Labor Attorney Choi Chang-gyun's Guide to Hospitality HR — Part 11
Labor Attorney Choi Chang-gyun's Guide to Hospitality HR
11. Hospitality Wage Management (Part 2)
Writer: Choi Chang-gyun, CEO & Labor Attorney, Seocho Labor Law Firm
Editor: ONDA Manager So Mo-ra
Seocho Labor Law Firm brings the deepest expertise in hospitality labor management to the table. We currently handle HR for numerous hotels and lodging businesses, conduct training for major hospitality franchise headquarters (including Yanolja and Yeogi Eottae), and work to create happier workplaces across the industry.
We believe that happy workplaces create happy lives. We launched this series to share essential labor management knowledge with the people building those workplaces together.
Hello, I'm Choi Chang-gyun from Seocho Labor Law Firm. Last time we covered standard wages and average wages in hospitality wage management. Today we're diving into one of the trickiest areas: minimum wage — the common pitfalls and how to avoid them.
1. What happens if you sign an employment contract below minimum wage?
Minimum wage is exactly what it sounds like: "the legally mandated floor you must pay anyone you employ." The rate is announced once a year through a statutory decision process.
Minimum wage is set as an hourly rate. In 2020, it stands at ₩8,590 per hour.
Under Article 6 of the Minimum Wage Act, minimum wage is mandatory. Even if you and your employee mutually agree to a lower wage, that agreement is void. In such cases, you must calculate what the employee should have received based on minimum wage, then pay the difference.
Article 6 (Effect of Minimum Wage)
① An employer shall pay wages equal to or higher than the minimum wage to workers subject to the minimum wage. ② An employer shall not reduce the existing wage level on the grounds of this Act. ③ Any part of an employment contract between a worker subject to the minimum wage and an employer that sets wages below the minimum wage amount shall be null and void; in such cases, the null and void part shall be deemed to have agreed to pay wages equal to the minimum wage amount under this Act.
Of course, paying below minimum wage also carries criminal liability (up to 3 years imprisonment or ₩20 million fine).
In real hospitality cases, minimum wage violations rarely stem from intentionally breaking the law. Most disputes arise because employers didn't realize the contract structure itself violated minimum wage rules.
Classic examples: employment contracts that don't specify break times clearly, leading to discrepancies between agreed and actual break time that trigger wage gaps, or contracts that list fewer break hours than workers actually take.
So how should you calculate minimum wage correctly?
2. How do you calculate minimum wage?
Minimum wage is calculated as: "Total monthly wages included in minimum wage scope / Monthly contractual work hours"
'Wages included in minimum wage scope' means wages paid regularly at least once a month. This includes monthly bonuses — but only the amount exceeding a certain threshold (in 2020: 20% of minimum monthly wage, or ₩359,062) — and cash welfare benefits like meal allowances and car maintenance stipends, again only above the threshold (in 2020: 5% of minimum monthly wage, or ₩89,765).
'Monthly contractual work hours' means the hours the employee agreed to work under the employment contract. This includes not just agreed work hours but also paid weekly rest allowances. However, overtime, night shift, and holiday work hours are excluded from the monthly contractual hours used for minimum wage calculation.
3. Do hospitality incentives (double-sell bonuses, sales commissions, etc.) count toward minimum wage?
Many lodging businesses offer special incentives to motivate staff: "double-sell bonuses" for selling the same room multiple times, "sales commissions" for selling goods or services, "walk-in bonuses" for short-stay bookings, etc.
These incentives count as performance-based wages under the Minimum Wage Act and are included in minimum wage calculations (Article 5(2) of the Minimum Wage Act Enforcement Decree).
Article 5 (Conversion of Wages for Minimum Wage Application)
② Wages determined by production-based or other contract-based pay systems shall be calculated as hourly wages by dividing the total wages for the wage calculation period (if there is a wage closing date, the wage closing period; hereinafter the same in this paragraph) by the total number of work hours during that period.
4. Do in-kind benefits like room accommodation or meal vouchers count toward minimum wage?
Some lodging businesses provide free rooms to employees, or meal vouchers. Because these are in-kind benefits, they're excluded from minimum wage calculations.
However, if you pay housing or meal allowances in cash as part of monthly salary, those count as welfare benefits — and as explained earlier, amounts above the threshold are included in minimum wage calculations.
5. Can you pay below minimum wage during a probation period?
If you sign an employment contract for one year or longer and set a probation period of up to 3 months, you can apply 90% of minimum wage (Article 3 of the Minimum Wage Act Enforcement Decree). However, workers in simple labor occupations designated by the Minister of Employment and Labor are excluded (proviso to Article 2 of the Minimum Wage Act).
Article 3 (Minimum Wage for Workers on Probation)
For workers who have entered into an employment contract for a period of one year or longer in accordance with Article 5(2) main clause and are on probation within 3 months from the start of probation, the hourly minimum wage shall be the amount specified in Article 5(1) latter part (meaning the amount set as minimum wage; hereinafter the same) minus 10 percent.
According to the ministerial notice, hotel and lodging facility cleaners and kitchen assistants are classified as simple labor — which means even with a probation period, they must receive full minimum wage. However, front desk staff and managers may qualify for the 90% rate depending on job complexity.
In other words, even if you set a probation period, check whether your employees' job classifications allow minimum wage reduction.
That wraps up this installment on hospitality wage management. Next time — in the final chapter of this series — we'll cover hospitality termination and severance management. Thank you.
For hospitality labor management inquiries (Seocho Labor Law Firm)
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