Employers With Wage Arrears of Three Months, Five Times, or Over 30 Million Won to Face Incentive Restrictions

The government will significantly expand the eligibility for Employment Retention Subsidies in response to the nationwide employment crisis and restrict support, including incentives, for employers with a history of habitual wage arrears. In addition, the government will strengthen the procedure for recovering substitute payments (wages paid by the state on behalf of employers), raising accountability to the level of national tax delinquency enforcement.

On April 28, the Ministry of Employment and Labor announced that the Cabinet had deliberated and approved amendments to the Enforcement Decree of the Employment Insurance Act and the Enforcement Decree of the Wage Claim Guarantee Act, which include these measures.

With this revision, the eligibility for expanded Employment Retention Subsidies, which has previously been limited to specific industries or regions, will now include cases where the employment situation has significantly deteriorated nationwide. Accordingly, the government expects to be able to respond more swiftly and flexibly in the event of a nationwide crisis, such as COVID-19.

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In addition, the previously complex support requirements, which were divided into work suspension and leave of absence, have been unified under the single criterion of “measures that do not provide work,” thereby reducing confusion in the field and improving utilization. For paid support, if an insured worker’s scheduled monthly working hours are reduced by 20% or more, they become eligible for support. This revised regulation will take effect from May 12.

Starting June 1, government support will be restricted for business owners who habitually delay wage payments. The restriction applies to employers who have delayed three months’ worth of employee wages within a year or who have delayed payment five or more times in a year, with the total amount in arrears exceeding 30 million won. These employers will be excluded from all support programs under the Employment Insurance Act, such as employment promotion and employment stability incentives. This is a follow-up measure after the revision of the Labor Standards Act last year, which established the legal basis for restricting government subsidies and support to habitual wage arrears employers.

The system for recovering substitute payments will also be completely overhauled. Until now, the recovery of substitute payments relied on civil execution procedures, which took a long time until a court ruling was made, resulting in a collection rate of only about 30%. Going forward, the procedures for national tax delinquency enforcement will be applied, making it possible to enforce collection without a final court decision.

The government expects this to shorten the average substitute payment recovery period by about 132 days, from 290 days to 158 days. The strengthened collection procedures will apply from May 12, with the policy that the government will hold employers in arrears fully accountable.

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