Payslips in Korea need six items, including the calculation method

This guide is for HR and payroll staff at companies in Korea, including foreign-invested companies, and for employees who want to check their own pay. Under the Labor Standards Act (근로기준법), a payslip (임금명세서) is more than a list of amounts. Where pay depends on days or hours worked, it must also show how the amount was calculated.

The rule: a written payslip every payday

Article 48(2) of the Labor Standards Act requires the employer to give each worker a payslip in writing when it pays wages. "Writing" includes electronic documents under Article 2, subparagraph 1 of the Framework Act on Electronic Documents and Transactions (전자문서 및 전자거래 기본법). So a payslip sent by email or through an in-house system counts as written delivery.

What the payslip must contain is set by Article 27-2 of the Enforcement Decree of the Labor Standards Act (근로기준법 시행령). Many companies think any pay statement will do, but subparagraph 5 asks for more than a list of amounts. Where the amount of a pay item varies with days worked, hours or similar factors, the payslip must state how that amount was calculated. For overtime work (연장근로), night work (야간근로) and holiday work (휴일근로), the calculation must include the number of hours.

The six required items

Item 4 adds a condition. If any wages were paid in something other than money, the payslip must show the item name, the quantity and the total assessed value. The common habit of leaving in-kind pay off the payslip breaks this rule.

Deductions under item 6 are limited to cases with a basis in the proviso to Article 43(1) of the Act. Writing a deduction on the payslip does not make it lawful. A deduction needs a specific provision in laws and regulations or in a collective agreement (단체협약). The payslip only shows what was deducted.

Which items need a calculation method

Subparagraph 5 is where most disputes arise. It applies only where an amount varies with days worked, hours or similar factors. Items paid at the same fixed amount every month do not need a separate calculation method.

• Fixed base pay: if it is the same every month, no calculation method is required.
• Overtime allowance: write the calculation method, including the number of hours.
• Night work allowance: write the calculation method, including the number of hours.
• Holiday work allowance: write the calculation method, including the number of hours.
• Pay calculated per day (일할계산): it varies with days worked, so the calculation method is required.
• Performance pay: if the payout is linked to results, it is safer to show the basis of calculation.

An overtime allowance shown as a single amount does not satisfy subparagraph 5. The worker must be able to see how many hours were paid and at what rate.

How to show the calculation

Take overtime pay. Put the converted hourly wage, the premium rate applied and the overtime hours for the month side by side. The worker should be able to check that their product matches the amount paid. You do not need to write sentences. Columns for hours and rate next to the payslip item are enough.

Pay calculated per day works the same way. Show which denominator the monthly ordinary wage (통상임금) was divided by and for how many days pay was given. Whether the denominator is calendar days or scheduled working days (소정근로일수) is for the company to decide. Set one standard and apply it consistently. If the standard changes from month to month, the calculation cannot be checked even when it is written down.

When you redesign the pay structure itself, its components become the structure of the payslip. See also Filing a change to the work rules.

A payslip is not a wage ledger

Article 48(1) requires the employer to keep a wage ledger (임금대장) for each workplace. Each time wages are paid, the ledger must record the items used as the basis for calculating wages and family allowances, the wage amounts and other matters set by Presidential Decree. The wage ledger is a record the company keeps. The payslip is a document given to the worker. These are two separate duties. A company that keeps the ledger but does not give payslips breaches paragraph 2.

Checklist

• Give a payslip on every payday.
• Decide how you deliver it: paper, email or an in-house system.
• If you deliver it electronically, confirm that workers can actually open and read it.
• Identify the worker with an employee number or date of birth.
• Show the date wages are paid.
• Check that the total wages match the amounts of the pay components.
• Include the item name, quantity and total assessed value of any wages paid in kind.
• Show the number of hours for overtime, night and holiday work.
• Show the formula for any pay calculated per day.
• List each deduction amount and the total deductions separately.
• Check separately that each deduction has a legal basis.
• Keep a separate wage ledger for each workplace.
• Compare the payslip with the ledger to make sure the figures match.
• Give a payslip with a departing employee's final pay as well.
• When you change the payslip template, check again that none of the six items is missing.