The Supreme Court has ruled that performance bonuses at Hyundai Marine & Fire Insurance (001450.KS) should not be included in the average wages used to calculate retirement pension contributions.
According to legal circles on Thursday, the Supreme Court's Second Division (presiding Justice Cheon Dae-yeop) overturned on February 26 a lower court ruling that partially favored 411 current and former employees of Hyundai Marine & Fire in a wage lawsuit against the company, remanding the case to the Seoul High Court.
The key issue was whether performance bonuses could be included in the "total annual wages" that form the basis for calculating retirement pension contributions. The first and second instance courts ruled that the performance bonuses were effectively wages paid on a regular basis and should be included in average wages.
However, the Supreme Court determined that it was difficult to conclude the company had an obligation to pay the bonuses continuously and regularly, given that there were no provisions regarding performance bonuses in the employment rules and the payment criteria had changed multiple times. The court also cited the fact that the company could choose not to pay bonuses depending on business conditions. Additionally, the court ruled that performance bonuses could not be considered compensation for labor, as net profit reflects not only work provided but also various factors including market conditions, capital size, and management decisions.