Construction Industry Shaken by Poor PF... Government Discusses Measures to Prevent Wage Arrears

June 6 Meeting Between Ministry of Land, Ministry of Employment, Financial Services Commission, and Construction Industry
Prompt Repayment of Secured Loans to Monetize Accounts Receivable
Minimizing Wage Arrears... Strengthening Cash Payments and Workplace Inspections

The government has initiated discussions to prevent damage caused by delayed payments of subcontractor fees and workers' wages in the construction industry, which is shaken by the contraction of real estate project financing (PF).

The Ministry of Land, Infrastructure and Transport, the Ministry of Employment and Labor, and the Financial Services Commission held a 'Meeting for Revitalizing the Construction Industry' on the 6th at the Construction Hall in Gangnam-gu, Seoul, with related construction industry organizations such as the Korea Construction Association and the Korea Specialty Contractors Association.

This meeting was arranged as a follow-up to the 'Housing Desired by the People' public discussion chaired by President Yoon Seok-yeol on the 10th of last month, to discuss measures to minimize damages such as delayed payments to partner companies and workers' wages caused by the recent contraction of PF projects.

At the meeting, the Ministry of Land, Infrastructure and Transport decided to first convert subcontract payments, including workers' wages, to direct payments by the ordering party to reduce delayed payment damages. If there is a disruption in subcontract payment, public projects will immediately switch to a direct payment system, and private projects will switch after consultation with the main lenders.

In the case of Taeyoung Construction, which has entered workout, direct payment has been converted at 80 out of 128 construction sites. All 65 public sites have been converted, and 15 out of 63 private sites have completed the conversion.

The Ministry of Land, Infrastructure and Transport also decided to encourage prime contractors to pay wages directly in cash even if subcontract payments are issued as accounts receivable.

To enable partner companies to liquidate accounts receivable, the prompt repayment of accounts receivable secured loans (AR loans) will also be promoted. The Korea Development Bank aims for Taeyoung Construction to repay 45.2 billion KRW of discounted AR loans within this month. For partner companies with a sales dependency rate of 30% or more on a specific construction company, support will be provided for a one-year debt repayment deferral and interest rate reduction.

On the 11th, the day when the fate of Taeyoung Construction, which applied for a workout (corporate restructuring) after failing to repay real estate project financing (PF) loans worth about 9 trillion won, will be decided, employees are arriving at Taeyoung Construction in Yeongdeungpo-gu, Seoul. Photo by Jo Yongjun jun21@

The Ministry of Employment and Labor will strengthen workplace supervision to eradicate wage arrears. Based on anonymous worker reports, multiple and high-value wage arrears reports this year, about 300 workplaces suspected of intentional and habitual wage arrears will be intensively supervised.

The Ministry of Employment and Labor announced that it is conducting on-site inspections at 105 nationwide construction sites managed by Taeyoung Construction to resolve wage arrears and will continue on-site inspections at 500 private construction sites.

For employers who delay wages, criminal punishment will be imposed along with strengthened economic sanctions such as restrictions on government subsidies and credit sanctions.

'Habitual wage arrears employers' are defined as those who delay wages for more than three months per worker within one year or delay wages five or more times (totaling 30 million KRW), and they will be excluded from government subsidies and support projects.

Points will also be deducted during pre-qualification screening and bid winner evaluation and decision according to the National Contract Act.

The Ministry of Employment and Labor stated that it will provide advance payments to workers who have not received delayed wages from employers to support their livelihood stability. At the same time, loan conditions for wage-arrears employers will be eased.

Minister of Employment and Labor Lee Jeong-sik said, "Through cooperation among related ministries, we will definitely bring about a social awareness change that no longer tolerates wage arrears, and we will do our best to protect vulnerable groups such as construction workers."

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