Pay

Monetary remuneration paid as consideration for work, including wages, allowances, and bonuses, and governed by a combination of labor law, tax law, and social security law.

Pay

Overview

Pay (給與, geubyeo) is a concept collectively referring to monetary remuneration received by a worker in return for providing labor to an employer. In legal usage, it is effectively synonymous with wages (賃金, imgeum) under the Labor Standards Act, and includes base pay paid regularly and continuously, various allowances, bonuses, and performance-based pay. Pay is a core source of income supporting workers' livelihoods and a major labor cost item for enterprises, and it is an area governed in combination by labor law, tax law, and social security law.

Main Content

Legal Concept of Wages

Article 2, Paragraph 1, Item 5 of the Labor Standards Act defines wages as “all money and other valuables that an employer pays to a worker as consideration for work, whether under the name of wages, salary, or any other name.” Regardless of the name, it is recognized as wages if ① the employer is obligated to pay it, ② it is paid as consideration for work, and ③ it has the nature of being paid regularly and continuously. In principle, however, reimbursements for actual expenses (travel expenses, maintenance costs for business vehicles, etc.) and welfare or gratuitous benefits are denied wage status.

Four Principles of Wage Payment

Article 43 of the Labor Standards Act sets out the principles of wage payment. First, wages must be paid in currency and cannot be replaced by goods or bills (principle of payment in currency). Second, they must be paid directly to the worker (principle of direct payment). Third, the full amount must be paid, and deductions not based on laws, regulations, or collective agreements are not permitted (principle of full payment). Fourth, wages must be paid on a fixed date at least once a month (principle of regular payment).

Ordinary Wages and Average Wages

Ordinary wages are wages paid regularly, uniformly, and fixedly, and serve as the basis for calculating overtime, night, and holiday work allowances, notice-of-dismissal allowances, and shutdown allowances. Average wages are the total amount of wages paid over the three months before the event giving rise to calculation, divided by the total number of days in that period, and serve as the basis for severance pay, disaster compensation, and shutdown allowances. The two concepts differ in calculation method and scope of application, so disputes frequently arise in practice; since the Supreme Court en banc decision in 2013, discussion has continued over whether regular bonuses constitute ordinary wages.

Wage System and Composition

Pay generally consists of base pay, job/duty allowances, long-service allowances, family allowances, various allowances such as meal and transportation expenses, bonuses, and performance pay. Recently, an increasing number of companies are shifting from seniority-based step wage systems to job- and performance-oriented wage systems, and various design methods such as job-based pay, skill-based pay, and annual salary systems are used.

Taxes and Social Insurance

Pay constitutes earned income under the Income Tax Act, and earned income tax and local income tax are withheld. In addition, workers and employers each bear social insurance contributions such as the National Pension, National Health Insurance, Long-Term Care Insurance, and Employment Insurance. Employers must issue a pay statement every month (Article 48, Paragraph 2 of the Labor Standards Act), through which workers can verify payment details and deduction details.

Minimum Wage and Wage-Related Statutes

The Minimum Wage Act requires employers to pay at least the minimum wage, and violations are subject to criminal punishment. In addition, the Labor Standards Act, the Act on the Protection, etc. of Fixed-Term and Part-Time Workers, the Wage Claim Guarantee Act, and the Act on Equal Employment and Support for Work-Family Reconciliation regulate the payment, protection, and prohibition of discrimination regarding wages. Wage claims are in principle paid with priority over other claims, and the statute of limitations is three years (Article 49 of the Labor Standards Act).

Recent Trends

The 2024 minimum wage was 9,860 won per hour, and the 2025 minimum wage was 10,030 won, surpassing 10,000 won for the first time in history. Accordingly, the monthly converted amount (based on 209 hours) also exceeded 2 million won, and the labor cost burden on small and medium-sized enterprises and small business owners has emerged as a major policy issue. In addition, as court rulings continue over the criteria for determining whether performance pay and regular bonuses constitute ordinary wages, risks in companies' wage design are growing, and the withholding method has also been adjusted through revisions to the simplified tax table for earned income. Furthermore, with the trend toward greater wage transparency, more companies are disclosing wage ranges at the recruitment stage, and with the spread of remote and flexible work, job-based compensation systems and performance-linked incentive designs are spreading. In 2025, discussions are also underway on expanding the items listed in pay statements and making retirement pensions mandatory.

Pay