Ending "Exploitative Subcontracting"... Why Is the Public Sector Overhauling Its Contracting Structure?

The government's introduction of the "Public Sector Outsourcing Operation Improvement Plan" is a measure aimed at resolving the long-standing issues of low wages, discrimination, and job insecurity in the public sector. This decision was based on the assessment that even in the public sector, the continuation of multi-tier subcontracting practices has revealed limitations in protecting workers.

According to the government on April 16, subcontracting has been routinely used not only in the private sector but also in the public sector, leading to persistent concerns over reduced contract amounts, low wages, discriminatory treatment, and job insecurity. In particular, President Lee Jaemyung ordered at a senior aides meeting in July last year to "accurately identify and address exploitative subcontracting practices in the public sector," which prompted a coordinated response from relevant ministries.

Members of the Korean Confederation of Trade Unions National Public Labor Union Federation held a rally near the National Assembly in Yeouido, Seoul on the 17th, resolving to achieve the "Five Major Demands of Public Workers." They called for the improvement of working conditions for public workers, the prevention of privatization and restructuring in the public sector, the legalization of public worker status, and the establishment of a permanent Public Workers Committee. Photo by Hyunmin Kim kimhyun81@

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In response, the government conducted its first written survey in August last year on 584 outsourcing contracts across six sectors-power generation, energy, airports, railways, roads, and ports. In September, the government carried out field inspections focusing on organizations with frequent subcontracting usage, closely examining structural issues such as wage levels, bid success rates, and contract unit prices. After gathering feedback from relevant ministries, public institutions, and labor groups through January this year, the government finalized the new plan.

The survey found that the outsourcing structure was widely used in the public sector, but structural problems were identified in some areas. In the six sectors, there were 460 primary contracts and 124 subcontracting contracts; 55.9% of primary contracts were awarded through competitive bidding, while 54.0% of subcontracts were private contracts. Kim Sumin, Director of Labor Policy at the Ministry of Employment and Labor, stated, "It was confirmed that as the number of subcontracting stages increased, the contract amount decreased, with the burden being passed on to subcontracted workers."

The problem is that such a structure leads to discrepancies in working conditions. Some institutions applied low bid success rates, resulting in reduced contract amounts, which in turn led to cases where labor costs fell below prevailing wage standards or even the minimum wage. There were also many cases where, despite performing identical or similar work, workers from the contracting institution and subcontracted workers received different wages. In fact, in some institutions, while employees of the contracting institution received wages in the range of 3.5 million won, subcontracted workers were paid only about 2.9 million won, highlighting the gap.

Job insecurity was also identified as a major issue. Since the duration of the service contract and employment contract were often set to be the same, many contracts were short-term, making stable employment difficult. For primary contracts, 51.3% were for terms of one year or less; for subcontracts, 35.3% were under one year, and 29.4% were exactly one year, indicating a high proportion of short-term contracts. This repeated contract renewal structure is effectively creating ongoing job insecurity.

Labor-only contracting and multi-tier subcontracting structures were also cited as problems. There were cases where agencies outsourced only manpower while providing facilities and equipment themselves, raising concerns over illegal dispatch or responsibility avoidance. Additionally, it was confirmed that as the number of subcontracting stages increased, the contract amount decreased, with the burden shifted onto subcontracted workers.

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The government determined that if these issues were left unaddressed, the public sector would be unable to fulfill its role as a "model employer" and that this could lead to a decline in the quality of public services. Accordingly, the government has shifted its policies to comprehensively overhaul outsourcing practices and strengthen worker protections.

An implementation plan has also been prepared. The government, in collaboration with relevant ministries, will establish the "Public Sector Appropriate Outsourcing Operation Guidelines" in the second half of this year, which will specify detailed outsourcing standards and procedures. Alongside this, revisions to related guidelines will be expedited to improve contract systems, such as raising the minimum bidding threshold.

A management system will also be set up to ensure effective implementation. A joint task force comprising relevant ministries will review progress on the measures every six months, and after the launch of the Public Workers Committee, further improvements will be discussed under its leadership. Additionally, the level of outsourcing operation will be reflected in the management evaluations of public institutions and local public enterprises to strengthen organizational accountability.

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