1. The Client's Situation
The client operates a wholesale and retail business and runs a workforce composed of office staff and sales staff. Among them, it had been paying performance-based pay to its office-staff managers by setting a performance scheme (KPIs) for each fiscal year. Recently, however, when changing the criteria for calculating performance pay, the client obtained consent from only some of the managers, and one worker did not sign the changed performance-pay criteria and the notice of non-payment, so the client sought to confirm whether there was any legal risk.
2. Your Legal Team's Advice
On the basis that the performance-pay system had been repeatedly operated according to certain criteria and procedures, Your Legal Team reviewed the possibility that the system could be regarded as de facto rules of employment. The team then determined that, since the changed performance-pay criteria operate unfavorably to workers, under Article 94 of the Labor Standards Act the change would be recognized as lawful only if consent was obtained from a majority of the office-staff workers. The team also made clear that the scope of those whose consent is required should be expanded not only to the recipients of performance pay but to all office-staff workers to whom future application is expected.
3. Result
As a result of the advice, the client reached the conclusion that, because it had failed to obtain the consent of a majority of office-staff workers, the changed performance-pay criteria have no effect and the existing system (based on the 2023 criteria) remains valid. Accordingly, the client was advised that it must pay performance pay to the non-consenting worker according to the existing criteria, and that non-payment could be sanctioned as non-payment of wages. In addition, the team prepared practical guidelines so that, when the performance-pay system is changed in the future, the client would obtain the consent of a majority of workers and complete the report of the change to the rules of employment.