0
An image generated by ChatGPT

Cosmetics manufacturer Company A did not keep track of its employees' clock-in and clock-out times. The management operated under the premise that they only needed to pay a fixed overtime allowance, commonly referred to as "fixed OT." In reality, however, employees regularly worked past the fixed OT hours into extended and overnight shifts, resulting in 123 million KRW in unpaid allowances affecting 310 workers. In effect, the blanket wage system served as a mechanism to mask the actual hours worked.

The Ministry of Employment and Labor announced on May 28 that it conducted a targeted inspection from February 26 over a roughly two-month period covering 101 workplaces suspected of abusing the blanket wage system. The results revealed that among 79 inspected workplaces utilizing blanket wages, 34 establishments (43.0%) failed to pay proper allowances for overtime, holiday, and night shifts. The total back pay owed by these workplaces was confirmed at 448 million KRW.

The targeted inspection selected suspect workplaces based on media reports, external complaints, petitions, and tips submitted to an anonymous reporting center. Service sectors such as restaurants and lodging, alongside information technology (IT) firms, made up a large portion of the inspected industries. Out of the 79 workplaces utilizing blanket wages, 73 applied fixed OT allowances, while six implemented flat-rate salary or flat-rate allowance systems.

A blanket wage system is a compensation scheme where a base salary and various allowances are calculated and paid in a predetermined lump sum, irrespective of the actual hours worked. While traditionally utilized for roles where calculating working hours is inherently difficult, it has frequently led to "free labor" issues in practice, where workers receive no extra pay despite working actual overtime, night, or holiday shifts.

The inspection exposed not only unpaid allowances blamed on blanket wages but also widespread deficiencies in managing long working hours. Thirty-four workplaces violated statutory overtime caps because they failed to properly oversee extended hours while utilizing blanket wages. Furthermore, 27 establishments violated labor tracking regulations by failing to accurately register actual overtime, night, and holiday hours on their payroll ledgers and pay stubs.

When expanding the scope beyond unpaid allowances to include overdue wages and severance packages, the number of non-compliant workplaces rises to 68, with total back pay swelling to approximately 1.54 billion KRW. Including all other miscellaneous violations of labor laws, the number of non-compliant businesses reaches 77, accounting for 97.5% of the inspected workplaces utilizing blanket wages.

Poultry processor Company B routinely required overtime and holiday shifts due to high workloads but paid zero overtime allowances beyond the fixed OT threshold, while also withholding portions of holiday pay. The company racked up 78 million KRW in unpaid wages affecting seven employees. Software developer Company C similarly disbursed only fixed OT amounts without verifying actual working hours, leaving 25 million KRW in overtime, holiday, and night shift allowances unpaid for 14 workers.

Violations of legal overtime limits were also uncovered. Software developer and supplier Company D frequently required holiday shifts for urgent maintenance during system glitches, yet failed to track holiday hours properly, exceeding the overtime cap 25 times by a total of 123 hours. Technical services firm Company F saw its workload surge amid business growth but took no corrective measures, breaching the overtime cap 44 times by a total of 698 hours.

The Labor Ministry ordered the non-compliant workplaces to rectify their working hour violations and disburse all back pay. The ministry plans to pursue criminal prosecution against employers failing to comply. Even for businesses that clear their violations, repeating inspections will be carried out periodically until illegal practices are completely eradicated.

Some workplaces initiated system overhauls following the inspection. They abolished practices where holiday allowances and unused annual leave payouts were paid out as flat rates regardless of actual holiday shifts or leave taken. The ministry aims to multiply such corrective turnarounds by providing consultation programs to improve blanket wage systems and offering guidance on labor management.

The government is also transitioning its inspection regimen into a permanent, ongoing framework. On May 14, the ministry launched an enforcement drive targeting the Guro and Gasan Digital Complexes, areas that yielded a high volume of tips through the anonymous reporting center for blanket wage abuse. Moving forward, the ministry plans to analyze reports and metrics monthly to select new target regions, sustaining relay-style inspections across various districts until the end of the year. Additionally, to encourage reporting, the ministry will heavily promote the anonymous center and provide streamlined access through 'Blind,' an anonymous community app popular among corporate employees.

"Ensuring that just compensation for labor is paid in full is the most fundamental principle for normalizing the labor market, and the legally mandated rewards of labor must not be denied under the guise of a blanket wage," stated Labor Minister Kim Young-hoon. "As reports of blanket wage abuse through our anonymous center continue to climb, we will swiftly reflect the demands of workers on the ground to aggressively inspect and reform these workplaces, ultimately rooting out free labor."

                                                                                                        Kim Nam-hyeong