Unpaid Wages in Korea?
Unpaid Wages & Allowance - What You Can Claim
What Constitutes Wage Arrears
Under the Labor Standards Act, wages must be paid directly to employees, in full and in currency, on a fixed date at least once a month.
Wage arrears occur when an employer fails to pay wages or other amounts owed to an employee by the statutory or agreed payment date. These may include regular wages, severance pay, overtime, night and holiday pay, unused annual leave compensation, bonuses, and other amounts due to the employee.
For current employees, wages are considered to be in arrears if all or part of the wages due are not paid on the regular pay date. Therefore, in principle, even a one-day delay in payment constitutes wage arrears. For employees whose employment has ended, all wages, severance pay, and other amounts due must be paid within 14 days of termination of employment. However, the deadline may be extended by mutual agreement.
Common Types of Wage Arrears
Severance Pay
Employers are legally required to provide severance pay to employees who leave the company after at least one year of continuous service. This applies even if the employer has only one employee. However, employees whose contractual working hours average less than 15 hours per week over a four-week period are not entitled to statutory severance pay. Severance pay must be provided regardless of the reason for termination, whether due to dismissal for misconduct or voluntary resignation.
※ For more information on severance pay under Korean labor law, please see here.
A key issue in severance pay disputes is often whether the individual qualifies as an employee under the Labor Standards Act, as statutory severance pay applies only to employees covered by the Act. Employee status is determined by whether the individual, in substance, worked under a subordinate employment relationship, regardless of the title or form of the contract.
※ For more information on employee status under Korean labor law, please see here.
Overtime, Night, Holiday Pay
In workplaces with five or more employees, overtime, night, and holiday work is subject to additional pay under the Labor Standards Act.
Overtime work refer to work in excess of 8 hours per day or 40 hours per week, while night work refers to work performed between 10 pm and 6 pm the following day. Both must be compensated at an additional 50% of the ordinary hourly wage.
Holiday work refers to work performed on weekly paid holidays, public holidays or contractual holidays. Holiday work of up to 8 hours must be compensated at an additional 50% of the ordinary hourly wage, and work exceeding 8 hours at an additional 100%.
The key issue in these claims is often proof. The burden of proof generally lies with the employee who brings the claim. The employee must prove the actual hours worked through objective evidence. Relevant evident may include access-card records, CCTV footage, computer login and shut down records, emails or messenger records, work-system access records, and recorded conversations.
However, employees are generally not entitled to compensation for such work if it was performed on their own initiative without the employer’s direction or knowledge. The employee needs to establish that the overtime, night, or holiday work was directed, authorized, or knowingly tolerated by the employer or, in the absence of any of those, was unavoidable under the circumstances.
Certain statutory exceptions apply to overtime and holiday pay requirements. Employees engage in agricultural, forestry, livestock, sericulture, or fishery work, approved surveillance or intermittent work, or managerial, supervisory, or confidential work are not entitled to overtime or holiday pay. However, night work premiums still apply.
**The Comprehensive Wage System and Its Legal Validity **
In some cases, employers refuse to pay overtime, night, or holiday pay on the grounds that a “comprehensive wage system” (포괄임금제) is in place. A comprehensive wage system is a pay arrangement under which statutory allowances are deemed to be included in the base salary or are paid as a fixed amount regardless of the actual hours worked.
However, such arrangements are recognized only in exceptional circumstances and are subject to strict legal requirements. As a result, they are likely to be held invalid in most cases. Therefore, even if an employment contract provides for a comprehensive wage system, its legal validity should be carefully reviewed.
Unused Annual Leave Compensation
Employees in workplaces with five or more employees are entitled to annual leave under the Labor Standards Act. Annual leave expires if not used within one year and can no longer be taken as leave. However, employees are entitled to compensation for unused annual leave, which is referred to as an unused annual leave allowance (미사용연차수당).
Unused annual leave allowance must be paid each year after the one-year period for using the leave expires. If the payment date is specified in the applicable workplace rules, payment must be made accordingly. If not, the allowance must be paid on the first regular pay date after the leave-use period expires.
The amount is calculated by multiplying the number of unused leave days by the employee’s daily ordinary wage (ordinary hourly wage x 8 hours).
However, an employer may be exempt from paying the unused annual leave allowance if the employees chooses not to use the leave despite the employer having properly followed the statutory procedures for encouraging the use of annual leave.
※ For more information on annual leave, please see here.
Weekly Holiday Allowance
Employees must be given at least one paid day off per week. This applies even if the employer has only one employee. However, employees whose contractual working hours average less than 15 hours per week over a four-week period are not entitled to a weekly paid holiday.
Since it is a paid holiday, employees must be paid even though they do not actually work on that day. This payment is generally referred to as a “weekly holiday allowance” (주휴수당).
To be entitled to weekly holiday allowance, an employee must have worked all scheduled working days during the week. Scheduled working days are the days the employee is contractually required to work. Therefore, public holidays, annual leave, and other days with no working obligations are excluded when determining attendance.
For employees paid a monthly salary, the weekly holiday allowance is already included in their salary, so no additional payment is required. However, employees paid by the hour or day must be paid an additional amount of weekly holiday allowance if they have worked all scheduled working days during the week.
The weekly holiday allowance is calculated based on the employee’s average contractual working hours per day (weekly contractual working hours ÷ weekly contractual working days). However, if an employee work fewer than 5 days per week, the calculation is based on a 5-day workweek. For example, an employee who works 8 hours a day, 3 days a week is entitled to 4.8 hours of weekly holiday pay (24 hours ÷ 5 days), rather than 8 hours.
