Supreme Court Clarifies When Performance Bonuses Do Not Constitute “wages”

On 12 February 2026, the South Korean Supreme Court (Court) issued a significant ruling clarifying the circumstances in which employee performance bonuses constitute "wages" under the Labour Standards Act (LSA). The decision, which considered the bonus schemes of a semiconductor manufacturer and a glass manufacturer, reached the opposite conclusion to the Court's earlier ruling on 29 January 2026, in which a target incentive scheme was recognised as wages.

12 February Decision

In finding that the performance bonuses paid by both companies did not constitute wages, the Court applied a three-part test, examining:

• whether the payment was directly or closely related to the employee's provision of labour;