▲ A flag bearing the logo of Samsung Electronics Co. flies outside the company's headquarters in southern Seoul on Jan. 29, 2026. (Yonhap)

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(LEAD) Supreme Court rules Samsung should count bonus in calculating severance pay

(ATTN: UPDATES with details of ruling)

SEOUL, Jan. 29 (Yonhap) -- The Supreme Court ruled Thursday that Samsung Electronics Co. should count bonuses as part of an employee's average wage when using it as the basis to calculate severance pay.

The ruling came almost seven years after 15 former Samsung employees sued the company, claiming it had paid them severance pay based on an average wage that excluded various bonuses they received for their performance.

The plaintiffs demanded the company pay them the remainder of their severance pay based on an average wage that included the bonuses.

The Supreme Court ruled that the "target incentives" -- a bonus paid to employees based on the performance of each project and department they belong to -- should count as pay for work, given the function, purpose and details of the assessment criteria for their payment.

According to previous rulings in similar cases, the wage that counts toward the "average wage" used as the basis for severance pay is defined as payment in exchange for labor.

An average wage is calculated by dividing the wages of the final three months before retirement by the total number of days in that period.

The employer then pays a severance pay equivalent to at least 30 days' worth the average wage for every year of consecutive employment.

The court, however, deemed that the "performance incentives," which are shared with employees using 20 percent of profit generated by each department, had no direct correlation to the provision of labor.

In fact, it said the profit in question depended on various other factors, including capital levels, spending, market conditions and the management's decision-making.

With the ruling, the court sent the case back to the Suwon High Court for a retrial, as both the district and appellate courts had ruled in favor of Samsung, saying neither the target nor performance incentives could be deemed as payment for labor or having a close correlation to labor.

Thursday's ruling was closely watched as it could set a precedent for similar cases pending at the Supreme Court involving former employees of SK hynix Inc., HD Hyundai Heavy Industries Co. and other companies.

Such suits against private enterprises have grown since the top court ruled in 2018 that bonuses should count toward the calculation of average wages at public institutions.

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