Seoul City Promotes Fair Subcontracting Culture... "Shortening Payment Period"

[Asia Economy Reporter Lim On-yu] The Seoul Metropolitan Government announced on the 19th that it will implement measures such as shortening the payment period for subcontracting fees in construction projects, expanding the direct payment system, and producing a guidebook related to subcontracting contracts to establish a fair subcontracting transaction culture.

Until now, the payment to subcontractors for construction workers, equipment, and material suppliers was delayed by the statutory payment period (15 days) that the primary contractor must pay the subcontracting fees. Additionally, a review of subcontracting practices over the past two years repeatedly confirmed minor unfair cases such as "delayed notification of subcontracting contracts" and "non-use of standard forms." In response, Seoul has prepared highly effective improvement measures to ensure prompt payment of subcontracting fees, prevent arrears, and eradicate minor repetitive unfair practices.

First, the payment deadline for subcontracting fees by the primary contractor will be drastically shortened from 15 days to 5 days to ensure prompt payment of wages to subcontracted construction workers and payments for materials and equipment. The construction fees paid by the ordering agency are deposited into the primary contractor’s ‘Daegeum e-Baro Fixed Account,’ which cannot be withdrawn or used for other purposes, enabling the primary contractor to pay the subcontractor immediately upon receipt. The city plans to provide incentives such as commendations through year-end evaluations to primary contractors who pay subcontracting fees within 5 days.

Second, the direct payment system for subcontracting fees, which can prevent arrears in subcontracting payments, will be expanded. Direct payment of subcontracting fees involves an agreement among the ordering agency, primary contractor, and subcontractor, allowing the ordering agency to pay the subcontractor directly without going through the primary contractor. Seoul plans to actively encourage agreements for direct payment of subcontracting fees in bidding announcements when ordering construction projects.

Third, to prevent minor repetitive unfair acts related to subcontracting contracts, a ‘Subcontracting Work Guidebook’ will be produced and distributed. Seoul will organize relevant laws, work procedures, standard forms, and major violation cases related to subcontracting contracts from the project ordering stage and distribute them to frontline construction project implementing agencies.

Kim Hak-jin, Director General of Safety at Seoul City, said, “Prompt payment and prevention of arrears in subcontracting fees will have a tangible improvement effect on workers and equipment/material suppliers, who are the main actors at construction sites,” adding, “We will continue to strive to establish a fair transaction order and a culture of mutual cooperation at construction sites.”

This content was produced with the assistance of AI translation services.