Korean Economy News
Korean carmakers to face fines for minimum wage violation despite high salary

Lee Jae-cheol and Choi Mira

South Korean automakers could face fines for violating the country’s minimum wage act next month even though they already pay handsome wages to their employees.

The country’s largest carmaker Hyundai Motor Co. pays an annual salary of 92 million won ($78,000) on average to its 65,886 workers. But about 7,200 workers are classified as those who receive below the hourly minimum wage of 8,350 won ($7) even though their annual salary amounts to around 50 million won.

The discrepancy is due to the company’s wage system with low base salary and high incentives. The Korean government only counts base salary and fixed payments in its minimum wage calculations, but excludes the high bonus pay that is doled out every other month. The government’s minimum wage calculation makes a majority of Korea conglomerates that have the similar wage system with Hyundai’s rule breakers despite their handsome payments.

Hyundai Motor Group’s parts making affiliate Hyundai Mobis also has 1,900 workers who are paid less than the minimum wage according to the government’s calculation. They have been trying to change the bi-monthly incentive payment system to monthly payment, but have not yet obtained consent from the labor unions. Unless they finish the labor-management talks by the end of this month when the government’s grace period expires, the employer will face up to three years in prison or a 20 million won fine.

The wage system with low base salary and high bonus payment has long been established in the auto industry through a series of labor-management wage talks. Not only the finished carmakers but also their smaller subcontractors have the similar payment system, so that they are raising their voice that the government should extend the grace period until the end of the year.

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