Cases of Employers Withholding Employees’ Contributions but Failing to Pay Are Surging
Only the National Pension Fails to Recognize Subscription Periods for Unpaid Contributions... System Reform Needed
There has been a growing number of cases where National Pension Service (NPS) contributions, diligently deducted from employees’ monthly salaries, have effectively disappeared due to employers’ non-payment. Employers withhold pension contributions from employees but fail to remit them, causing the amount of unpaid contributions to snowball. Nevertheless, critics point out that the National Pension Service system continues to place the burden of responsibility on the employees.
According to the National Health Insurance Service as of the end of 2024, the total amount of long-term unpaid contributions (over 13 months) for the four major social insurances reached 1.1217 trillion won. Of this, unpaid National Pension Service contributions accounted for the largest share at 488.8 billion won, involving 31,000 workplaces in arrears.
The amount of unpaid National Pension Service contributions has recently surged again. After decreasing from 581.7 billion won in 2021 to 488.8 billion won in 2024, the amount recorded by June this year already reached 503.1 billion won, surpassing the total for the previous year. The economic downturn is directly undermining the retirement safety net for workers.
The workplace with the longest period of non-payment has failed to pay contributions for 213 months-over 17 years-resulting in 160 million won in unpaid contributions. In another case, a business failed to pay more than 2.6 billion won in just two years and two months.
The core of the problem lies in what is described as a “toxic provision” of the National Pension Service. In the case of health insurance or employment and industrial accident insurance, even if the employer fails to pay, employees can still receive full benefits as long as they can prove they worked. The government protects employees first and later seeks reimbursement from the employer.
If the Employer Doesn’t Pay, the Employee’s Pension Is Also ‘Zero’
In contrast, with the National Pension Service, if the employer does not remit the contributions, the period in question is not recognized as part of the employee’s subscription period. In other words, even if 4.5% is deducted from the employee’s salary each month, if the employer fails to pay, the pension for that period is effectively lost.
The government’s “individual payment” system is also ineffective. Employees must pay their own already-deducted share (4.5%) again, and even then, only half of the subscription period is recognized. To have the full period recognized, the employee must pay both their own share and the employer’s share (a total of 9%) out of pocket. This has led to understandable complaints from employees, who ask, “Why should I pay twice and cover my employer’s share for something that isn’t my fault?”
The collection system is also inadequate. Over the past 10 years, there have been only 855 criminal prosecutions for unpaid National Pension Service contributions, and only 8.2 billion won was actually collected, resulting in a collection rate of just 19%. During the same period, 115.7 billion won was deemed uncollectible due to business closures and other reasons.
Due to these lenient penalties and lax oversight, it is common for employers in arrears to hide assets or delay payment by exploiting legal loopholes. As a result, the system is increasingly characterized by a structure in which “the employer defaults and the employee bears the responsibility.” There is an urgent need to strengthen the collection system and reform the pension system to hold employers accountable and protect employees.
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