The Inclusive Wage System: Korea's Blanket Overtime Pay
Like an all-you-can-eat buffet pass, fixed overtime pay is pre-packaged into your monthly paycheck rather than counted hour by hour.
Definition A compensation structure in South Korea where a predetermined amount of overtime, night, and holiday allowance is bundled directly into the base salary as a fixed package, rather than calculated from actual extra hours worked each month.
Why Bundle Overtime Pay into a Monthly Salary?
At an all-you-can-eat buffet, you pay a single flat entry fee and enjoy your meal without counting every plate. Korea's inclusive wage system (*pogwal-imgeum-je*) works on a similar idea: bundling overtime pay into a flat lump sum rather than calculating wages hour by hour. It was originally designed for outside sales reps and frequent travelers whose exact working minutes are hard to measure.
Because logging and verifying every minute of overtime can be tedious for both sides, employers and employees agree on a set estimate upfront—for instance, 20 hours of overtime per month—and roll that allowance directly into the regular paycheck. For companies, this keeps payroll expenses predictable and cuts down on administrative paperwork.
As a result, a predetermined fixed overtime allowance appears on the payslip as part of a bundled compensation package. For workers, it can initially seem convenient because it provides a steady, guaranteed monthly allowance upfront.
Why It Became the Culprit of 'Free Overtime'
Problems arose when this system expanded far beyond its original intent into typical office settings and IT development roles where work hours are easily tracked. Companies began abusing it as a loophole to squeeze extra hours out of staff without paying proper overtime wages.
For example, an employment contract might package in 20 hours of monthly overtime pay, but the employer routinely demands 50 or 60 hours of overtime work. When workers ask for compensation, management brushes it off, claiming that all extra hours are already covered under the blanket contract. This cemented a widespread culture of unpaid overtime (known as *gongjja yageun* in Korea) across countless workplaces.
Because businesses face no extra cost whether an employee stays all night or works over the weekend, heavy workloads get piled on indiscriminately. This has led to severe worker burnout, chronic fatigue, and an erosion of the basic right to rest.
A Closer Legal Look
Legally speaking, signing an inclusive wage contract does not give an employer the right to demand unlimited free labor. If an employee logs more overtime than the quota specified in the contract, the company is legally required to calculate and pay additional statutory overtime for every extra hour.
If your contract includes pay for 20 overtime hours a month but you actually logged 35 hours, the company must pay you for the remaining 15 hours. Claiming that nothing more is owed because of a blanket contract constitutes illegal wage theft under South Korean labor law.
Furthermore, Korean courts frequently rule that inclusive wage contracts are entirely invalid for standard office jobs where work hours can be easily monitored through keycard swipes or computer logs. Paying fair compensation proportional to time worked remains the foundational standard of labor law.
🤔 Common misconceptions
If you sign an inclusive wage contract, the employer never has to pay extra overtime no matter how much you work.
If you work beyond the fixed overtime quota stated in your contract, the company is legally required to pay extra for all exceeded hours.
🧺 Where you meet it
A payroll method that bundles fixed overtime pay into regular wages; any hours worked beyond the agreed quota must be paid separately by law.