The Ministry of Labor issued the Lao-Dong-Tiao-Two-1070130882 Circular of June 21, 2018 (hereinafter, the “Circular”), pointing out that the wages commuted pursuant to law for workers who have extended their work hours or have not taken supplemental leave after working on their rest days are included in the average wage if the extend work hours or rest days take place within six months prior to the day when the reasons of calculation occurs.
For workers who have worked for extended hours or on rest days and who have chosen to supplement the leave, this Circular clarified the issue of whether the wages paid by an employer in case the supplemental leave period has expired or there are still number of leave hours not taken when the labor contract expires should be included in the calculation of their average wages.
Article 32-1, Paragraph 1 of the Labor Standards Law provides: “When an employer extends work hours pursuant to Paragraphs 1 and 2 of Article 32 or causes the worker to perform work on rest days under Article 36, if the worker is willing to choose supplemental leave with the approval of the employer, the number of the worker’s work hours shall be used to calculated the number of supplemental leave hours.” Paragraph 2 provides: “With respect to the supplemental leave in the preceding paragraph, the supplemental leave period shall be negotiated between the employer and the employee. If the supplemental leave period expires or if there are still supplemental leave hours not taken when the labor contract expires, wages calculated by the standard for calculating wages for the extended work hours or the rest days on which work was performed shall be paid. In case of failure to pay wages, penalties shall be imposed for violation of Article 24.” Article 2, Subparagraph 4 of the Labor Standards Law is excerpted as follows: “‘Average Wage’ means the figure reached by taking the total wages for the six months preceding the day on which an event requiring that a computation be made occurs, divided by the total number of days in that period….” The so-called “total wage” means the total compensation obtained for work within six months prior to the day when the reasons of such calculation take place.
This Circular further pointed out that when workers choose to take supplemental leave in accordance with Article 32-1 of the Labor Standards law after working extended hours or working on rest days, whether the wages commuted by the employer pursuant to law for the number of untaken supplemental leave hours upon expiration of the supplemental leave period or termination the labor contract should be included in the calculation of the average wage should depend on whether the original extended work hours or the rest day work giving rise to the untaken supplemental leave hours takes place within six months prior to the day on which the reasons of calculation take place.
This Circular also provided an example for the sake of illustration by assuming that the employer and employee of a specific business organization have agreed that the right to take special leave shall be exercised during January 1 through December 31 each year with a period of six months for supplemental leave for overtime work and with the fifth of each month as the pay day. If Worker A worked overtime for two hours on July 12 and September 12 of 2018 respectively and has chosen to take supplemental leave with the employer’s approval, but no supplemental leave is taken by Worker A as of December 31, 2018, the employer pays the wages for 4 untaken leave hours based on the wage calculation standard for the overtime work on July 12 and September 12 of 2018. The employer subsequently terminates the labor contract (with severance) with Worker A on February 1, 2019, and the calculation of the average wage should be pushed back to August 1, 2018 from January 31, 2019. Therefore, Worker A’s overtime pay for September 12, 2018 should be included in the calculation of the average wage, while the overtime pay for July 12, 2018 may be excluded from the calculation of the average wage.