Increase Recovery Rate of Unpaid Wages and Advance Payments... Credit Sanctions on Employers with Outstanding Payments

Long-term Uncollected Debt Management Entrusted to Korea Asset Management Corporation

The government pays overdue wages to workers first and then recovers the amount from the employer. A revised enforcement decree allowing credit sanctions if the employer fails to repay such large advance payments has passed the Cabinet meeting. This measure was taken to improve the recovery rate, which has remained at around 30%.

[Photo by Ministry of Employment and Labor]

The Ministry of Employment and Labor announced on the 30th that from July 7 next month, it will impose credit sanctions on employers who have not repaid large advance payments for over a year and entrust the Korea Asset Management Corporation with the collection of long-term uncollected claims, following the deliberation and approval of the 'Revised Enforcement Decree of the Wage Claim Guarantee Act' at the Cabinet meeting.

The government protects workers by paying overdue wages on behalf of employers within a certain scope when wage arrears occur. In such cases, the employer must later reimburse the advance payment. However, since there have been no significant sanctions for non-repayment, the cumulative recovery rate has remained at about 30%.

The Ministry of Employment and Labor decided to provide comprehensive credit information institutions with details of uncollected amounts and personal information of employers when the unpaid amount exceeds 20 million won and the repayment period exceeds one year after the advance payment. In such cases, the employer will face disadvantages such as restrictions on bank loans, credit card issuance, and differential interest rates.

Additionally, to manage claims efficiently, the ministry will entrust the Korea Asset Management Corporation, a specialized debt collection agency, with the recovery of long-term uncollected claims that have accumulated annually for over five years and are less than 100 million won. Currently, the scale of such long-term uncollected claims amounts to 593.6 billion won, accounting for 17% of the total uncollected amount.

Meanwhile, considering the recent rapid increase in wage arrears, the government is conducting special inspections targeting intentional and habitual wage arrears. It is strengthening supervision of employers regarding arrears to current employees and enhancing the handling of reported cases focused on corrective orders and judicial processing.

The Ministry of Employment and Labor stated, "We expect that this revision of the enforcement decree, along with these measures, will contribute to preventing wage arrears by employers, who bear the ultimate responsibility, and improving the recovery rate of repayment amounts."

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