A Claim for Insolvency Payment Jung, Bongsoo, “A Claim for Insolvency Payment”, 「Labor Law」, Jungang, April 2011.


‘Hanguk Ness,’ a company located in Namyangju, Gyeonggi Province and established on October 26, 1995, had hired 34 employees and been engaged in the molding business to manufacture window frames. Since the beginning of 2010, the company’s sales began to gradually decrease, resulting in accumulated deficits and the closure of its business on November 2, 2010. At the time of closure, the company owed its 34 employees overdue wages and severance pay in the amount of 400 million won. Besides these overdue wages, the company had various debts amounting to 1.2 billion won, which precluded operation of business and the payment of its employees. This firm (KangNam Labor Law Firm) was commissioned to represent the employees and petitioned the Labor Office towards receiving their overdue wages and severance pay. We received confirmation from the Labor Office that the company was bankrupt in actuality, after verifying that company debt was much more than the employer could afford to pay, and that it had been impossible for the company to pay wages for three months. Employees would not be able to receive any wages directly from the employer. Instead, their overdue wages of three months and three years’ severance pay came through the insolvency payment system.
Petition for Unpaid Weekly Holiday Allowance Jung, Bongsoo, “Unpaid Weekly Holiday Allowance”, 「Labor Law」, Jungang, May 2013.


1. Summary

On Sep. 21, 2009, a Korean cook (hereinafter referred to as “the Employee”) who worked at a US Army restaurant (hereinafter, “the Employer”) based in Korea applied to the Seoul Regional Labor Office for his unpaid weekly holiday allowance. The employee claimed that his monthly salary was calculated by multiplying his actual working hours by an hourly wage rate and then allowances, like bonuses, were included, but he did not receive anything called a weekly holiday allowance. He therefore asked that the Employer pay him the unpaid weekly holiday allowance from the previous three years until the present time. The Labor Inspector investigated the claims of both parties related to the case and concluded on Jan. 12, 2010, that the Employer had not violated any related laws.

2. The Employee’s claim

According to his employment contract, the Employee received an hourly wage, paid every month, in the amount calculated by multiplying the actual working hours by the hourly wage rate, plus an amount reflecting the Welfare Benefit allowance & PIK allowance, as well as a monthly bonus calculated by dividing 700% of the annual bonus by 12. The Employee has not received anything called a weekly holiday allowance in his salary. Monthly wages were always variable according to the hours worked each month because the wage structure was not a monthly wage system but an hourly wage system. Accordingly, as the Employer did not pay a fixed monthly wage, but paid different wages every month according to the number of hours worked, the Employer should also pay a weekly holiday allowance.

3. The Employer’s claim

When paying wages in an hourly wage system, the Employer calculated the wages as (working hours × hourly wage rate) and, instead of adding a weekly holiday allowance, included a fixed monthly ‘benefit allowance’ and ‘PIK’ allowance, which was an amount exceeding the weekly holiday allowance. Given that this is the case, how would it be possible for the Employer to pay 700% of the annual bonus (divided into 12 months), as well as subsidize middle and high school students’ tuition while neglecting to pay the statutory weekly holiday allowance? As the Employer paid an amount equivalent to the weekly holiday allowance each month, even though the Employer did not call it a weekly holiday allowance, this amount can replace the weekly holiday allowance.

4. Related administrative guidelines

1) Inclusion or non-inclusion of paid weekly holiday (Jul. 8, 2008; kunrokijun-2455)
If an employer pays employees according to a monthly wage system, the monthly wage shall be considered to include a paid weekly allowance, if there are no exceptional situations (Supreme Court ruling 93 da 32514). If the employee receives fixed allowances along with basic hourly wages every month in a monthly wage system, such fixed allowances shall be interpreted to have similar characteristics as wages for paid weekly holiday allowance (Supreme Court ruling 97 da 28421).
2) The weekly holiday does not normally apply to daily workers, but if a daily worker works for six consecutive days, a paid weekly holiday shall be provided. (Apr. 2, 1997, Gungi 68207-424)
Weekly holiday allowance under the Labor Standards Act shall be given to a worker who fulfills their weekly contractual working hours. However, in principle, the weekly holiday shall not be given to daily workers because it is not possible to calculate weekly contractual working hours for daily workers, as they engage in daily employment contracts.
The purpose for providing a weekly holiday is to reduce the accumulated fatigue on workers after one week’s work, thereby helping to protect their health, and to provide time to participate in social and cultural activities. If a daily worker works for 6 consecutive days per week without absence, actual working days, and not contractual working days, shall be applied and weekly holiday shall be granted. The employer shall pay weekly holiday allowance separately from wages for daily workers, unless the affected worker agrees to receive the weekly holiday allowance in advance, with their daily wages.

5. Judgment on the case

The labor inspector in charge of this case concluded that the Employer had paid a weekly holiday allowance to the Employee as the Employer had paid monthly wages based on the hourly wage system and added a regular allowance for each month, which was an amount equivalent to the weekly holiday allowance. If, in this case, the Employer had paid wages by multiplying the actual working hours by the hourly wage rate without a monthly regular allowance, only adding a monthly bonus calculated for the annual 700% bonus, the Employer would have to pay all employees, including the Employee in this case, all unpaid weekly holiday allowances for the past three years.


