Resolution Rate to Rise to 87% This Year...
Habitual Offenders Excluded from Non-Prosecution
Lee Administration Aims to Reduce Wage Arrears to 1 Trillion Won During Its Term
A comprehensive government-wide plan to strengthen enforcement has been announced to reduce overdue wages, which have ballooned to an annual scale of 2 trillion won. The plan includes expanding the scope of business owners subject to public disclosure for wage arrears, and if a business owner who has already been publicly disclosed commits another offense, the exemption from non-prosecution at the victim’s request will no longer apply. In addition to imposing fines, the government will increase pressure through punitive damages and other measures. The government aims to raise the wage arrears resolution rate to 87% this year, and reduce the total amount of wage arrears by 1 trillion won during the current administration’s term.
A construction site of an apartment in downtown Seoul. Unrelated to the article. Photo by Yonhap News.
On September 2, the Ministry of Employment and Labor held a "Government-wide Task Force for the Eradication of Wage Arrears" at the Government Complex Seoul, discussed goals and measures for eradicating wage arrears with relevant ministries, and announced its "Measures to Eradicate Wage Arrears." With the amount of overdue wages exceeding 2 trillion won last year and increasing by 5.5% year-on-year to 1.1 trillion won in just the first half of this year, the government is mobilizing all policy tools across ministries to strengthen the effectiveness of sanctions against wage arrears.
Resolution Rate to Rise to 87% This Year... Habitual Offenders Excluded from Non-Prosecution
The government will immediately increase the number of labor inspections in the second half of the year from 15,000 to 27,000 sites. In addition to anonymous reports from current employees, joint inspections will be carried out with relevant ministries and local governments. The government will also operate a focused resolution period before Chuseok to achieve the target 87% resolution rate for this year, and expand the scope of employer loans and substitute payments to cover up to six months of wages. To increase the recovery rate of repayments, a dedicated recovery center will be established, and the introduction of compulsory collection procedures through national taxes and other means is under consideration. With the revised Labor Standards Act (the Law to Eradicate Habitual Wage Arrears) set to take effect on October 23, the government is also focusing on implementing the new system.
To address the structural vulnerabilities that cause wage arrears, the government will prevent wage leakage in subcontracting. In industries where multi-tier subcontracting is prevalent, legislation will require the separation of wage costs from contract costs, and measures will be introduced to allow clients to pay subcontracted workers directly. This will first be implemented in the construction and shipbuilding industries, with plans to expand to other sectors following public discussion. The government will also work toward the gradual mandatory implementation of retirement pensions to address retirement pay, which accounts for 40% of total wage arrears.
Criminal penalties will also be strengthened. To ensure that business owners recognize wage arrears as a "significant management cost," the statutory sentence for wage arrears crimes will be increased to the level of embezzlement and other property crimes (from up to three years to up to five years in prison). The scope of business owners subject to public disclosure will be expanded, and if a business owner who has been publicly disclosed commits another offense, not only will the exemption from non-prosecution at the victim’s request be removed, but also fines, punitive damages, and travel bans will be imposed. In addition, even a single malicious case of wage arrears will result in a ban on public financial support, such as policy funds, until the arrears are resolved.
A Ministry of Employment and Labor official stated, "Currently, business owners with two or more convictions within three years are subject to public disclosure, but going forward, even a single conviction will result in disclosure." The official added, "Even after the disclosure period (three years) has passed, if a business owner repeats wage arrears, we will pursue measures such as removing the exemption from non-prosecution, imposing fines or penalties, and applying punitive damages." Although habitual offenders account for only 13% of all business owners with wage arrears, they are responsible for 70% of the total overdue amount. "The intention is to impose much stronger sanctions on repeat offenders," the official explained.
Lee Administration Aims to Reduce Wage Arrears to 1 Trillion Won During Its Term
Through these measures, the government aims to make next year a turning point for reducing wage arrears. During the current administration’s term, the goal is to reduce annual wage arrears from 2 trillion won to 1 trillion won, and to raise the resolution rate to 95%. Minister of Employment and Labor Kim Younghoon stated, "These measures will not be a one-off," adding, "We will modernize the wage arrears data management system, review the effectiveness of these policies through the task force, and, if necessary, prepare even stronger measures, including abolishing the exemption from non-prosecution." He also said, "During the administration’s term, we will achieve a substantial reduction in wage arrears that the public can truly feel."
The amount of overdue wages had been decreasing since 2020, but began to rise again in 2023 (1.7845 trillion won) due to factors such as the downturn in the construction industry. Last year, it reached 2.0448 trillion won, surpassing 2 trillion won for the first time. The increase rates for wage arrears in 2023 and last year were 32.46% and 14.59%, respectively. The resolution rates were 79.1% and 81.7%. As of the end of July this year, the cumulative amount of overdue wages is 1.3421 trillion won. Of this, 1.1435 trillion won has been resolved, resulting in a resolution rate of 85.2%.
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