Korean Banks Split Lunar New Year Pay, With Bonuses Varying by Lender

Ahead of the Lunar New Year holiday, many South Korean bank employees will see a temporary bump in take-home pay, though the money is not always a true bonus. Some banks pay extra holiday allowances, while others simply split contracted base pay into additional installments. Bankers may call it a shell game, but many still welcome the lump-sum payment.

According to the financial industry on the 14th, banks have paid holiday allowances ahead of the Lunar New Year break.

Practices vary by bank. Some include holiday pay within base salary and pay part of annual compensation around Lunar New Year and Chuseok. Others provide an additional holiday payment on top of base pay.

KB Kookmin Bank pays a separate holiday allowance in addition to base salary. It provides a payment equal to about 50% of monthly base pay for Lunar New Year and again for Chuseok.

Shinhan Bank divides 90% of annual salary into 14 parts, paying 12 parts monthly and the remaining two parts as one additional payment each around Lunar New Year and Chuseok. For example, an employee with an annual base salary of 56 million won would receive 8 million won in the months that include Lunar New Year and Chuseok, double the usual amount.

Hana Bank pays 12 monthly salaries and adds holiday payments for Lunar New Year and Chuseok. Early in the year, a performance-based payment is added, bringing the total to 15 installments, though amounts vary.

Woori Bank divides annual salary into 13 parts, paying 12 parts monthly. The remaining one part is split in half and paid at Lunar New Year and Chuseok. With an annual salary of 52 million won, an employee would receive 4 million won per month, plus an extra 2 million won at each holiday.

NH NongHyup Bank gives employees 500,000 won worth of Rural Love Gift Certificates ahead of the holidays. Performance pay is also typically paid before major holidays.

By contrast, policy banks such as Korea Development Bank, the Export-Import Bank of Korea and IBK Industrial Bank of Korea do not provide separate holiday bonuses, paying only performance pay tied to annual public-institution evaluation grades.

A financial industry official said that because some banks are simply dividing base pay already included in contracted annual compensation, it is hard to call it a bonus. The official added that while it may feel like a shell game, KB Kookmin Bank and NH NongHyup Bank employees receive what amounts to a genuine additional payment, leading to mixed reactions.

Industry officials also say the days of collecting holiday pay equal to twice a month’s salary are long gone, and that differences in holiday payments now carry little practical meaning because true bonuses have largely disappeared from banking.

Before the financial crisis, some large banks paid separate holiday bonuses of about 500,000 to 1 million won, but those payments largely vanished around the 2008 financial crisis.

Many bank employees now focus more on special performance pay paid early in the year when banks post excess profits.

A financial industry official said that while manufacturing still has a bonus-paying tradition, banks often do not have enough room to justify calling these payments bonuses.

A separate survey found that more than half of companies in general pay Lunar New Year bonuses. The Korea Employers Federation surveyed 447 companies nationwide with at least five employees and found 58.7% planned to pay holiday bonuses. Among large companies with 300 or more employees, 71.1% paid bonuses, compared with 57.3% among companies with fewer than 300 employees.