevant worker, the adjustment of average wage under paragraph(1) or(2) shall be based on employees engaged in the occupation of similar category.
4) The average wage applicable to computation of retirement benefits under Article 8 of the Act on the Guarantee of Employees’ Retirement Benefits, which shall be paid to an employee who suffers from an occupational injury or disease, shall be the average wage adjusted in accordance with paragraphs(1) through(3).