Advisory Case on Nonpayment of Management Performance Bonuses to Lowest-Rated Employees and on Restructuring Sick-Leave and Leave-of-Absence Policies

1. The Client's Situation

The client is a company that had regularly paid year-end management performance bonuses, distributing them on a differentiated basis according to individual performance-evaluation grades, while also having a practice of paying a certain amount even to those in the lowest grade. While reviewing a plan not to pay performance bonuses to those in the lowest grade as part of recent management-efficiency efforts, internal concerns were raised about the legality of such a measure. In addition, due to an increase in the use of long-term sick leave, the company wished to reorganize its sick-leave and leave-of-absence systems, but it needed guidance on the procedures for amending the rules of employment and the scope of employee consent required.

Your Legal Team organized the issues centered on the possibility of recognizing wage character and whether working conditions would be changed, based on the actual payment practice and operating structure of the management performance bonus. In particular, on the premise that a performance bonus repeatedly paid even to those in the lowest grade is highly likely to be protected as a working condition, the team reviewed, in a differentiated manner, whether the change constituted a disadvantageous amendment of the rules of employment and what procedures would be required. The team also presented the need to approach the amendment of the sick-leave rules and the establishment of a leave-of-absence system separately, and clearly delineated the procedures for hearing employees' opinions or obtaining their consent required for each item. Through this, the team proposed a phased amendment plan that would allow the systems to be improved while minimizing the risk of disputes.

Based on the advice, the client was able to prepare in advance the procedures for amending the rules of employment necessary when changing the management performance bonus system, and to proceed with the system reorganization after clarifying whether employee consent had been obtained. By separating and systematizing the sick-leave and leave-of-absence systems, internal operating standards became clear, and the company was able to substantively lower the likelihood of future disputes related to wages and working conditions. As a result, it achieved the outcome of securing flexibility in organizational operation while controlling legal risks in the process of reorganizing its HR and labor systems.