Unpaid Wages & Allowance - What You Claim
Under the Labor Standards Act, wages must be paid directly to employees, in full and in currency, on a fixed date at least once a month.
Wage arrears occur when an employer fails to pay wages or other amounts owed to an employee by the statutory or agreed payment date. These may include regular wages, statutory severance pay, overtime, night and holiday pay, unused annual leave compensation, bonuses, and other amounts due to the employee.
For current employees, wages are considered to be in arrears if all or part of the wages due are not paid on the regular pay date. Therefore, in principle, even a one-day delay in payment constitutes wage arrears. For employees whose employment has ended, all wages, severance pay, and other amounts due must be paid within 14 days of termination of employment. However, the deadline may be extended by mutual agreement.
Employers are legally required to provide severance pay to employees who leave the company after at least one year of continuous service. This applies even if the employer has only one employee. However, employees whose contractual working hours average less than 15 hours per week over a four-week period are not entitled to statutory severance pay. Severance pay must be provided regardless of the reason for termination, whether due to dismissal for misconduct or voluntary resignation.
※ For more information on severance pay under Korean labor law, please see here.
A key issue in severance pay disputes is often whether the individual qualifies as an employee under the Labor Standards Act, as statutory severance pay applies only to employees covered by the Act. Employee status is determined by whether the individual, in substance, worked under a subordinate employment relationship, regardless of the title or form of the contract.
※ For more information on employee status under Korean labor law, please see here.
In workplaces with five or more employees, overtime, night, and holiday work is subject to additional pay under the Labor Standards Act.
Overtime work refer to work in excess of 8 hours per day or 40 hours per week, while night work refers to work performed between 10 pm and 6 pm the following day. Both must be compensated at an additional 50% of the ordinary hourly wage.
Holiday work refers to work performed on weekly paid holidays, public holidays or contractual holidays. Holiday work of up to 8 hours must be compensated at an additional 50% of the ordinary hourly wage, and work exceeding 8 hours at an additional 100%.
The key issue in these claims is often proof. The burden of proof generally lies with the employee who brings the claim. The employee must prove the actual hours worked through objective evidence. Relevant evident may include access-card records, CCTV footage, computer login and shut down records, emails or messenger records, work-system access records, and recorded conversations.
However, employees are generally not entitled to compensation for such work if it was performed on their own initiative without the employer’s direction or knowledge. The employee needs to establish that the overtime, night, or holiday work was directed, authorized, or knowingly tolerated by the employer or, in the absence of any of those, was unavoidable under the circumstances.
Certain statutory exceptions apply to overtime and holiday pay requirements. Employees engage in agricultural, forestry, livestock, sericulture, or fishery work, approved surveillance or intermittent work, or managerial, supervisory, or confidential work are not entitled to overtime or holiday pay. However, night work premiums still apply.
**The Comprehensive Wage System and Its Legal Validity **
In some cases, employers refuse to pay overtime, night, or holiday pay on the grounds that a “comprehensive wage system” (포괄임금제) is in place. A comprehensive wage system is a pay arrangement under which statutory allowances are deemed to be included in the base salary or are paid as a fixed amount regardless of the actual hours worked.
However, such arrangements are recognized only in exceptional circumstances and are subject to strict legal requirements. As a result, they are likely to be held invalid in most cases. Therefore, even if an employment contract provides for a comprehensive wage system, its legal validity should be carefully reviewed.
Employees in workplaces with five or more employees are entitled to annual leave under the Labor Standards Act. Annual leave generally expires if not used within one year and can no longer be taken as leave. However, employees are entitled to compensation for unused annual leave, which is referred to as an unused annual leave allowance (미사용연차수당).
Unused annual leave allowance must be paid each year after the one-year period for using the leave expires. If the payment date is specified in the applicable workplace rules, payment must be made accordingly. If not, the allowance must be paid on the first regular pay date after the leave-use period expires.
The amount is calculated by multiplying the number of unused leave days by the employee’s daily ordinary wage (ordinary hourly wage x 8 hours).
However, an employer may be exempt from paying the unused annual leave allowance if the employees chooses not to use the leave despite the employer having properly followed the statutory procedures for encouraging the use of annual leave.
※ For more information on annual leave, please see here.
Employees must be given at least one paid day off per week. This applies even if the employer has only one employee. However, employees whose contractual working hours average less than 15 hours per week over a four-week period are not entitled to a weekly paid holiday.
Since it is a paid holiday, employees must be paid even though they do not actually work on that day. This payment is generally referred to as a “weekly holiday allowance” (주휴수당).
To be entitled to weekly holiday allowance, an employee must have worked all scheduled working days during the week. Scheduled working days are the days the employee is contractually required to work. Therefore, public holidays, annual leave, and other days with no working obligations are excluded when determining attendance.
For employees paid a monthly salary, the weekly holiday allowance is already included in their salary, so no additional payment is required. However, employees paid by the hour or day must be paid an additional amount of weekly holiday allowance if they have worked all scheduled working days during the week.
The weekly holiday allowance is calculated based on the employee’s average contractual working hours per day (weekly contractual working hours ÷ weekly contractual working days). However, if an employee work fewer than 5 days per week, the calculation is based on a 5-day workweek. For example, an employee who works 8 hours a day, 3 days a week is entitled to 4.8 hours of weekly holiday pay (24 hours ÷ 5 days), rather than 8 hours.
