I. Summary
The company related to this case, a foreign-invested company based in Sweden with about 50 employees in Korea, produces and sells medicine. Its salary structure is composed of a basic annual salary and a variable bonus. The company sets a business target each year and in March determines the variable bonus by evaluating its target achievements for the previous year. The company includes a business performance bonus into the average wage when calculating severance pay and also into the total salary in calculating premiums for Industrial Accident Compensation Insurance and Employment Insurance. At this, since this labor attorney provides legal service to this company, I explained that the business performance bonus paid by the company is not remuneration for labor and so shall be excluded from total salary, and that the company can receive a retroactive refund of the overpaid premiums for the past three years, as the total wages were calculated with faulty information. In December of 2009, the company applied to the Pyeongtaek Branch Office of the Employee Welfare Corporation for a refund of the overpaid premiums.

Ⅱ. Business Performance Bonus-Related Rules
Wages refer to remuneration for labor service that the employer pays to the employee. Such payments as 1) money given under friendly and favorable terms, 2) pure welfare fees, and 3) money paid for actual expenses, are not wages because they are not remuneration for work. In addition, the business performance bonus that has not been paid regularly, but paid temporarily or irregularly at the employer’s discretion, and according to company business profits, shall not be regarded as wages.
The Employee Welfare Corporation has regulated the "Criteria for Business Performance Bonuses" (Kongdan Jingsu 6510-52, Jan 23, 2003) as follows: 1) if the condition for payment is related to business performance, the bonus is not to be considered wages; 2) business performance is acceptable in various areas such as corporate profits, output, total sales, cost-saving measures, defect rate, accident ratio, market share, labor disputes, and so on; and 3) if the payment was decided by the results of business performance (such as sales, profits, etc.), even though the bonus has been paid regularly for a certain period due to good business performance, payment is not usually recognized as a general practice regulated as remuneration for work. Even though the company has included the business performance bonus into average wages to calculate severance pay, or the company has stipulated in the Rules of Employment, ‘the bonus is paid according to the results of company business,’ a business performance bonus whose payment and amount is determined by business results is not wages regardless of whether or not there is repeated payment. However, regular bonuses with no connection to business performance shall be included in total wages.
Premiums for Industrial Accident Compensation Insurance and Employment Insurance are calculated by multiplying the total wages by the company’s premium rates. Accordingly, if the total wages used to calculate those premiums includes a business performance bonus which is not wages, the resulting calculations would be faulty, resulting in the company paying more in premiums than required. The company would then be eligible to receive a refund for the overpaid premiums through an official petition.

Ⅲ. Details of the Company’s Business Performance Bonus
The company does not regulate anything about the performance bonus paid outside of wages in the Rules of Employment, only mentioning in the employment contract that "the employee’s performance bonus can be paid at the employer’s discretion, according to business results for the company."
The procedures to determine whether or not a business performance bonus will be paid for the previous year are the following： 1) The general manager or the plant director discusses business performance with the company president, and then 2) the president would discuss with the HR director of the head office in Sweden and then make a final decision about the company’s business performance. The business performance bonus was then distributed to each employee each year according to individual performance and team performance. When deciding on increases to employee annual salaries in March of each year, the company also determined whether a business performance bonus would be paid for the previous year, and how much would be paid to each employee. Ⅳ. Refund of Premiums and Conclusion
The Employee Welfare Corporation confirmed that the company calculated the total wages incorrectly and paid more in premiums for Employment Insurance and Industrial Accident Compensation Insurance, and then refunded the overpaid premiums for the past three years (6,753,000 won) on Feb 19, 2010. This was the result of the company’s business performance bonus not being considered work-related remuneration, but to be excluded from total wages. From now on, the employer would be able to exclude business performance bonuses when calculating total wages to determine Employment Insurance and Industrial Accident Compensation Insurance premiums. However, if the companies that used to include the business performance bonus into total wages decide to exclude that business performance bonus from the total salary, assuming that the money might be regarded as a business performance bonus, without petitioning the Employee Welfare Corporation for permission, it may be an illegal payment of insurance premiums.