April 19, 2024

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[THE INVESTOR] Deputy Prime Minister for economic affairs and Finance Minister Kim Dong-yeon said on Sept. 1 that the government intends to propose revisions to Korea’s Labor Standards Act in an effort to further clarify the legal scope regarding ordinary wages, amid intensifying legal confrontation between the labor and the management.

“We plan to further strengthen business roadmaps and add support to the wage system restructuring in order to prevent any unnecessary labor-management disputes,“ Kim said at a ministerial meeting on economic relations held at Seoul Government Complex on Sept. 1.

 

Finance Minister Kim Dong-yeon attends a ministerial meeting on economic relations held at Seoul Government Complex on Sept. 1.

Kim’s announcement came a day after a Seoul court ordered Kia Motors to pay 422.3 billion won ($375.5 million) in back-pay to its employees after ruling that regular bonuses must be considered as ordinary wages when calculating overtime and severance. 

The verdict came amid a strong backlash by the local business community citing the ruling would further add to fiscal constraints during a worsening economic climate. Others also voiced fears that the ruling may lead to further suits against other corporations.

As most businesses in Korea distribute employee bonuses as lump-sum payments as an addition to a regular salary, companies avoid having to adjust workers’ overtime or severance pay to include added bonuses. However, if companies are forced to count bonuses as part of an employee’s ordinary wages, they must also increase the level of benefits based on the new pay wage, adding to its fiscal burden. 

Kim assured the ministry will be strengthening its efforts to ensure that no unnecessary disputes between management and labor forces break-out while companies restructure their wage systems. 

“We expect to establish an institutional settlement, including institutional supplementation and reasonable payment, in accordance with corporate standards,” said the finance minister.

“In order to revive the economic recovery and stabilize living costs, the government needs to inspect, compensate, and manage the economy,” he added. 

The finance minister also added that the Korean economy is expected to achieve 3 percent economic growth this year on the back of rebounding export figures. However, he also cautioned that the quality of growth still remains weak amid stagnant growth in certain industry sectors, soaring household prices and continuing political spats with North Korea and China.
According to the data compiled by Statistics Korea on Sept. 1, the country’s consumer prices increased at the fastest pace in more than five years last month following spikes in food costs. 

Korea’s consumer price index rose 2.6 percent in August compared to a year earlier, and also marks an increase compared to July’s 2.2 percent rise, the data showed. 

“We will actively respond to the unstable price of vegetables such as cabbage by expanding the volume of supply and demand and managing the growth of crops so that this will not place a burden on Chuseok holiday prices,” Kim said. 

By Julie Jackson/The Korea Herald (juliejackson@heraldcorp.com)