Korean Labor Law Update: Ending the Overtime-Inclusive Salary?

Table of Contents :

1. Why This Labor Law Change Matters Now
2. What Is Korea’s “Inclusive Wage System”?
3. Inclusive Wage vs Fixed Overtime vs Allowance Pay
4. Real Case Studies: What Can Go Wrong
5. What’s Changing by 2026?
6. Why It’s Controversial: Worker vs Employer Viewpoints
7. Checklist: What You Should Check Today
8. FAQ: Foreign Workers’ Common Questions

Why This Labor Law Change Matters Now

In June 2025, South Korea elected a new president, Lee Jae‑myung, who promised major reforms to improve everyday life for workers and families. One of the biggest areas of change is labor law, especially rules around long working hours and fair pay.

If you’re a foreigner working in Korea, you might not be familiar with all the local labor systems—but they can affect your pay, your rights, and your work-life balance.

One system now under review is the “inclusive wage system,” where overtime pay is bundled into your salary—even if you work extra hours. This system has caused confusion, unfair treatment, and legal disputes.

To address this, the Korean government plans to ban or strictly limit this system by 2026. This is a major shift that could change how companies pay their employees—and how you understand your contract.

What Is Korea’s “Inclusive Wage System”?

The inclusive wage system (포괄임금제) is when your salary includes pay for things like overtime, night shifts, or weekend work—even if those hours aren’t tracked separately.

Instead of calculating extra pay every month, the company just pays you a fixed amount. On paper, it sounds simple. But in reality, it often means you don’t get extra money even if you work extra hours.

This system is often used for jobs where working hours are irregular—like sales, client-facing roles, or positions that involve frequent travel. However, many companies apply it to regular office jobs too, even when work hours are easy to track.

📌 Example:
Let’s say your contract says your salary includes 30 hours of overtime per month. But what happens if you work 50 or 60 hours? Under this system, you might not get any extra pay—unless the extra hours are recorded and negotiated.

Inclusive Wage vs Fixed Overtime vs Allowance-Based Pay

There are similar systems in Korea, and it’s easy to confuse them. Here’s a simple chart to help you understand:

Inclusive wage is vague and often lacks detailed records. Fixed overtime systems require clear records of hours worked, which better protects workers.

If you don’t understand which system your contract uses, you could miss out on rightful pay. That’s why it's important to check your contract—and ask questions if you're unsure.

Real Case Studies: What Can Go Wrong

Let’s look at some real situations that happened in Korean workplaces. These examples show how the inclusive wage system can be misused.

Case 1: 30 Hours in Contract, 60 Hours in Reality

An employee at a marketing company had a contract saying, “30 hours of overtime included.” But every month, she worked over 60 hours—with no extra pay.
She filed a complaint with the labor office. The company had to pay back some wages, but because the contract didn’t explain how the 30 hours were calculated, the court ruled in favor of the employee.

Case 2: Vague Contract = Invalid

A developer at a tech startup had a contract that said, “overtime pay is included in the salary”—but didn’t explain how much or how often.
The court said the contract was too vague and ruled the inclusive wage system invalid. The company had to pay the full overtime based on real hours worked.

Case 3: Switching to Fixed OT Cut Disputes by 70%

A large company used inclusive wages for all office workers. But they got too many complaints.
So, they switched to a fixed overtime system with time-tracking apps. Result? Legal disputes dropped by over 70% in one year.

💡 Takeaway: If your contract isn’t clear or if your hours aren’t tracked, you may be losing money—and legal protection.

What’s Changing by 2026?

In 2025, Korea’s Ministry of Employment and Labor announced a reform plan to limit the use of inclusive wages.

Here’s what’s coming:

🔵 Time-Tracking Becomes Mandatory

Companies will be required to track employees’ working hours using electronic systems (like apps or biometric entry).

🔵 Inclusive Wage Use Will Be Restricted

Only very specific jobs where hours are hard to measure (e.g. field sales, research) may use this system. Most office jobs will no longer qualify.

