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South Korea’s Supreme Court delivered a landmark ruling against Samsung Electronics, mandating the tech giant include performance bonuses when calculating severance pay for departing employees (according to Yonhap News). The decision marks a significant victory for workers’ rights in Asia Pacific’s largest technology hub.
Samsung’s Seven-Year Legal Battle
The ruling concluded a protracted legal dispute that began when 15 former Samsung Electronics employees sued the company in 2019, claiming their severance packages were calculated using artificially low average wages. The plaintiffs argued Samsung deliberately excluded “target incentives” — performance-based bonuses tied to project and departmental achievements — from their final wage calculations, reducing their entitled severance payments.
The Supreme Court definitively ruled that these target incentives constitute “payment in exchange for labor” based on their function, purpose, and detailed assessment criteria. This classification means such bonuses must be included in the “average wage” used as the foundation for severance pay calculations, following the standard practice of dividing final three-month wages by total working days.
Regional Impact on Employment Practices
This precedent-setting decision could reshape employment compensation across South Korea’s technology sector and potentially influence similar cases throughout Asia Pacific. Samsung Electronics, as one of the region’s most prominent employers and a bellwether for corporate practices, often sets standards that other multinational companies follow.
The ruling particularly impacts South Korea’s performance-driven corporate culture, where bonuses and incentives form substantial portions of employee compensation packages. Companies across the country may need to reassess their severance calculation methods to ensure compliance with this expanded definition of wages subject to severance obligations.
What’s Next for Korean Corporate Law
Legal experts anticipate this ruling will prompt widespread reviews of employment contracts and severance policies among major Korean conglomerates. The decision strengthens worker protections in a country where job security concerns have intensified amid economic uncertainties and technological disruption.
For Samsung, the immediate financial impact remains unclear, but the company will likely need to adjust its HR policies and potentially face additional claims from other former employees. The ruling also signals South Korea’s courts are increasingly willing to interpret employment law in favor of workers, potentially encouraging more labor-related litigation across Asia Pacific’s dynamic job market.
