Medium-Sized Business Sector: "Electricity and Gas Fees Should Also Be Included in Payment Linkage"

This Year’s '2nd Payment Collection Committee Meeting'
Discussion on Establishing Linkage Measures for Unit Price Contracts

The small and medium-sized enterprises (SME) sector has argued that energy costs such as electricity fees should also be included in the scope of price linkage for supply payments.

The Korea Federation of SMEs announced on the 28th that it held the ‘2nd 2024 Supply Payment Fair Pricing Committee’ at the Federation of SMEs in Yeouido, Seoul.

The committee is a forum to discuss measures to activate the supply payment linkage system and adjustment consultation system to support SMEs in receiving fair prices for their supply payments.

At the meeting, institutional improvements were discussed, including ‘including energy-related expenses such as electricity and gas fees in the linkage scope,’ ‘establishing linkage measures for unit price contracts,’ and ‘improving exception clauses to allow non-application of the linkage system only upon the request of the subcontracted company.’

Lee Bok-gyu, Chairman of the Daegu-Gyeongbuk Concrete Industry Cooperative, stated, “Currently, the linkage system limits the linkage scope to raw materials, so rapidly increased expenses such as electricity and gas fees are not subject to the linkage system,” and emphasized, “The law should be promptly amended to expand the linkage scope to include not only raw materials but also expenses.” During the 22nd National Assembly, nine bills (five under the Win-Win Cooperation Act and four under the Subcontracting Act) were proposed to expand the linkage scope of the linkage system, but they were deferred without passing the parliamentary bill subcommittee.

Ryu In-gyu, Director of the Wire Industry Cooperative, said, “Under current law, the linkage system does not have to be applied to small contracts with supply payments under 100 million won, but it is difficult to determine whether a unit price contract, where the supply payment cannot be fixed at the time of contract signing, qualifies as a small contract,” and added, “There is a need to establish linkage measures for unit price contracts where only the supply unit price and contract period are set, and deliveries are made per purchase order.”

Yang Chan-hoe, Head of the Innovation Growth Division at the Federation of SMEs, explained, “Although the supply payment linkage system can be non-applied by agreement between the principal and subcontracted companies, subcontracted companies with relatively weak bargaining power cannot refuse the principal company’s request to conclude a non-linkage agreement due to concerns about losing business partners,” and said, “The exception clause should be improved to allow non-application of the linkage system only upon the request of the subcontracted company.”

Choi Jeon-nam, Chairman of the Supply Payment Fair Pricing Committee, stated, “To vitalize the system, it is important to supplement the system by collecting voices from the field, and the committee will do its best to serve as a practical channel to resolve difficulties faced by SMEs.”