Due to Soaring Delivery Orders, Riders Face 'Income Tax Burden' and Quit... Delivery Fees Will Increase

Increasing Delivery Demand... Rider Industrial Accident and Employment Insurance Mandate
Platform Industry "Income Exposure Burden... Dual-Job Riders Leaving"
Ruling and Opposition Parties Push Bills to Protect Riders and Strengthen Platform Company Responsibility
Consumer Burden Rises Unless Platform Usage Fees Are Reduced

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] As the government and the National Assembly roll up their sleeves to protect rider rights, an unintended consequence of 'delivery fee increases' is emerging in the industry. This is the result of looking at only one side without understanding the chronic rider labor shortage in the delivery platform market. According to the law of supply and demand, if supply cannot keep up with demand, prices (delivery fees) inevitably rise. With the simultaneous push for legislation strengthening platform operators' responsibilities and the introduction of riders' industrial accident and employment insurance enrollment systems, the cost burden passed on to consumers is expected to increase.

With the resurgence of COVID-19, social distancing in the metropolitan area was raised to level 4 starting from the 12th, causing a surge in delivery order demand. According to delivery agency Barogo, the number of completed deliveries increased by 12.6%, from 1.43 million during the three days from the 5th to 7th to 1.61 million from the 12th to 14th. A Barogo official stated, "We have already surpassed 100 million delivery completions recorded last year in the first half of this year," adding, "Due to the COVID-19 resurgence, delivery orders are expected to hit a record high this month."

The problem is that since the revised Industrial Accident Compensation Insurance Act took effect on the 1st of this month, rider attrition is accelerating. The reasons for exemption from industrial accident insurance application for special-type workers (teukso hyeong geunro jongsaja, or teukgo) and platform workers have been limited, effectively making industrial accident insurance enrollment mandatory. For example, for a rider earning a monthly wage of 1,599,400 KRW, applying the industrial accident insurance rate of 1.9% results in an insurance premium of 30,380 KRW, which is split evenly between the rider and the business owner. However, the income tax burden due to income disclosure is greater than the monthly insurance premium. An industry insider explained, "When riders enroll in industrial accident insurance, their income is automatically recorded, and they must pay income tax. Previously, when riders were scarce, branch managers had no choice but to accept riders' covert requests not to report income, but now this is no longer possible."

[Image source=Yonhap News]

The rider supply shortage is even more severe in provincial areas. He said, "It has become even harder to find riders in provinces with smaller populations than the metropolitan area," adding, "Many dual-job riders who worked mainly in factories during the day and did delivery work in the evening are quitting due to the burden of income exposure."

The government's 'National Employment Insurance Roadmap' plans to include riders as mandatory employment insurance subscribers starting January next year, raising concerns about additional cost burdens. Unless platform companies voluntarily reduce their commissions, delivery fees will inevitably rise. Another delivery agency industry official predicted, "Platform companies are required to report insured qualifications and withhold and pay employment insurance premiums. With strengthened government regulations, the vicious cycle of rider shortages and delivery fee increases will repeat."

Both ruling and opposition parties have also moved to legislate strengthening platform operators' responsibilities to protect rider safety and rights. If the bill passes the National Assembly, it is expected to have a significant impact on the delivery market. On the 14th, the National Assembly's Environment and Labor Committee held a public hearing discussing the Platform Workers Protection Act (led by Rep. Jang Cheol-min of the Democratic Party) and the Special-Type Workers Protection Act (led by Rep. Im I-ja of the People Power Party), sparking debate. At the hearing, Professor Kwon Oh-sung of Sungshin Women's University argued that "special-type workers should be viewed within the category of workers," while Lee Jun-hee, a team leader at the Korea Employers Federation, criticized, "This is regulation for the sake of regulation that does not reflect reality at all, and it is a very outdated, 20th-century regulation." Lee also pointed out, "It is impossible to predict in which direction and to what extent cost pass-through will occur."

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