One Year Since Introduction of Payment Linked Pricing System... 25% of Contractually Obligated Companies 'Uncontracted'

Ministry of SMEs and Startups "Survey on the Delivery Payment Linkage System"
74.7% of companies required to sign agreements have complied
Of these, 8.5% opted for non-linked agreements... "Due to reluctance to disclose information"
The most common reason for not signing was "lack of understanding of the system"

During the one year since the implementation of the Delivery Payment Linkage System, it has been identified that about 25% of companies required to mandatorily enter into linkage agreements have yet to sign contracts.

On the 16th, the Ministry of SMEs and Startups announced the results of the "2024 Delivery Payment Linkage System Survey," which included this information. Among 12,000 subcontracting companies surveyed, 4,013 companies (33.4%) responded. The Delivery Payment Linkage System is a system that allows flexible adjustment of delivery payments according to changes in raw material prices. It was introduced in October 2023, underwent a guidance period, and was officially implemented in January of last year.

First, among the responding companies, 795 companies (19.8%) answered that they knew the detailed contents of the linkage system. 1,746 companies (43.5%) said they knew the name of the system but did not know the details, and the remaining 1,472 companies (36.7%) said they did not know about it at all.

469 companies (11.7%) reported having major raw materials. Among them, 58 companies (1.4%) fell under the exemption reasons for mandatory linkage agreements, and a total of 411 companies (10.2%) had transactions subject to the linkage agreement application.

Among the 411 subcontracting companies with transactions subject to the linkage system, 272 companies (66.2%) had signed linkage agreements, and 35 companies (8.5%) had signed non-linked agreements, confirming that a total of 307 companies (74.7%) complied with the linkage obligations.

When asked about the reasons for signing non-linked agreements among the 35 companies that responded, the most common answer was "because they did not want to provide cost information to the commissioning company (45.7%)."

Among the 104 companies that had transactions subject to the linkage system but had not signed linkage agreements, the most common reason was "lack of understanding of the system (53.4%)."

To establish the linkage system, the Ministry of SMEs and Startups established the "Guidelines on Delivery Payment Linkage" in December last year, clarifying the applicable transactions, the obligation to issue linkage agreement documents, negotiation principles, and criteria for judging illegal acts.

This year, the focus will be on raising awareness of the linkage system and easing the burden of cost disclosure for companies. On-site briefings will be conducted nationwide, and cost analysis and linkage agreement consulting will be provided to 1,000 small and medium-sized enterprises.

Kim Woo-sun, Director of the Win-Win Cooperation Policy at the Ministry of SMEs and Startups, said, "To promote the spread of the system in the future, we will focus on raising awareness on the ground and resolving difficulties," adding, "We will inspect illegal acts such as evasion through annual regular surveys and occasional on-the-spot investigations."