Ordinary Wage and Average Wages in Korea

July 28, 2015

1. Overview

The term “Wage” means wages, salaries, and any other money and valuable, regardless of their titles, which the employer pays to a worker as remuneration for work (Article 2 (1)-5 of Labor Standards Act(LSA)).  The Ordinary Wage and Average Wage are two distinct concepts of Wages that are applied in different situations.  The Ordinary Wage is included in the calculation for ⓐ extended work allowance, night work or holiday work allowance, ⓑ unused leave compensation in cases where the paid is under ‘paid allowance' not under average wage, ⓒ dismissal allowances replacing advance notices of dismissal.  And Average Wage is included in the calculation for ⓐ severance pay to a retired employee, ⓑ compensation of employees during the period of suspension of a business, ⓒ and compensation for occupational injury or disease.  

2. Definition of Ordinary Wage

1)   “Ordinary Wage” means hourly wage, daily wage, weekly wage, monthly wage, or contract amount to be paid to a worker for a specifically agreed work or entire works on a regular and flat basis.

2)   In case of calculation an ordinary wage as an hourly wage rate, the ordinary wage shall be an amount calculated in accordance with any of the following formulas;

①  The amount agreed upon as an hourly wage, if any

②  The amount obtained by dividing a daily wage rate by the contractual working hours per day, if there is an amount agreed upon as a daily wage rate

③  The amount obtained by dividing a weekly wage rate by the standard hours for the calculation of the weekly ordinary, if there is an amount agreed upon as a weekly wage rate

④  The amount obtained by dividing a monthly wage rate by the standard hours for the calculation of the monthly ordinary wage, if there is an amount agreed upon as a monthly wage rate

⑤  The amount obtained by applying subparagraphs ② through ④ mutatis mutandis, if there is an amount agreed upon as the wage rate for any period other than a day, a week, or a month

⑥  The amount obtained by dividing total sum of wages calculated on a piece work basis for the period for the calculation of the wages by total working hours during the same period (referring to the wage settlement period, if there is a date set for the settlement of wages), if there is a wage agreed upon as the contract amount

⑦  The amount obtained by adding up the amounts calculated in accordance with subparagraphs ① through ⑥, if the wage to which a worker is entitled consists of two or more different types of wages set forth in subparagraphs ① through ⑥.

3)   When the calculation of the ordinary wage under paragraph (1) is based on a daily wage rate, such ordinary wage shall be calculated by multiplying the hourly wage rate under paragraph (2) by the contractual working hours per day.

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Please refer the enclosed for more information.