On Monday, May 28, 2018, at the last plenary session of the first half of this year, an amendment to the minimum wage bill was passed by the National Assembly. The bill calls for bonuses and welfare benefits of a certain size to be regarded as wages in determining violations of minimum wage which would be subject to criminal penalty. The expected enforcement date of the amended law is January 1, 2019.

1.Changes to Minimum Wage Calculation

Under the current Minimum Wage Act, bonuses paid at more than one month intervals and welfare benefits are not considered as wages in determining violations of the minimum wage. However, the new bill will take into account portions of regularly paid bonuses (“Bonuses”) and welfare benefits, such as subsidies for transportation, meals, lodging, etc. (“Welfare Benefits”) exceeding certain thresholds as wages in determining violations of the minimum wage.

Specifically, Bonuses up to 25% and Welfare Benefits of up to 7% of the minimum wage for the respective year will be excluded from the wage calculation while Bonuses exceeding 25% and Welfare Benefits surpassing 7% will be included. These percentages will be progressively lowered every year until 2024 when all such regularly paid Bonuses and Welfare Benefits will be included in the wage calculation.

Category

2019

2020

2021

2022

2023

2024

Exclusion Rates

Bonuses

25%

20%

15%

10%

5%

0%

Welfare Benefits

7%

5%

3%

2%

1%

0%

2.Procedures for Changing Payment Cycles of Wages, Bonuses, Etc.

According to the new bill, if an employer intends to amend its rules of employment so that wages previously paid out in intervals of more than one month are now paid out once per month to ensure that such wages are incorporated into the wage calculation in determining violations of the minimum wage, only consultation (rather than consent) with the employee representative would be required. There has long been dispute as to whether consultation or consent was required, but the new bill has finally resolved this issue.

3.Looking Forward

However, despite such changes, Welfare Benefits to be regarded as wages in determining violations of the minimum wage have not been clearly defined. Subsidies for transportation, meals, lodging have been provided as examples, but do not constitute an exhaustive list. Therefore, we expect that the debate over whether to include various subsidies and allowances under the scope of Welfare Benefits will continue.

In summary, based on the foregoing changes, it is necessary for employers to have a complete understanding of the wage structure of their companies and ensure that they are in compliance with the revised Minimum Wage Act.