If Your Salary Is Delayed, the State Pays Up to 10 Million Won... 600 Billion Won Paid Annually by the Government? [Wage Arrears Tracker] ③

Last year's wage payment guarantees reached 724.2 billion won, 2.7 times higher than a decade ago
2.33 trillion won paid out in just the first four months of this year
Despite poor finances, recovery rate remains at only 30 percent
Wage Claim Guarantee Fund halved in five years, but no effective countermeasures

Editor's NoteThe amount of unpaid wages surpassed 2 trillion won for the first time last year, and as of April this year, it is approaching 800 billion won, on track to reach an all-time high. Even considering the economic downturn, it is difficult to understand why Korea's unpaid wages are more than 20 times those of Japan, which has twice the labor force. We have investigated the reasons why wage arrears have become so common and easy in Korea.

On the morning of the 18th, a citizen is waiting to submit a petition at the Seoul Employment and Labor Office. Photo by Park Hyunju

As more people use the wage payment guarantee system, in which the state pays workers' unpaid wages on behalf of employers, the Wage Claim Guarantee Fund (Wage Fund), which finances this system, is rapidly being depleted. The number of unscrupulous employers who intentionally withhold wages is increasing. At the same time, the government has been unable to effectively recover the amounts paid out, which is accelerating the depletion of the Wage Fund. Although the government fills the shortfall in the fund each year with tax revenue, there is no clear way to improve the recovery rate, leading to criticism that taxpayers' money is being wasted.

According to data titled "Annual Status of Wage Payment Guarantee Disbursements" received by Democratic Party lawmaker Kim Jooyoung's office from the Ministry of Employment and Labor on the 22nd, a total of 39,858 workers received 233.051 billion won in wage payment guarantees from January to April this year. Of this, simplified wage payment guarantees accounted for 214.03 billion won (9,649 workplaces, 37,070 workers), while insolvency wage payment guarantees accounted for 19.048 billion won (486 workplaces, 2,788 workers). The simplified wage payment guarantee can be claimed when a company has not gone bankrupt but is unable to pay wages due to temporary cash flow problems, with a maximum payout of 10 million won. The insolvency wage payment guarantee, which can be claimed when a business has gone bankrupt, has a payout limit of 21 million won.

Last year, the total wage payment guarantee disbursement was 724.2 billion won, which is 2.7 times higher than ten years ago (263.2 billion won in 2014). At the current pace, this year's total could reach as high as 900 billion won, surpassing last year's record. Over the past five years (2020-2024), the annual average for wage payment guarantees has been about 600 billion won.

By industry, manufacturing had the largest amount of wage payment guarantees at 72.249 billion won. This was followed by transportation, warehousing, and communications (4.623 billion won), construction (3.219 billion won), agriculture (668 million won), and finance and insurance (264 million won). Notably, 133.827 billion won, or 57% of the total, was paid out in Seoul and the Gyeongin region, where the population and jobs are concentrated. This was followed by Busan (32.9 billion won), Gwangju (28.5 billion won), Daejeon (18.3 billion won), Daegu (14.6 billion won), and Gangwon (4.7 billion won).

The fund is well managed... but cannot keep up with the surge in payouts

The problem is that as wage payment guarantees increase, the size of the Wage Fund is shrinking. The Wage Fund, which was 679.8 billion won in 2020, has dropped to 324 billion won in 2024. Even though the fund's average return on investments such as bonds and stocks was 4.41% over the past five years, the fund has effectively been cut in half during this period.

The government is filling the gap created by unpaid wages with supplementary budgets funded by taxpayers. In April, the Cabinet allocated 81.9 billion won solely for wage payment guarantees. Last year, 221.6 billion won was also used from supplementary budgets during the parliamentary session.

The recovery rate for wage payment guarantees is only 30%... "We must recover from employers by any means necessary"

It is not easy for the government to recover the overdue wages it paid from employers. The cumulative recovery rate remains around 30% each year.

Yang Seungyeop, associate research fellow at the Korea Labor Institute, said, "The financial health of the fund is deteriorating. It is to the point where we may need to tap into the lottery fund," and suggested, "If we apply the same procedures used for collecting delinquent national taxes to the recovery of unpaid wages, it could help replenish the fund." He added, "Although many employers genuinely lack the ability to pay, so the recovery rate is unlikely to increase dramatically, it would send a strong warning signal to unscrupulous employers."

Lee Byounghoon, emeritus professor of sociology at Chung-Ang University, pointed out that the Wage Fund is a protection and relief measure for vulnerable workers, so some level of deficit is inevitable. He said, "Wage arrears are common among small and micro enterprises," and added, "Since the fund was created to protect workers when employers are genuinely unable to resolve wage arrears, some deficit is unavoidable."

Nevertheless, he emphasized, "If it is confirmed that an employer has the ability to pay but is maliciously evading wage repayment, recovery must be prioritized," and "Beyond simply recovering the unpaid amount, there must be strict criminal penalties to end the practice of employers dodging wage payments."