Small Business Owners to Receive Official Compensation for Damages from 'Level 4 Social Distancing'

Last May, officials from the Korea Entertainment Food Service Association held a march urging the withdrawal of the ban on gatherings at entertainment bars. They stated, "Since the government's ban on gatherings was enforced from March last year, when COVID-19 prevention measures were strengthened, we have been unable to operate for a total of 10 months." They also claimed, "As a result, more than 90% of entertainment business owners, who are small-scale operators relying on their livelihood, are facing miserable situations such as eviction lawsuits from building owners." Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Lee Chun-hee] As the fourth wave of COVID-19 intensifies, a new Level 4 social distancing measure will be uniformly applied in the Seoul metropolitan area starting from the 12th. This measure effectively bans evening gatherings, prohibiting groups of three or more people after 6 p.m. Amid anticipated losses for small business owners, the government plans to pursue compensation under the Small Business Support Act.

On the 11th, the Ministry of SMEs and Startups reported on the "Follow-up Measures for Level 4 Social Distancing in the Seoul Metropolitan Area" at the Central Disaster and Safety Countermeasures Headquarters meeting held that day, aimed at compensating small business owners for operational losses caused by the escalation to Level 4 social distancing.

This measure follows the amendment to the "Act on the Protection and Support of Small Businesses," which passed the National Assembly plenary session on the 1st and was promulgated on the 7th. The amendment includes provisions for compensating small business owners for operational losses incurred due to government measures for COVID-19 prevention and control.

The enforcement date of this amendment is October 8, three months after its promulgation. However, through a supplementary provision, the scope of compensable losses is defined as those incurred after the date of promulgation of the amended law. Accordingly, losses resulting from the Level 4 social distancing escalation in the Seoul metropolitan area starting on the 12th are expected to be included in the compensation scope.

However, the amendment does not include compensation for losses incurred before the law’s promulgation. It does include provisions stating that "for serious damages caused by administrative orders such as gathering bans or business restrictions related to COVID-19 before the promulgation date, sufficient support will be provided to recover damages, considering the level of measures, scale of damage, and existing support."

The specific recipients of compensation are small business owners who have suffered significant operational losses due to gathering bans or operating hour restrictions under the "Infectious Disease Prevention and Control Act," which limits or prohibits entertainment, assemblies, rituals, or other gatherings of multiple people.

Detailed criteria such as the method of calculating compensation and payment timing will be determined by the Minister of SMEs and Startups after review by a public-private joint Loss Compensation Deliberation Committee, which will be formed in line with the law’s enforcement.

The compensation amount will be calculated and paid individually for each business, comprehensively considering the level and duration of the measures imposed, business income, and business size.