when New Year's Day or Thanksgiving rolls around, there's a topic that never fails to come up in office conversations. "Are we getting a holiday bonus this year?", "How much did we get last year, what will it be this year?" It's a conversation filled with anticipation and excitement. In fact, one study found that more than 1 in 2 employees receive a holiday bonus, so for many, it's more than just a bonus - it's a gesture of encouragement from the company and a way to get through the holidays.
but not everyone gets to experience this joy - many people are left disappointed when they don't receive the envelope they've been expecting, or upset that the amount is different from their regular colleagues. Are holiday bonuses just a "gift" that companies give out when they feel like it, or when they don't? or are they an "entitlement" that we can assertively demand?
in this article, we'll answer all your questions, from the legal nature of holiday bonuses, to the legality of differential pay, to what to do if you're wronged.
are holiday bonuses legal? (Core principles)
let's start with the most fundamental question: Are companies legally obligated to give employees holiday bonuses? the answer is both no and yes. Let's take a look at three key principles to understand when the answer is no and when the answer is yes.
silence in the Labor Standards Act: The legal obligation is no
the Labor Standards Act, Korea's flagship labor law, does not have a clause stating that "holiday bonuses must be paid." This means that the law itself does not force companies to pay holiday bonuses. Therefore, if your company has never given holiday bonuses since its inception, you are not breaking the law. Within the confines of the law, holiday bonuses are basically a "favor" or "consideration" from the company to boost employee morale and encourage hard work.
when a promise becomes an obligation: the power of work rules and collective agreements
but the moment a company promises to "give," it's a completely different story, because if it's in writing, it's no longer a favor, but a legal "obligation." The documents we're talking about are employment rules, collective agreements, and labor contracts.
if your company's employment rules say something like "The company will pay all employees 50% of their base salary as bonuses every year during the Chinese New Year and Chuseok," that becomes part of the terms and conditions of employment. the company must abide by this rule, and if it unilaterally withholds the payment because of business difficulties, it violates the Labor Standards Act and is guilty of wage arrears. This is the crucial moment when a promise turns into a legally binding obligation. So if you want to know the legal basis for your holiday bonus, these documents are the first place to look.
when a long-standing practice becomes a right: The legal effect of labor practices
"My company doesn't have a written policy, but we've been giving bonuses every holiday for years." this is often the case. Even if you don't have an explicit policy, if you've consistently and regularly given holiday bonuses to all workers on a consistent basis over a significant period of time, this may qualify as a "labor practice.
a labor practice is an unwritten rule or custom that has long been taken for granted by both labor and management. courts tend to view them as part of the employment contract and therefore legally binding. So, if the practice has developed to the point where employees have a reasonable expectation that they can expect to receive a holiday bonus, the company cannot unilaterally stop it - it would have to go through the process of changing the work rules to the disadvantage of the employees (with the approval of a majority of the employees).
in the end, the legal nature of a holiday bonus is not determined by the name "bonus" but by whether there was a binding promise to pay it. while it's not a legal obligation, if the company has promised to pay it through a work rule, collective bargaining agreement, or long-standing practice, it becomes a "wage" - the price of labor - and an obligation that must be honored.
[Related: What Are Work Rules? A Complete Guide to How They Differ from Labor Agreements]
when is it legal to pay differential bonuses?
it's rare that all employees receive the same amount of holiday bonuses. often, the amount varies depending on the position, seniority, and type of employment. When is this 'differential payment' reasonable and when is it illegal discrimination?
'Pay for tenure': digging into the controversial incumbent condition
many companies have a clause in their employment rules that says, "Bonuses are payable only to employees who are still employed on the date of payment." this so-called "incumbency clause" often prevents workers who leave their jobs just before the holidays from receiving their bonuses.
in the past, administrative interpretations by the DOL and some court cases have upheld this incumbency requirement. However, the tide has been turning in the courts, with a growing number of cases holding that it is unfair to deny employees full payment for work they have already provided simply because they left the company before the payment date, especially if the holiday bonus is paid for work during a specific period of time.
for example, consider a situation where an employee who worked hard from January through August doesn't receive a Chuseok bonus on September 15th. if this bonus is compensation for the first half of the year, then not paying them a dime because they left on September 10 could be viewed as not paying them for their work. while this is still up for debate, it's worth remembering that tenure is no longer an absolute standard.
tenure-performance-based differentials: OK if there's a reasonable reason
companies can make differential holiday bonuses based on reasonable criteria. for example, giving a larger bonus to employees with more years of service to encourage longevity, or giving a larger bonus as an incentive to employees for outstanding job performance are generally recognized as legitimate differentials.
example 1: "Employees with less than 1 year of service receive 300,000 won, employees with 1 year to 3 years of service receive 500,000 won, and employees with more than 3 years of service receive 1 million won."
example 2: "Grade S in the HR department will receive 100% of the basic salary, Grade A will receive 70%, and Grade B and below will receive 50%."
as long as the criteria for payment is clear and based on reasonable work-related reasons, it is not a legal problem.
this is a no-no: discriminating against someone because they're a "contingent worker
however, there is one type of discrimination that is never allowed. the Act on the Protection of Fixed-term and Part-time Workers, etc. (the Fixed-term Law) expressly prohibits employers from treating employeesless favorably than full-time employees engaged in the same or similar work because they are fixed-term (contract) or part-time (part-time) workers.
