Every office worker looks forward to their bonus. It’s a welcome relief in tough financial times, but whether this bonus should be included in the ordinary wage, which serves as the basis for our overall pay, has always been a hot topic. In particular, a series of Supreme Court rulings in 2026 have brought this complex issue back to the forefront. Beyond simply receiving more money, the message from these Supreme Court decisions is clear: defining the scope of the ordinary wage, which is the standard for calculating various allowances and severance pay.
In recent ordinary wage lawsuits involving Korea Hydro & Nuclear Power (KHNP) and city bus workers, the Supreme Court seemed to acknowledge the ordinary wage nature of bonuses, yet still demanded complex calculations for the detailed criteria. It’s necessary to take a closer look at what has changed and what still remains a source of controversy.
Supreme Court’s Criteria for Recognizing Bonuses as Ordinary Wages: What Has Changed?
In 2026, the Supreme Court presented important criteria in its ordinary wage rulings. Specifically, it ruled that even bonuses with a ‘condition of employment on the payment date’ are considered ordinary wages if they are paid regularly and uniformly as compensation for labor. This marks a significant change compared to the past, where the ‘condition of employment’ was a primary reason for denying ordinary wage status. In fact, this ruling means many companies will have to re-evaluate their wage systems.
- Reinterpretation of the employment condition: The court viewed the condition of being employed on the payment date to receive a bonus as merely a ‘settlement method’ for salary payment, not a condition that negates its nature as compensation for labor.
- Regular and uniform payment: If a bonus is paid regularly and uniformly to all employees according to a consistent standard, regardless of a specific period, it is recognized as an ordinary wage.
- Recognition of city bus bonuses: A ruling was made that regular bonuses for city bus workers are also included in ordinary wages. This could impact the entire transportation industry.
Performance-Based Pay, a Hidden Variable in Ordinary Wages: The Challenge Left by the KHNP Ruling
However, not all bonuses cross the threshold of ordinary wages. As seen in the KHNP case, while basic bonuses were recognized as ordinary wages, the Supreme Court ruled that the scope of recognition for basic performance-based pay, which was paid differently based on business units and individuals, needed further review. In other words, the ‘minimum guaranteed amount’ has emerged as a key issue. In the case of performance-based pay where payment rates vary significantly based on performance, it is interpreted as a signal that the entire amount may not be recognized as ordinary wages.
- Complexity of differentiated performance-based pay: Performance-based pay, where payment rates vary based on individual performance or business unit results, struggles to meet the ‘fixedness’ requirement.
- Importance of the ‘minimum guaranteed amount’: It is highly likely that only the minimum amount guaranteed to all employees, regardless of performance, will be recognized as ordinary wages.
- Need for corporate system overhaul: Companies need to clarify the nature of their management performance-based pay systems and prepare for ordinary wage-related lawsuits.
From Astronomical Bonuses to Educators’ Performance Pay: The Diverse Faces of Bonus Systems
Bonuses vary greatly depending on their purpose and form. In May 2026, Kwak Noh-jung, CEO of SK Hynix, received a bonus of company shares worth 8.5 billion won for his contributions to the growth of High Bandwidth Memory (HBM). This is a prime example of an incentive that rewards outstanding individual performance and encourages long-term corporate growth. In contrast, different forms of bonuses exist in the public sector.
- High-value performance incentives: As in the case of SK Hynix CEO Kwak Noh-jung, executives who significantly contribute to achieving specific management goals or corporate growth may receive large bonuses, such as stock grants.
- Public sector performance bonuses: In 2026, performance bonuses for educators saw budget increases and changes in evaluation methods, such as an increased weight on quantitative assessments. This is an attempt to boost teacher morale and enhance the objectivity of evaluations.
- Holiday bonuses and regular bonuses: Holiday bonuses and regular bonuses, received by most employees, contribute to the basic financial stability of workers and are often at the center of ordinary wage controversies.
Ultimately, bonuses are more than just extra payments; they are an important element that affects employees’ rights and a company’s wage structure. Recent Supreme Court rulings clarify the legal nature of bonuses while once again highlighting the complex structure of performance-based pay. It is time for both companies and employees to accurately understand the meaning of bonuses and their legal implications.