The Supreme Court ruled in March last year that bonuses, if paid out to the employee periodically and uniformly, constitute part of ordinary wages. What might have appeared to be an innocuous decision was a bombshell for Korean industry, which now had to include bonuses in the calculation of severance pay.

Prior to the ruling, corporations had kept bonuses from the calculation of severance pay. Moreover, guidelines from the Ministry of Employment and Labor had stated that payments made under the name of periodic bonuses did not qualify as part of ordinary wages

Since the ruling, trade unions have been bringing their complaints about the exclusion of bonuses from the calculation of severance pay to the court. If all of them should prevail in court, their companies would have to pay 38.6 trillion won in additional severance pay, according to an estimate by the Korea Employers Federation.

Among those embroiled in such legal disputes is GM Korea, which, should it lose the case, would have to pay up to 810 billion won in additional severance pay. The case involving the Korea subsidiary of the global automaker is undoubtedly of great concern to Daniel Ackerson, chairman and chief executive officer of General Motors, who raised the issue when he and other American businessmen met with President Park Geun-hye during her U.S. visit last week.

Park committed herself to solving the problem, saying that the issue concerning bonuses as part of ordinary wages was a problem for the Korean economy as a whole. But her remarks were inappropriate to the extent that they could be seen to infringe on the authority of the court and thus breach the separation of powers. No wonder the opposition Democratic Party and trade unions are denouncing the president for not honoring the court’s decision.

True, the ruling, if not reversed, would have a grave impact on the Korean economy, as President Park noted. If labor costs were to increase as much as predicted, job opportunities would certainly dwindle, if not by as many as 370,000 to 410,000, as is claimed by the Korea Employers Federation.

But much of the blame lies with corporations, which have in the past wanted to reduce severance pay by raising periodic bonuses and created various types of allowance while pushing down the basic salary. Now, they will have to improve their pay systems, preferably in consultation with trade unions. It is also necessary to define ordinary wages in clear terms by revising relevant laws and enforcement ordinances.

At the same time, labor, management and government representatives will have to pursue a grand bargain on the thorny issue.