[Exclusive] "Report Unemployment Benefit Fraud and Get Rewards"... 30.5 Billion Won Caught in 5 Years

Increase in Unemployment Benefit Fraud Reporting Rewards
Amount Detected Rises Over 50% from 4.3 Billion to 6.6 Billion Won in 5 Years
Budget for Reporting Rewards Expanded and Monitoring Strengthened
"Crackdown on Unemployment Benefit Fraud to Tighten Further"

Mr. Kim Seok-jin (alias), who opened a cafe in Mapo-gu, Seoul, recently heard a ridiculous story from a part-time worker. The part-time worker had to quit due to personal reasons but asked Mr. Kim to state in the accounting report that the dismissal was due to business difficulties. Mr. Kim said, “I refused because it would mean participating in fraudulent claims,” but also admitted, “The part-time worker worked hard, and since I wouldn’t really lose anything by letting them receive unemployment benefits, I honestly found it a difficult decision.”

Mr. Song Hyun-seok (alias), who runs a small business in Andong, Gyeongbuk, has been struggling with an employee on leave for the past four months. The employee verbally notified a sick leave due to back pain and did not come to work for several months. When Mr. Song informed the employee that no more sick leave could be granted, the employee insisted on being processed as a ‘voluntary resignation recommended by the employer.’ Mr. Song lamented, “It seems they acted this way from the start aiming to receive unemployment benefits.”

The government has detected over 30 billion KRW in fraudulent unemployment benefit claims over five years through a reward system. This is interpreted as a result of increased unemployment benefit benefits and the expansion of employment insurance programs, which have led to more attempts at fraudulent claims. The government plans to expand the budget for reward reporting and strengthen audit levels to eradicate fraudulent claims.

According to data submitted by the Ministry of Employment and Labor to Asia Economy on the 8th, the total amount detected through the unemployment benefit fraud reporting reward system reached 30.56 billion KRW. The amount detected in 2018 was 4.3 billion KRW, which increased by 2.38 billion KRW (55.3%) to 6.68 billion KRW last year. Especially in 2021, when COVID-19 was prevalent and unemployment increased, the amount detected surged to 9.45 billion KRW.

Since a broker-involved unemployment benefit fraud case in December 2007, the government has operated a reward system for reporting fraudulent unemployment benefit claims with allocated budgets. Informants receive 20% of the fraudulent claim amount up to an annual limit of 5 million KRW. If reporting fraud related to employment stabilization or vocational skill development projects, the reward can be up to 30% of the fraudulent amount with an annual cap of 30 million KRW. Confidentiality measures for informants are also implemented.

The number of rewards and the amount paid have also increased. The number of unemployment benefit reward cases, which was about 800, recently expanded to 1,300?1,400 cases. The reward amount increased from 870 million KRW in 2018 and 910 million KRW in 2019 to 1.38 billion KRW last year.

Claiming Unemployment Benefits for 52 People Through a Ghost Company... "Crackdown on Fraudulent Claims to Tighten"

As the scale of unemployment benefit payments increased during the COVID-19 period, attempts at fraudulent claims have risen and their types have diversified. Cases detected by the Ministry of Employment include situations where recipients left the country while receiving unemployment benefits and asked acquaintances to apply on their behalf, or where individuals performing military service as social service agents did not postpone their benefit period but still received unemployment recognition. There were also workers who found jobs while receiving unemployment benefits but deliberately omitted this fact to the employment center and continued to receive benefits for several months.

Organized fraudulent claims have not ceased. At the end of last year, a broker in Daegu was caught after setting up a ghost company, employing 52 acquaintances, and deliberately dismissing them to fraudulently claim unemployment benefits.

Park Dae-chul, Chairman of the Policy Committee of the People Power Party, is speaking at a public hearing on unemployment benefit system improvement held at the National Assembly on the 12th of last month. Photo by Hyunmin Kim kimhyun81@

Accordingly, the ruling People Power Party has also raised issues regarding unemployment benefits. On the 12th of last month, Park Dae-chul, the policy chief of the People Power Party, held a public hearing with the Ministry of Employment and Labor and stated, “The unemployment benefit minimum amount system, which is 80% of the minimum wage, and overly generous eligibility criteria for unemployment benefits have created a distorted practice of repeatedly engaging in short-term employment and claiming unemployment benefits,” adding, “We need to change this abnormal unemployment benefit system where working people receive less.” He also added that there was “a consensus to strengthen administrative measures to prevent fraudulent claims.”

The Ministry of Employment and Labor is preparing measures to eradicate the increasing fraudulent unemployment benefit claims. This year, the budget for preventing fraudulent claims in employment insurance projects was initially planned at 2.367 billion KRW but was increased by 50.7% to 3.567 billion KRW. The ministry explained, “The scope of fraudulent claims is expanding, including collusive fraud, and we will promote sound insurance finances through prevention activities, investigations, and reward payments for reporting.”

Special inspections have also been expanded from once to twice this year. For planned investigations, nationwide special investigations will be conducted on fraudulent unemployment claims involving ghost companies and fictitious workers. If suspicious cases are found, 48 local offices will simultaneously conduct ad hoc planned investigations. To support this, 14 employment insurance investigators were added in December last year and dispatched as dedicated investigators to six regional offices.

An official from the Ministry of Employment and Labor emphasized, “Management of fraudulent unemployment benefit claims has been strengthened since the end of the previous administration as part of fiscal soundness measures and has gradually intensified under the current government,” adding, “Regardless of how unemployment benefits are operated, fraudulent claims themselves are wrong.” He further stated, “Crackdowns to catch fraudulent unemployment benefits will be tightened further going forward.”