In a significant ruling, the Supreme Court of Korea upheld a lower court's decision that former employees of Hanwha Ocean are not entitled to include management performance bonuses in their severance pay calculations. This decision stems from a lawsuit filed by approximately 970 former employees who argued that the bonuses, which are distributed based on company performance, should be considered part of their average wage for severance purposes. However, the court ruled that these bonuses do not directly correlate with the labor provided by the employees and thus should not be classified as wages in the context of severance pay.

The Supreme Court's ruling, which confirmed earlier decisions made by the lower courts, stated that the management performance bonuses are more akin to a distribution of business profits rather than compensation for labor. Accordingly, the initial ruling emphasized that the bonuses do not have a direct relationship with the level of work performed and therefore cannot be factored into average wage calculations. This underscores a broader legal distinction regarding what constitutes wage versus performance-based compensation, affecting how severance pay is calculated for outgoing employees in various sectors.

This ruling may have wider implications for similar cases involving former employees of large corporations in Korea, as different rulings have emerged depending on the nature of the performance bonuses in question. For instance, while the Supreme Court ruled in favor of former employees of Samsung Electronics by including 'target performance bonuses' as wages due to their regularity, the decision for SK Hynix was similar to Hanwha Ocean's, further complicating the landscape of labor compensation and severance pay within the corporate sector. The ongoing legal discourse surrounding performance bonuses signals a need for clearer guidelines and definitions in employment law, especially as performance-based compensation becomes more prevalent.