Whether Compensation Should be Given for Unused Annual Leave Jung, Bongsoo, “Whether Compensation should be given for Unused Annual Leave”, 「Labor Law」, Jungang, August 2015.


A certain company (“the Company”) regulated in its rules of employment that it would not compensate for unused annual leave and instead would promote its use, which the Company did through individual emails to all personnel. Where the promotion of using annual leave has been done through email, the main point is whether or not the Company must give financial compensation for unused leave.

1. Current situations

The Company regulated in the rules of employment that it would not compensate for unused leave, and had informed personnel of the number of available annual leave days in the early part of the year, and sent similar emails again after six months to the employees to actively promote the use of annual leave. Then in October it notified each individual employee by email that he or she needed to use their remaining annual leave days by the end of the year, and if they did not, there would be no financial compensation for unused leave. In reality, the Company has not paid any allowance for unused annual leave so far.
2. Related law and guideline regarding measures for promoting use of annual leave

(1) Regulation of the Labor Standards Act (LSA)
The current LSA regulates the provision of ‘promoting the use of annual paid leave’ in relation with ‘annual paid leave’. Article 60 (Annual Paid Leave) (1) An employer shall grant 15 days’ paid leave to a worker who has registered not less than 80 percent attendance during one year.
(2) An employer shall grant one day’s paid leave per month to a worker whose consecutive service period is shorter than one year or whose attendance is less than 80 percent, if the worker has offered work without absence throughout one month.
(4) After the first year of service, an employer shall grant one day’s paid leave for each two years of consecutive service in addition to the leave prescribed in paragraph (1) to a worker who has worked consecutively for 3 years or more. In this case, the total number of leave days including the additional leave shall not exceed 25.
(7) The leave referred to in paragraphs (1) through (4) shall be forfeited if not used within one year. However, this shall not apply in cases where the worker concerned has been prevented from using the leave due to any cause attributable to the employer.
Article 61 (Promoting the Use of Annual Paid Leave) If a worker’s leave has been forfeited for non-use pursuant to Article 60 (7) despite the fact that the employer has taken measures described in any of the following subparagraphs to promote the use of paid leave prescribed in Article 60 (1), (3) and (4), the employer shall have no obligation to compensate the worker for the unused leave, and shall not be deemed to have caused the non-use through reasons attributable to the employer’s action(s) under the proviso of Article 60 (7):
1. Within the first 10 days of the six months before unused leave is to be forfeited pursuant to Article 60 (7), an employer shall notify each worker of the number of their unused leave days and urge them in writing to decide when they will use the leave and to inform the employer of the decided leave period; and
2. If a worker, despite the urging prescribed in subparagraph (1), has failed to decide when they will use whole or part of the unused leave and to inform the employer of the decided leave period within 10 days after they were urged, an employer shall decide when the worker uses the unused leave and notify the worker of the decided leave period in writing no later than 2 months before the unused leave is to be forfeited pursuant to Article 60 (7).


(2) Related guidelines
The ‘written document’ mentioned in Article 61 of the LSA refers to a paper document. Electronic documents are only possible in exceptional cases where the company has handled every operation by means of electronic documents in the process of its drafting, obtaining approval and implementing through equipped electronic work-processing systems (Guideline Gunjung-1128, Feb. 7, 2012). Accordingly, informing by email in the course of promoting the use of annual leave cannot be regarded as notification by written document (Guideline Gujung-6488, Nov 1, 2013).
If the employee has submitted a vacation plan with stipulated dates of leave after the employer has promoted the use of annual leave, the stipulated dates of leave shall be regarded as the employee’s declaration of intention to use their annual leave. Provided, in cases where the employee comes to work on the stipulated date of leave, if the employer received the employee’s labor and did not express a rejection of their coming in to work, it shall be regarded that the employer has approved the labor service on the expected date of leave, and so the employer shall pay an unused leave allowance (Guideline Limjang-285, Oct 21, 2005).
3. The Company’s countermeasures

The Company has promoted the use of annual leave through email, but has not done so through written documents. Also, the Company did not evidentially reject the provision of the employee’s labor when the employee provided work on dates expected to be used as annual leave. Based upon these facts, the Company recognized that it had not taken measures promoting the use of leave as stipulated by the LSA, and then paid unused annual leave allowance for the past three years in the salary payment for June 2015.
The labor case herein is a very common case that can occur easily for companies. Regarding promotion of the use of annual leave, it is frequent for companies to take formal measures without assigning annual leave for definite working days to employees and in this way avoid paying allowance for the unused annual leave. That is, companies promote the use of annual leave by informing through email only. In cases where the employees come to work on days designated for annual leave, companies do not pay annual leave allowance for unused annual leave owing to their efforts to promote the use of annual leave. However, as this case shows, the Company did not provide the use of annual leave on the designated days, and employees could not use annual leave due to reasons attributable to the Company. The Company therefore had to pay an unused annual leave allowance.