The Abuse of Comprehensive Wage System and Deemed Working Hours System in Korea: Reality and Solutions

 

Introduction: When Fair Compensation Disappears

In today's workplaces across South Korea, the term "free overtime" has become all too familiar. Many workers, especially those in administrative positions, find themselves trapped in a system where they work long hours without proper compensation. This situation is often facilitated by two problematic work arrangements: the "Comprehensive Wage System" (포괄임금제) and the "Deemed Working Hours System" (간주근로제).

One administrative employee shared their experience working at a company with a labor union for production workers. While production staff receive overtime pay for additional work, administrative employees are forced to work until 8 PM without extra compensation under the pretext that this is already "include

d in their monthly salary." Moreover, they are required to sign a "deemed working hours consent form" to go on business trips, resulting in excessive workloads without proper compensation.

This article examines the nature of these systems, how they are being misused, and what workers can do to protect their rights.

Understanding the Comprehensive Wage System and Deemed Working Hours System

The Comprehensive Wage System

The Comprehensive Wage System is a wage calculation method that includes various allowances (overtime, night work, holiday work) in the basic salary in advance. Surprisingly, this system is not explicitly defined in the Labor Standards Act but has been recognized through court precedents.

For the Comprehensive Wage System to be legally valid, it must meet these conditions:

1. It can only be applied in cases where working hours are difficult to calculate
2. It must not disadvantage the worker
3. The predetermined allowances included in the salary must not be less than the legally required allowances based on actual working hours

The Deemed Working Hours System

The Deemed Working Hours System is defined in Article 58 of the Labor Standards Act. It allows employers to consider an employee to have worked a set number of hours when they work outside the workplace and their actual working hours are difficult to track.

The system can be applied in three ways:

1. Standard working hours: The employee is considered to have worked the contractually agreed hours
2. Hours typically required: The employee is considered to have worked the hours typically required for the task
3. Hours agreed upon in writing: The employee is considered to have worked the hours agreed upon in writing between the employer and employee representatives

The Reality: How These Systems Are Being Abused

Common Abuses of the Comprehensive Wage System

While the Comprehensive Wage System was originally intended for exceptional cases where working hours are difficult to track, it is now being widely misapplied:

1. Illegal application to general office work: The system is applied to office work where working hours can easily be measured
2. Formalistic wage contracts: Contracts include the term "comprehensive wage" but pay minimal allowances regardless of actual overtime
3. Ignoring the 52-hour workweek rule: Using the system as an excuse to force employees to work beyond legal working hour limits

According to a 2020 Ministry of Employment and Labor survey, approximately 30% of surveyed companies applied the Comprehensive Wage System, with the figure reaching 76% in the IT and gaming industries.

Abuses of the Deemed Working Hours System

Similarly, the Deemed Working Hours System is being misused:

1. Excessive workload assignment: Unreasonable workloads during business trips or field work
2. Forced consent forms: Requiring employees to sign deemed working hours consent forms as a condition for business trips
3. Ignoring actual working hours: Acknowledging only standard working hours despite knowing extended work will be necessary

Legal Perspective and Recent Developments

Court Rulings on the Comprehensive Wage System

The Korean Supreme Court has clearly defined the limits of the Comprehensive Wage System:

• In a landmark 2010 ruling (Supreme Court Decision 2008Da6052), the court stated that "unless working hours are difficult to calculate, wage payment contracts based on the comprehensive wage system cannot be permitted"
• There is an increasing number of cases where courts have ruled comprehensive wage systems invalid when applied to office workers and other positions where working hours can be easily tracked

The courts have consistently ruled that "if the statutory allowances included in the comprehensive wage are less than those calculated according to the Labor Standards Act, that portion of the wage contract is disadvantageous to the worker and therefore invalid."

Government Policies and Legislative Movements

The Korean government and National Assembly have also taken steps to address these issues:

• The Ministry of Employment and Labor established a "Comprehensive Wage System Abuse Reporting Center" in 2023
• Multiple amendments to the Labor Standards Act have been proposed to prohibit or restrict the Comprehensive Wage System
• In May 2024, the Justice Party hosted a discussion titled "Why is a Law Prohibiting the Comprehensive Wage System Necessary?"

Experts argue that the Comprehensive Wage System undermines the purpose of the Labor Standards Act and that clear legal standards need to be established.

Worker Response Strategies

If you find yourself in a situation where these systems are being abused, consider the following steps:

1. Review Your Employment Documents

• Check your employment contract for comprehensive wage system clauses
• Review company rules and wage regulations to see if separate overtime payments are specified
• Examine any written agreements related to the deemed working hours system

2. Keep Detailed Records

• Record your actual working hours meticulously (using apps, emails, or notebooks)
• Document work instructions and completed tasks
• During business trips, record actual working hours and tasks performed

3. Pursue Legal Remedies

• Report to the Ministry of Employment and Labor's "Comprehensive Wage System Abuse Reporting Center"
• File a complaint with the local labor office
• Consider legal action to claim unpaid wages (consult with a legal professional)

4. Seek Collective Solutions

• Connect with colleagues in similar situations for collective action
• Consider joining or forming a labor union
• Request improvements through employee representatives

Proper Implementation for Employers

Employers can ensure legal compliance and fair treatment by:

1. Proper Application of the Comprehensive Wage System

• Apply the system only to positions where working hours are genuinely difficult to calculate
• Clearly specify the scope and calculation standards for allowances included in the comprehensive wage
• Ensure the amount is not less than what would be paid according to actual working hours

2. Correct Implementation of the Deemed Working Hours System

• Apply only when work outside the workplace makes tracking hours difficult
• Establish proper written agreements with employee representatives
• Assign reasonable workloads and avoid excessive work instructions

3. Improve Wage Systems

• Build transparent and fair wage structures
• Implement accurate systems for tracking working hours and calculating allowances
• Consider alternatives to the comprehensive wage system

Conclusion: Toward Fair Compensation for All Workers

The Comprehensive Wage System and Deemed Working Hours System were originally intended as exceptional measures for specific working conditions. However, they are now being widely misused as tools for "free overtime," infringing on workers' rights and reinforcing a culture of long working hours that decreases both productivity and quality of life.

The Comprehensive Wage System, in particular, lacks a strong legal foundation and is only recognized in limited circumstances through court precedents. Clearer legislative guidelines are urgently needed. The Deemed Working Hours System also requires stricter oversight to ensure it operates according to its original purpose.

Most importantly, the fundamental principle of the Labor Standards Act—"fair compensation for work performed"—must be realized in practice. Workers need to be aware of their rights and actively respond to unfair treatment, while companies should strive for fair wage payments according to legal principles. Government and legislative bodies should also work to improve these systems to reflect real-world conditions.

We hope for the creation of a fair and healthy work environment where no worker is sacrificed by the abuse of these wage systems.

References

1. Ministry of Employment and Labor (2020). Comprehensive Wage System Survey.
2. Supreme Court Decision 2008Da6052 (May 13, 2010).
3. Labor Standards Act, Article 58 (Deemed Working Hours System).
4. Justice Party (May 2024). Discussion Materials: "Why is a Law Prohibiting the Comprehensive Wage System Necessary?"
5. Ministry of Employment and Labor (2023). Policy to Eradicate Illegal Wage Payment Practices.