"Prevent Wage Arrears in Construction Industry"…Wages Guaranteed Even if Construction Companies Participating in Public Projects Go Bankrupt

[Asia Economy Reporter Kim Bo-kyung] Starting next year, even if a construction company participating in public construction goes bankrupt and its bank accounts are seized, workers' wages are expected to be securely guaranteed.

The Ministry of Land, Infrastructure and Transport and the Public Procurement Service, along with other government departments, announced improvement measures for the direct wage payment system in the construction industry at a meeting of the Job Committee held at the Korea Press Center on the 15th.

Although the direct wage payment system by the client was mandated last June to prevent wage arrears at public construction sites, this is a supplementary measure in response to criticisms that protection for on-site workers was insufficient.

First, even if a construction company goes bankrupt and its bank accounts are seized, workers' wages will be secured.

Currently, the Construction Industry Promotion Act excludes labor costs from seizure targets, but if labor costs are mixed indistinguishably with other items in the construction company's payment management account, all can be seized. Accordingly, the government plans to separate labor cost accounts in the Public Procurement Service's electronic payment system for public construction, 'Hado-geup Jikimi,' and apply this to all public construction projects starting next year.

The government also plans to enable clients to directly pay material and equipment costs through Hado-geup Jikimi.

At present, it is difficult for clients to closely track the flow of some construction payments such as advance payments, but this will be improved to allow real-time monitoring going forward.

The 'Win-Win Payment System,' an electronic payment system of the Ministry of SMEs and Startups, will also have its functions enhanced.

This system allows clients to directly pay material and equipment workers through the 'Win-Win Payment Deposit Account,' but advance payments and others have been kept in the accounts of contractors, making misuse prevention difficult. Therefore, the government plans to improve the system so that advance payments and others are also processed through the deposit account starting in the second half of this year.

Individual payment systems of public institutions will also be reorganized. The Korea Rail Network Authority plans to establish a special account starting next year to directly pay subcontractors, workers, and material and equipment suppliers without going through the construction company's account.

Some local governments using their own payment systems, such as Seoul City and Gyeonggi Province, will also upgrade their systems to use the improved functions starting next year.

The scale of construction projects subject to the direct wage payment system will be expanded from KRW 50 million to KRW 30 million, and the types of applicable projects will also increase.

The government will reflect efforts to improve payment systems and eradicate wage arrears by public ordering agencies in public institution management evaluations, and plans to provide incentives such as reduced payment guarantee fees if the direct wage payment system is implemented in privately ordered construction projects.

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