🔵 New Penalties for Non-Compliance

If a company breaks these rules:

• They may face fines

• Or be ordered to correct the contract

• Or even face legal action from employees

These rules will start in 2026, so companies and workers still have time to prepare. But the sooner you review your contract, the better.

Why It’s Controversial: Worker vs Employer Viewpoints

This change isn’t simple. Not everyone agrees.

🔴 Workers & Labor Unions Say:

• “It allows unpaid overtime and abuse.”

• “No time-tracking = no proof = no rights.”

• “It’s against labor standards and encourages burnout.”

🔵 Some Employers Say:

• “Some jobs don’t follow fixed hours—this change ignores real-life conditions.”

• “The new rules create extra admin and confusion.”

• “We need better guidelines, not a full ban.”

🟡 The Government’s Middle Ground:

To balance both sides, the Korean government plans to:

• Allow the system only for a small group of jobs

• Require clear contracts

• Make time-tracking mandatory for everyone else

📌 Why this matters to you:
If you're in a job where hours can be tracked (like most office roles), your company must follow the new rules—or they may be breaking the law after 2026.

Checklist: What You Should Check Today

For Foreign Employees

1. Do you know which wage system your contract uses?
Ask your HR or manager if you’re under the inclusive wage system, fixed OT, or a different structure.

2. Does your contract clearly explain overtime pay?
Look for details: how many hours are included? What’s the extra pay policy?

3. Is your working time recorded?
If your company doesn’t use a time-tracking system, you should keep your own records using apps or notes.

4. Can you speak with HR in English or your language?
Check if your workplace has bilingual support or if a co-worker can help you understand the contract fully.

For Employers Hiring Foreign Workers

1. Review all contracts with legal experts or labor consultants.
Foreign workers may not know local labor law—so it's your job to ensure transparency.

2. Introduce or upgrade time-tracking systems.
Use mobile apps, biometric readers, or simple online forms to log hours.

3. Train team leads and managers to explain pay structures clearly.
Especially for multilingual teams—transparency reduces conflict.

4. Communicate the 2026 law changes early.
Foreign staff might not follow Korean news, so inform them proactively.

FAQ – Foreign Worker Edition

Q1. Can I refuse to sign a contract if the overtime policy is not clear?

Yes. You have the right to ask for clarification or changes before signing. If the overtime pay section is vague, request more details or an English version. You can also ask for help from the Korea Labor Welfare Service (근로복지공단) or local expat support centers.

Q2. My company doesn’t use any time-tracking system. Is that legal?

For now, some small companies still operate this way. But by 2026, all workplaces must record working hours digitally. Until then, keep your own record using apps like Timesheet, Work Log, or even Excel.

Q3. Are there free legal services for foreign workers in Korea?

Yes. Many local governments and NGOs offer free labor consultations with interpreter support. Try these trusted services:

• Seoul Global Center – Offers free legal and labor advice in English.

• Korea Labor Foundation – English-language labor support and online Q&A by the Ministry of Employment and Labor.

You can also call the Labor Counseling Hotline at 1350 (press 5 for English) for direct help.

Q4. What if I already signed an inclusive wage contract—can I still complain later?

Yes. If your actual working hours and pay do not match the law, you can file a report at the labor office. Even if your contract said "all included," the law still protects your right to fair pay.

Q5. What Korean keywords should I look for in my contract?

Look for terms like:

• “포괄임금제” (inclusive wage system)

• “연장근로 수당 포함” (overtime included)

• “야간/휴일 수당 별도 지급” (night/holiday pay given separately)

If you see these words, ask what they mean in your case.

The inclusive wage system has long been a part of Korean work culture—but that's about to change. As new labor laws take effect, it's more important than ever to check your contract, understand your pay structure, and keep track of your working hours.

Whether you're already working in Korea or planning to, now is the right time to review your employment terms carefully. Make sure everything is clear and fair—especially when it comes to overtime.

By 2026, stricter rules will help ensure fairer treatment for workers across the board. Don’t wait until problems happen. Stay informed, stay ready—and protect your time and income.