"Unfavorable treatment" includes not just wages, but all working conditions, including holiday bonuses, performance bonuses, and benefits. if a contractor is given no or significantly less holiday bonuses than a full-time employee, even though their work is essentially the same or similar, simply because they are a contractor, this is a clear violation of the law. In this case, the company must prove that there is a "legitimate reason" for the discrimination.
discrimination in action: people going to the labor board over holiday bonuses
here are some real-life examples to illustrate how strict the law is.
case 1: Welfare point discrimination at a financial company A large financial company gave regular employees 2.1 million welfare points per year and 1 million won in wedding congratulations, but gave 400 temporary workers who worked at the same teller counter only 1.6 million won per year in welfare points and no congratulations. This was recognized as unreasonable discrimination and the company was ordered to pay the difference.
case 2: Bonus and performance pay discrimination by a manufacturer A salad manufacturer and supplier paid 100% of base salary as a holiday bonus to regular employees, but did not pay any holiday bonus to short-time workers doing the same job. The company also paid performance bonuses to temporary workers much less than regular employees, which was also found to be discriminatory.
these cases show that company excuses such as "different budgets" or "different hiring processes" are unlikely to be recognized as legitimate reasons for discrimination. the key is 'is the work the same' and if it is, it's illegal to discriminate against holiday bonuses based on different forms of employment.
common worker question: If this is the case, do I get a bonus?
now that we've got the theory out of the way, let's take a look at some of the most common questions from real-life employees in a Q&A format.
"I've only been with the company for a short time..." Holiday bonuses for probationary employees
there is no specific law on holiday bonuses for probationary employees, so it all depends on the company's employment rules or related regulations.
if the rules say "those on probation are not eligible for bonuses": Unfortunately, you won't get a bonus, as it's not against the law for a company to decide who to pay within reason.
if thepolicy doesn't say anything: In principle, you should be paid the same as other employees. If your company arbitrarily withholds it from you because you're a probationary employee, it could be unfair treatment.
if it's proportional to the length of service: It's also possible to make it proportional to the length of service, such as "50% for the first three months of employment".
in conclusion, whether or not a probationary employee is entitled to a holiday bonus depends entirely on the company's bylaws, so it's important to check your labor contract or employment rules carefully when you join a company.
"I'm leaving soon, but..." last-minute bonuses for leavers
this is the biggest dilemma for employees who are thinking about leaving before the holidays, and it comes down to the presence or absence of a 'vesting condition'.
if your employment rules have a "pay only to those who are still employed on the date of payment" clause: In principle, this is hard to do, and has led to the "bonus cheat" controversy, where many employees give notice shortly after receiving their bonus. however, as mentioned above, there are legal challenges to the validity of this clause, so you may want to seek legal counsel if you think it's unfair.
if there's no 'vesting' clause: If you worked during the period for which you were eligible to receive a bonus, you can legitimately ask for your bonus to be proratedfor the time you worked when you left. this is because the bonus is considered "wages" that have already been earned in exchange for your labor.
"How much do I owe in taxes?" A complete breakdown of holiday bonus taxes
have you ever received a generous holiday bonus, looked at your paycheck stub, and been surprised by how much tax you owe? The bottom line is that holiday bonuses are taxable earned income. not just cash, but gift certificates, expensive gift sets, etc. are all valued at market value and taxable.
bonuses are added to your salary in the month you receive them to calculate your income tax. for example, if an employee earns a monthly salary of KRW 3 million and receives a bonus of KRW 1 million, their taxable income for the month is KRW 4 million. income taxes are progressive, which means that as you move up the income scale, you may have more tax withheld than usual. of course, you won't have to worry too much about this, as you'll eventually be reimbursed at the end of the year.
my bonus you didn't get, a practical guide to claiming your rights
what if your company didn't give you the holiday bonus you were owed, or unfairly discriminated against you? don't give up, there's a clear process for finding out your rights. who to file with and how will depend on your situation, so check out the table below to see what's right for you first.
