Lunar New Year Bonuses Head to Court as Ordinary Wage Scope Expands

[Financial News] The Lunar New Year bonus is increasingly at the center of legal disputes. Although bonuses paid around Lunar New Year and other holidays have long been viewed as customary “holiday bonuses,” they are now giving rise to a wide range of conflicts, from whether they qualify as part of the ordinary wage to whether reductions or non‐payment are lawful.
The issue has gained prominence in particular after the Supreme Court of Korea shifted its legal stance to broaden what counts as ordinary wage in relation to regular bonuses. On December 19, 2024, the Court ruled that regular bonuses conditioned on the employee being on the payroll at the time of payment must still be included in the ordinary wage, effectively abolishing the previous requirement of “fixedness.” As a result, legal experts say that holiday allowances and holiday bonuses paid uniformly at fixed intervals, such as during traditional holidays, are now more likely to be recognized as part of the ordinary wage.
Earlier, in March last year, the Supreme Court of Korea also sided with environmental officers and park maintenance workers employed on permanent contracts by a local government, who had sued to have their holiday allowances and similar payments included in their ordinary wage. The Court indicated that even if such payments are made only once or twice a year, they can still qualify as ordinary wage if they are paid regularly and uniformly as compensation for predetermined work.
Disputes over Lunar New Year bonuses are not limited to whether they are counted as ordinary wage. Outcomes differ depending on what rules they were based on, whether the reduction procedures were lawful, and whether there was a budgetary basis for payment.
For executives, internal company regulations often become the key point of contention. In December last year, executive C at company B filed a lawsuit after the Lunar New Year bonus for 2023–2024 was cut from 2 million won to 1 million won. The court, however, found the reduction lawful, noting that the company’s executive compensation rules stipulated that bonuses were to be set by the board of directors, and that if the board was not constituted, the Chief Executive Officer (CEO) would exercise that authority. Since the CEO had decided, in accordance with the articles of incorporation, to reduce the Lunar New Year bonus to 1 million won, the court concluded that it could not be viewed as an unlawful reduction.
Cases involving public servants show a different pattern. In September last year, teacher D, who had worked at a high school in North Jeolla Province, won a lawsuit against the school foundation, claiming 113.56 million won in unpaid Lunar New Year bonuses and long‐service allowances. The school had cited budget shortages and reduced the relevant allowances after drawing up an additional budget, but the court held that because the allowances were established on the basis of law and budget, they had to be paid regardless of whether funds were actually appropriated. The court warned that if an employer could avoid its payment obligations simply by omitting items from the budget, it could lead to abuses in which allowances are not paid at all.
Ultimately, the Lunar New Year bonus is no longer just a simple “holiday bonus.” Amid legal changes that are expanding the scope of ordinary wage, it has emerged as a core issue in defining the nature of wages. Because conclusions vary depending on the legal basis, payment method, and eligible recipients, continued legal battles over the lawfulness of workplace rules and procedures appear inevitable.
scottchoi15@fnnews.com Choi Eun-sol Reporter