The minimum wage system is a legal mechanism in which the government intervenes in the wage determination process between labor and management to set a minimum level of wages and obligates employers to pay wages above this level, protecting low-wage workers. The minimum wage is determined annually by a committee composed of nine representatives each from labor, management, and public interest groups (a total of 27 individuals) and is applicable from January 1st to December 31st of the following year, with the decision being made by August 5th each year.
The minimum wage system primarily affects small businesses that employ low-wage workers and has a direct impact on wage determinations for security guards, janitors, foreign workers, and other low-wage workers.
Increasing the minimum wage is the most desirable way to reduce the wage gap between regular and non-regular workers. However, significant changes are expected for small and medium-sized service businesses that have difficulty paying the minimum wage. According to the current minimum wage system in South Korea, a single minimum wage is applied without distinction for industry or region, and employers have an obligation to pay wages above the minimum wage.
As the minimum wage system is designed to ensure a minimum level of wages for workers, employers must pay wages above the minimum wage. Employment contracts that establish wages below the minimum wage are void in that regard, and the employer must pay the minimum wage for that portion. Violations of this requirement may result in imprisonment for up to three years or a fine of up to 20 million won. Minimum Wage Act, Article 6 and 28

■ Significance of Minimum Wage
❍ Scope of Application of Minimum Wage
Minimum wage applies to all businesses or workplaces that employ workers. First, the reduction can be applied to probationary workers who have been employed for less than three months, with a 10% reduction possible.
Second, the excluded categories are ① persons with significantly reduced work capacity due to mental or physical disabilities approved by the Minister of Employment and Labor, ② relatives who live together and work in a business that only employs relatives, ③ domestic workers, ④ sailors subject to the Sailor Law and shipowners who employ sailors.

❍ Obligations of Employers Related to Minimum Wage
Since the minimum wage system guarantees the minimum level of wages for workers, employers must pay at least the minimum wage, and employment contracts that set wages below the minimum wage are invalid only for that portion, and the difference between the minimum wage and the invalid portion must be paid additionally. Violations are punishable by imprisonment for up to three years or a fine of up to 20 million won (Articles 6 and 28 of the Minimum Wage Act). Additionally, employers must post the minimum wage, the range of wages not included in the minimum wage, and the effective date in a place easily visible to workers or inform workers in another appropriate way when the minimum wage is announced. Violations are punishable by a fine of up to 1 million won (Articles 11 and 31 of the same Act). Exceptions to the application of minimum wage are persons ①with significantly reduced work capacity due to mental or physical disabilities and ②other persons who are recognized as inappropriate for applying the minimum wage and have been approved by the Minister of Employment and Labor. Article 7 of the Minimum Wage Act, (Exemption from Application of Minimum Wage)


(1) Employer's Duty to Inform
The Employer must post or inform employees in an appropriate manner, such as displaying in a place easily visible to workers, about the minimum wage amount, the range of wages not included in the minimum wage, and the effective date when the minimum wage is announced.

(2) Obligation to Pay Minimum Wage
The Employer must pay the workers subject to the minimum wage at least the minimum wage amount. A labor contract that sets wages below the minimum wage amount is invalid only for that part, and the invalidated part is deemed to have agreed to pay the same wage as the minimum wage amount.

(3) Joint Liability of Subcontractors
In the case of a subcontracted business, if the recipient pays workers less than the minimum wage amount due to the subcontractor's responsible reasons, the subcontractor is jointly liable with the recipient. The scope of responsible reasons includes the act of the subcontractor deciding the wage rate that cannot reach the minimum wage amount at the time of concluding the subcontracting contract and the act of the subcontractor deciding the wage rate that cannot reach the minimum wage amount during the subcontracting period.

(4) Wage Compensation Due to Reduced Working Hours
Even if the working hours (Article 50 of the Labor Standards Act) are reduced by mandatory regulations, the Employer cannot reduce the wage subject to the minimum wage without a legitimate reason. In this case, wage preservation is only applied if the minimum wage amount calculated based on the original scheduled working hours before the reduction and the minimum wage amount calculated based on the scheduled working hours after the reduction (including the increase in the minimum wage amount) are compared and the latter is lower.

(5) Penalties for Violation of the Minimum Wage Law
① Imprisonment for up to 3 years or a fine of up to 20 million won
② A fine of up to 1 million won

■ Criteria for Determining Compliance with Minimum Wage
To determine whether wages paid by an employer comply with the minimum wage, it is necessary to ① calculate the total amount of wages that are included in the minimum wage on a monthly basis, ② convert this amount into an hourly wage by dividing it by the monthly standard working hours, and ③compare it with the minimum wage specified by law. Supreme Court ruling 2007. 6. 29. 2004da48836 Decision (minimum wage calculation)

The wages that are included in the calculation of the minimum wage range from ① wages or allowances that are specified as payment items in collective agreements, employment rules, or employment contracts or that are paid according to custom, to ② wages or allowances that are regularly and uniformly paid once a month or more for standard working hours according to predetermined payment conditions and rates (Article 2, Appendix 2 of the Enforcement Regulations of the Minimum Wage Act).