category report wage arrears filing a charge of discrimination key situations the company withholds a bonus that it is obligated to pay "to everyone" or "to me without good reason the company does not give a bonus to regular employees but does not give it to me, a non-regular employee, or gives me less report to ministry of Employment and Labor (Local Employment and Labor Office) labor Commission (Local Labor Commission) main objectives get the money you were not paid (back wages) to correct unfair discrimination and obtain monetary compensation legal basis labor Standards Act fixed-term Employment Law, Temporary Labor Law processing period approximately 1-2 months (depending on the case) may take several months including mediation/arbitration
step 1: How to determine your company's obligation to pay
before you take action, the first thing you need to do is gather evidence. You need to objectively prove that your company owes you a holiday bonus.
check your labor contract: This is the most basic document. look for any clauses about bonuses.
request work rules: If you have 10 or more full-time employees, you're required to have work rules and make them available to employees. don't be afraid to ask your HR team for access or a copy.
check your collective bargaining agreement: If you have a unionized workplace, your collective bargaining agreement likely has a bonus policy.
obtain past pay stubs, coworker testimony: If you need to make a labor practice claim, past pay stubs or coworker testimony to prove that bonuses were consistently paid over the years will be important evidence.
step 2: How to File a Wage Payment Claim
if your company's obligation to pay you is clear from the above sources and you still haven't received your bonus, you're owed wages. in this case, you can file a report (complaint) with the Ministry of Laborto seek redress.
how to file: You can either visit the local employment and labor office with jurisdiction over your workplace or file a 'wage arrears complaint' online through the 'Complaint Center' on the Ministry of Employment and Labor's website. The 'Wage Arrears Complaint Center' is especially busy around the holidays.
procedure: Once a complaint is received, a labor inspector will be assigned. the labor inspector will summon the complainant (worker) and the respondent (employer) to investigate the facts. if the investigation confirms that wages are owed, the labor inspector will issue a "corrective order" to the employer to pay.
the outcome: most employers pay the back wages at the cure order stage. if the employer refuses to pay, the case will be referred to the prosecutor's office for criminal prosecution.
step 3: Discrimination, how to fix it?
if you've been denied a holiday bonus because you're a temporary worker, even though you do the same or similar work as a full-time employee, this is a case of "discrimination." You should knock on the door of the Labor Commission.
how to file: You must file an "Application for Correction of Discrimination" with the local labor commissioner in charge of your workplace within six months of the discriminatory treatment. Note that there is a six-month time limit.
procedure: The labor commission will conduct an investigation using investigators and public members, and hold a hearing to hear both sides of the case. it may also try to resolve the case through mediation or arbitration.
outcome: if the investigation finds discrimination, the labor board will issue a "corrective order" to the employer to stop the discriminatory treatment and pay any unpaid bonuses. if the discrimination is found to be willful or repeated, a punitive backpay order can also be issued, requiring you to pay up to three times the amount of damages.
frequently asked questions (FAQs)
Q1: My company gives me a holiday gift every year, but this year they suddenly stopped. is this wage arrears?
A: It depends on the nature of the gift itself. if your company has consistently given you a gift with a cash-like value, such as a $100 department store gift card, every year, you may be able to make a case for wage arrears, as it is part of your wages that has become an established labor practice. but if the items and value kept changing, like a fruit basket one year and a set of cooking oils the next, it's more of a fringe benefit at the company's discretion, and it's harder to claim as an entitlement. The key is consistency and predictability.
Q2: Is there a penalty for leaving the company immediately after receiving a bonus? Is there a legal issue?
A: Legally, there is no problem - the bonus you are obligated to pay is payment for work you have already provided, so it is your legitimate right to receive it. however, leaving the company shortly after receiving a bonus may be criticized for being unprofessional in your relationships with coworkers and supervisors. this is more a matter of personal choice and workplace reputation than a legal issue.
Q3: My company unilaterally cut my bonus because of difficulties, is this possible?
A: No, you can't. if holiday bonuses are specified in your employment rules or collective bargaining agreement, they are part of your working conditions. even if the company is experiencing business difficulties, it cannot unilaterally reduce or stop paying bonuses without your consent. This constitutes an "adverse change to employment rules" and is invalid unless it is done through due process (collective agreement of a majority of employees). the amount of the reduction can be reported as wage arrears.
the bottom line
while holiday bonuses are not a legal obligation, they are "wages" that must be honored from the moment they are promised as a company rule or practice, and discrimination based on employment status is clearly illegal.
you're only as good as your knowledge, and we hope this article has answered your questions about holiday bonuses and given you the courage to speak up if you ever find yourself in an unfair situation. if you have any questions or experiences with holiday bonuses, please feel free to share them in the comments.