Mr Thilo Halter, the president of the ECCK, contributed an op-ed article to Dong-A Daily on the ordinary wage. Mr Halter pointed out that changes in the ordinary wage in an unpredictable manner would crete a negative perception of Korea’s business environment. The article is available HERE (in Korean). The full text in English is below. “Frustrating Business Environment for Foreign Investors” With in sight the final Supreme Court decision on what constitute ordinary wages, debates are heating up involving politicians, labour unions, and business associations. In March last year, the Supreme Court ruled that regular bonuses should be part of ordinary wages. Since then, subsequent claims and arguments have reverberated with more than 160 lawsuits, two proposed amendments to the labour law from the opposition parties to codify the Supreme Court ruling, and unionsÛª boycott of tripartite talks with business and government representatives. As the ordinary wage is a basis to calculate an employeeÛªs overtime or holiday pay, the additional labour costs may reach trillions of Korean Won, if those claims were accepted in court. As the representative of the European Chamber of Commerce in Korea and a foreign CEO, I am deeply concerned about this policy’s fallouts over how foreign investors perceive Korea, let alone its actual costs incurred both financial and legal. Needless to say, the extra burden on domestic and foreign businesses is immense. According to a survey by the Korea Chamber of Commerce and Industry (KCCI), 87.4% of companies in Korea pay regular bonuses for their employees, indicating that most corporations in Korea will face sharp increase in labour costs. If regular bonuses are included in ordinary wages, the overall extra costs ÛÒ dues and three years of back paysÛÒ would be 38.6 trillion Won (35 billion USD) and additional 9 trillion Won (8.4 billion USD) each year. Moreover, the decision will influence already tense labour-management relations. The majority of companies in Korea have traditionally decided the scope of basic salary and allowances through collective bargaining agreements with the labour unions. In Germany, which is a representative member country of EU, wages for overtime work are determined pursuant to collective bargaining agreements or labour contracts, and absent such agreement, employers are not required to pay any additional wages at all. As the ruling opened an avenue to different interpretations in court, it is not difficult to anticipate the increase in legal action on the labour side. The surge of labour costs would reduce new employment or lead to restructuring, creating even more tensions. KoreaÛªs labour relations have long been a pressing concern for foreign investors, and they will be reasonably alarmed by the new development. What frustrates foreign investors the most, however, is how such a sensitive matter has been addressed under KoreaÛªs regulatory system. The Labour Standard Act of Korea does not define the scope of ordinary wages clearly, nor do its enforcement decrees. Therefore, both domestic and foreign-invested businesses in Korea have followed the guidelines by the Ministry of Employment and Labour in which regular bonuses paid with an interval of more than one month are excluded from ordinary wages. And overnight, the guidelines have been overturned, forcing businesses that have complied with those rules to pay the amount even in a retroactive manner. The signal to the market ÛÒ right or wrong will be: even if you stick to the rules, you never know whether you will be punished tomorrow. It is precisely this kind of flip-flop in regulation that makes foreign investors think twice about investing in Korea. Although the country is impressively committed to promoting foreign investment and improving the business environment, a negative perception could undermine such dedicated efforts very quickly. Perception is not always true, but it is a nonnegotiable fact. If Korea is regarded as a country where investors face financial and legal challenges due to unpredictable regulation, its reputation as an attractive investment destination will be irreparably tarnished. On balance, we understand that the verdict is up to the court, and that it should be respected. We also agree with Employment and Labour Minister Phang on his comment in July that the wage structures of Korean companies are too complex, thus need to be simplified. I want to believe that fierce debates about ordinary wages are part of growing pains as Korea makes improvement in its wage and employment systems. However, to attract investors, how to fix a problem is often as important as fixing the problem itself. The soundness of regulations as well as their reliability and continuity are key criteria for investors. Surprises are poison for the investment climate that will only create acid rain, precipitating back on the own paddy fields. Once the ground is perceived to have gotten sour, it is hard to change this even after the rain has gone.