Making Employees Work Overtime with Zero Allowance... National Assembly Accelerates 'Comprehensive Wage Ban' Bill

Widespread Malpractice Continues Across IT and Manufacturing Sectors
Cases Uncovered of Reduced Working Hours and Unpaid Allowances
National Assembly Reviews Bills to Ban or Restrict the System

"It was a reality where exceptions became the rule."

The abuse of the comprehensive wage system is not limited to specific industries but is deeply rooted throughout the entire industrial landscape. According to the government's region-specific relay inspections conducted four times this year, cases where employers reduced official working hours or failed to pay statutory allowances under the pretext of the comprehensive wage system were found extensively across IT and gaming, manufacturing, finance, and call center sectors. In effect, what was meant to be an exceptional system has become the de facto norm in wage structures across various workplaces.

Reality Where 'Exceptions Become the Rule'

During the second round of inspections targeting Pangyo Techno Valley in Seongnam—a hub for young workers—cases of abuse of the so-called "Crunch Mode" (intensive work regime) were uncovered. IT and gaming companies required employees to work overtime until 10 p.m. every day for two months, yet did not pay overtime allowances by claiming instructions were given verbally, and did not properly record working hours. At the Changwon National Industrial Complex in South Gyeongsang Province (third inspection), companies in manufacturing were found not paying a single penny of overtime beyond the fixed extended overtime allowance of 48 hours per month stipulated in employment contracts, and went so far as to block employees from entering actual working hours into the in-house IT system once the statutory weekly limit of 52 hours was exceeded—amounting to systematic circumvention.

Similar irregularities were found in inspections of the finance and call center sectors in Jung-gu and Yeongdeungpo-gu, Seoul. Some employers skipped working hour measurement for managers to avoid paying night shift allowances, or refused to disclose calculation details for overtime allowances, simply stating "there is no excess over fixed OT." Additionally, a cosmetics manufacturer omitted time and attendance records, resulting in 123 million won in unpaid overtime for 310 workers. In the Guro and Gasan Digital Complexes in Seoul, a laundry service was found to have violated the extended work limit 412 times and failed to pay an unused annual paid leave allowance totaling 42 million won.

Customs Solidified Ahead of the Law

Such rampant misuse of the comprehensive wage system on site is enabled by a legal characteristic: the system is not explicitly stipulated in the Labor Standards Act. Article 56 of the current act mandates that employers calculate and pay extra allowances for overtime, night, and holiday work based strictly on actual hours worked. However, the courts have recognized comprehensive wage contracts—where such allowances are pre-included in salaries—only in exceptional cases where it is objectively difficult to measure working hours due to the nature of the job or business. This precedent was first set by a Supreme Court ruling in 1974 (Case No. 73Da1258).

Since then, the Supreme Court has upheld three strict requirements for the legitimacy of the comprehensive wage system: ▲ it must be objectively difficult to calculate working hours; ▲ there must be no disadvantage to the worker; ▲ the contract must be justified under the overall circumstances. If working hours are not difficult to calculate and statutory allowances fall short of actual hours worked, such contracts have been ruled invalid (e.g., Supreme Court ruling on May 13, 2010, Case No. 2008Da6052, etc.). However, despite these strict exceptional standards established by the court, in reality, the comprehensive wage system permitted as an exception has come to be treated as the general rule in many workplaces.

National Assembly Push for ‘Comprehensive Wage Ban Act’

The National Assembly is moving quickly to enact a legal ban to prevent such circumvention from becoming the norm. According to a review by the National Assembly's Climate, Energy, Environment and Labor Committee, a revision to the Labor Standards Act explicitly banning comprehensive wage contracts (proposed by Assemblymembers Chun Hyun-hee and Kim Tae-sun of the Democratic Party of Korea) is currently under committee review. The two proposed amendments define contracts that do not specify a base salary or fail to itemize overtime, night, or holiday allowances—paying them instead as a lump sum—as comprehensive wage contracts, and prohibit their establishment.

Assemblymember Chun's bill would permit comprehensive wage contracts only in limited cases where it is difficult to calculate working hours, requiring employee consent, consultation with employee representatives, and approval from the Minister of Employment and Labor, with violations punishable by up to two years' imprisonment. Assemblymember Kim's bill seeks a blanket ban with no exceptions, additionally prohibiting contracts that include a lump sum instead of annual leave compensation, and imposing mandatory electronic recording and preservation of work start and end times on daily, weekly, and monthly bases.

Yonhap News Agency

The Fuse of Labor-Management Conflict: Actual Wage and Working Hour Tracking

In the workplace, while there is agreement on the problematic nature of unpaid overtime, labor and management conflicts over wage structures and actual working hour management are complex and could increase burdens for both sides. Business circles are calling for the current system to be maintained, raising concerns over the push to ban the comprehensive wage system and strengthen working hour measurement. According to a survey by the Korea Chamber of Commerce and Industry, 74.7% of companies using the comprehensive wage system wished to maintain the current practice. They argue that banning the comprehensive wage system, if it includes fixed overtime (OT), could require companies to overhaul wage structures and could also reduce employees' actual earnings. The Korea Employers Federation likewise reported that in 79.3% of businesses adopting the comprehensive wage or fixed OT system, the full agreed allowance was paid even if actual working hours were less than the contracted hours. Therefore, abolishing the system could actually decrease some employees' take-home pay.

Some in the labor sector have also raised concerns about the obligation to record working hours. They warn that minute-by-minute tracking could spark disputes over break times or personal matters. The Korea Economic Research Institute stated, "According to our survey, 52.5% of large corporations opposed the ban on the comprehensive wage system, citing concerns that measuring actual working hours will intensify labor-management conflict." Ku Chungwoo, Professor of Sociology at Sungkyunkwan University, said, "Given how interests differ by the size of company or stakeholder group, reforming the comprehensive wage system should not be rushed but should go through adequate public discussion and social consensus building."

This content was produced with the assistance of AI translation services.