1. The Characteristics of Wage Management

Wage management is classified into ① level management, for total amount management, and ② system management, for the distribution of wages to employees. Level management is concerned with the exterior market balance, whereas system management maintains interior balance.
Wage management has two distinct characteristics: labor costs in the form of a company's production costs, and an employee's living costs. Accordingly, the principle of the least amount is applied to the former, while the principle of the greatest amount is applied to the latter. This brings about many conflicts in finding mutual interests. However, extremely low wages make it impossible to recruit or maintain capable manpower, while extremely high wages burden the company and hinder stable growth.
There are three separate working conditions. These are wages, working hours, and the work place (or work environment), which become the criteria by which new employees choose a company for which to work. Accordingly, the wage level must be determined considering working hours and the work place.

2. Determining Wage Level Jung, Bongsoo, 『The Korean Labor Law Bible』, 6th ed., 2021. Jungang, pp. 591-592.


The company's ability to pay, the employees' living costs, and the market price of wages are major factors considered when determining the wage level.

(1) Company's ability to pay
The company's ability to pay is not the financial capability of the company to pay the maximum, but its encompassed ability to pay within the limits of business operation.
Ability to pay is decided and disclosed by economic indicators of physical productivity such as value added, increased sales, and product productivity.
(2) Living costs
Living costs are the employee's general living expenses, including child education fees, as well as all other necessities of life. Direct living costs are difficult to calculate and so a model of the standard living costs including economic, social, and cultural conditions often serves as the common method adopted by the Life Cycle of a household model.

(3) Market prices of wages
Wages are directly related to manpower acquisition and employee morale. Even if wages are decided reasonably in terms of general considerations, it is usually impossible to hire the necessary employees if the company's wage level is lower than that of other companies in the same industry or if the company is unstable. Accordingly, the social wage level is highly considered when determining the wage level.

3. Wage System Management Jung, Bongsoo, 『The Korean Labor Law Bible』, 6th ed., 2021. Jungang, pp. 592-598.


The wage system is designed to keep internal balance through a reasonable distribution of limited labor costs. In practice, it depends on how the portions are divided among the items. The wage system is divided into basic pay and miscellaneous pay.

(1) Basic pay
Basic pay is the wage paid for labor under ordinary working hours and ordinary working conditions. Not only does it account for calculating standards for miscellaneous pay, but it is also the core of the wage system, revealing the company's wage policy.
Basic pay consists of seniority-based pay centered on human factors, job-based pay centered on job factors, and combined job-ability pay. Most companies use seniority-based and job-based pay schemes to varying degrees.
1) Seniority-based pay
Seniority-based pay, which is also known as human-based pay, is the typical wage system in accordance with the criteria of human factors. This is a wage increase system along with the regular promotion system according to the number of service years in terms of individual education, age, etc. and is widely adopted in Asian cultures.
2) Job-based pay
Job-based pay is a type of wage structure that determines individual wages according to the respective value of each evaluated job. This means to say that the system is a wage structure designed by the principle of “equal pay for equal work.” Therefore, job-based pay is one of the most general ability-centered wage structures.
3) Job-ability based pay
Job-ability based pay is a wage structure that combines seniority-based pay for human factors and job-based pay for job factors. That is, job-ability based pay classifies job skills, defines office organization (e.g., in-charge, part leader, section manager, etc.) and equates hobong (service year) level with seniority-based pay, which includes seniority factors. Therefore, the wages are determined by job content and individual job ability.

(2) Miscellaneous pay
Miscellaneous pay is wages paid as a reward for labor service, which has been provided additionally and for job performance as an additional pay structure. Miscellaneous pay includes technology allowances, title allowances, and legal allowances (overtime, day-off, and night allowances).

4. Wages and the Labor Standards Act Jung, Bongsoo, 『The Korean Labor Law Bible』, 6th ed., 2021. Jungang, pp. 71-72.


(1) Concept of wage

Article2 (5) of the LSA (Definition of Wages)
The term “wages” means wages, salary, and any other money or valuables, regardless of its title, which the employer pays to a worker as remuneration for work.


(2) Wage requisites
1) Paid by the employer
Given that wages are what the employer pays to the employee, the service charge that a worker receives from customers in a hotel or restaurant cannot be considered as wages in principle.
2) Remuneration for work
As wages are paid as remuneration for work, they cannot be deemed wages if the employer renders payment under friendly and favorable terms outside of work, or if the employer provides pay as part of welfare, or if the employee receives reimbursement for actual expenses.
3) Any payment regardless of label
Wages are paid in forms of salary or allowance in general. If the employer is paying remuneration for work to a subordinate employee, it is considered wages, regardless of what label the payment is given. Accordingly, we shall not estimate information allowance and welfare fees as wages just by their titles, because wages are differentiated by payment conditions.

(3) Concrete criteria of wages
1) Money paid under friendly and favorable terms is not considered wages
Money is not considered to be wages if paid for optional, courteous, and friendly reasons including congratulatory and consolation allowances, awards for quality control activities, or money paid favorably to celebrate special occasions such as the Company's foundation day.
2) Money paid for actual expenses is not considered wages
Money paid to reimburse the actual cost of purchasing production instruments such as security equipment is not wages. Reimbursements for purchase of work uniforms, tools and materials, business trip expenses, travelling expenses, account expenses, confidential expenses, and information fees are also not considered wages.
3) Welfare fees are not considered wages (in principle).
The welfare fee in its true meaning is not a wage because it cannot be treated as remuneration for work. However, if paid regularly to all workers in accordance with the collective agreement, rules of employment, or a repeated precedent, it is considered to be wages under the Labor Standards Act.

Wages

⋅Regular and continual bonuses and grants
⋅Severance pay (post-paid wage)
⋅Benefits paid for paid holidays or paid monthly/annual leave
⋅Allowances for suspended work
⋅Monetary payment for employee benefit, such as a price-linked allowance, a commuter allowance, or a family allowance whose payment is a general and established practice.

Non-wages

⋅Monetary payment made as a token of courtesy, goodwill, or favor, such as an allowance for congratulations or condolence
⋅Monetary payment made to reimburse expenses for business trips
⋅Dismissal allowances
⋅Compensation for damage, such as suspended work compensation