(1) Wages Other Than Regular Wages Paid at Least Once a Month
① Regular attendance allowance paid based on attendance performance beyond January
② Long service allowance paid for continuous work beyond January
③ Incentive pay, efficiency pay, or bonus paid based on reasons that span beyond January
④ Other temporary or sudden reasons such as marriage allowance, winter allowance, Kimchi allowance, physical training expenses, or irregular wages and allowances even if the payment conditions are predetermined but the reason for the payment is not determined or is irregular.

(2) Wages Other Than Wages Paid for Regular Working Hours or Regular Working Days
① Vacation pay, paid shutdown allowance, and paid holiday pay for regular workers, regardless of the name given to the payment
② Overtime pay and additional wages for working on holidays
③ Additional wages for night work
④ Special allowances and long-service allowances
⑤ Any wages that cannot be recognized as wages paid for regular work, regardless of the name given to the payment.

(3) Wages That are Not Considered Appropriate for Inclusion in the Minimum Wage
Wages paid in kind or in similar forms, such as meals, dormitories, housing, transportation for commuting, and other benefits provided for the welfare of employees.

■ Calculation of Hourly Wages for Minimum Wage
The minimum wage is determined in units of hours, days, weeks, or months. In the case of determining the minimum wage in units of days, weeks, or months, it must also be expressed in hourly wages. The minimum wage determined in units of months is calculated by dividing the amount by the number of prescribed working hours in one month. To calculate the minimum wage for a monthly salary, the hourly minimum wage is calculated by dividing the salary included in the monthly minimum wage by the number of prescribed working hours in one month (Article 5 of the Minimum Wage Act and Article 5 of the Enforcement Decree). The prescribed working hours for one month include paid holidays and bonuses that have been treated as paid through collective agreements. Relevant case law and administrative interpretations are as follows.

❍ Case Law
Regarding the number of prescribed working hours for one month, case law states that "Article 5 of the Enforcement Decree of the Minimum Wage Act stipulates that the amount paid on a weekly or monthly basis should be calculated as an hourly wage by dividing it by the number of prescribed working hours for one week or month. Therefore, since the so-called weekly paid holiday, which is the wage for paid holidays in a weekly or monthly salary system, is paid regularly at least once a month for the prescribed work, it should be added when calculating the comparative wage" Supreme Court ruling 2007. 1. 11. 2006da64245 Decision (regarding minimum wage-related cases)
. In the case of a 40-hour workweek, the number of prescribed working hours for a month, including paid holidays, is 209 hours.

❍ Examples of Specific Application of Minimum Wage
(1) Quarterly Performance Bonus, Meal Allowance, Vehicle Management Expenses
① Quarterly performance bonuses are not included in wages for minimum wage calculation.
② "Meal allowance" is considered as wages for minimum wage calculation if it is regularly paid to all employees on a fixed and uniform basis according to the collective agreement and employment rules that stipulate that it is included in the regular wage. "Vehicle management expenses" are also considered as wages for minimum wage calculation if they are uniformly paid once or more per month according to pre-determined payment conditions for driving workers. This is understood as a duty allowance or operating allowance for specific job categories. Administrative Interpretation, 2010. 12. 15. Wage and Welfare Department-2356


(2) Incentive Pay and Sales Commission (Productivity Bonus)
① Annual incentive pay and regular incentive pay calculated on an annual basis and paid out equally each month are included in the minimum wage if they are divided into monthly payments on a pro-rata basis.
② Sales commission (performance-based bonus) First, for sales employees, the sales commission, which varies monthly depending on sales performance, is considered a productivity bonus, as defined in Article 5, Paragraph 2 of the Enforcement Decree of the Minimum Wage Act, and must be compared with the annual minimum wage after adding the monthly total working hours divided by the monthly standard working hours and the monthly base pay divided by the monthly standard working hours. Compliance must be determined based on this comparison. Administrative Analysis 2004. 2. 14. Wage Policy Division-501; 1990.4.3. Wages 32240-4770; 2005. 10. 2. Wage Policy Division-801; 2003. 6. 20, Wage 68200-471

Second, if a health trainer is in charge of individual lessons (PT) for each member and receives additional tuition according to pre-determined payment conditions and payment rates, this can be seen as equivalent to production wages included in the minimum wage. After dividing the tuition fee by the total working hours and converting it into hourly wages, the wages determined on a monthly basis, such as the basic wage, are divided by the prescribed working hours (including paid weekly allowances, etc.) and added to the converted hourly wages. make a judgment. Administrative Analysis 2015. 10. 2. (Labor Standards Policy Division-4782)


(3) Welfare allowance
First, it is reasonable to consider the cost of improving treatment, which corresponds to money and goods for welfare benefits such as allowances to support workers' livelihoods, as wages that are not included in the minimum wage. Administrative Interpretation 2014. 2. 7. Labor Improvement Policy Division-659

Second, even if the "welfare allowance" is included in the ordinary wage and is paid, if the collective agreement clearly states that it is a subsidy for living expenses or an allowance in the nature of welfare benefits, it is a welfare benefit stipulated in Article 2 Attached Table 1 of the Enforcement Rules of the Minimum Wage Act. Considered as a welfare allowance, it should be regarded a wage that is not included in the wages for the application of the minimum wage. Administrative interpretation 1989. 5. 17. Wage 32240-7146