Unpaid Wages Paid by the State: "Recovery Pursued to the End Using National Tax Delinquency Procedures"

Direct Seizure of Delinquent Employers' Assets
Recovery Period Expected to Drop from 290 to 158 Days

The government is set to strengthen the procedures for recovering “advance payment reimbursement” funds, which are paid by the state on behalf of employers who have delayed wage payments and then collected from those employers. A new national tax delinquency disposition process will be introduced to accelerate compulsory collection. The intent is to hold delinquent employers fully accountable by directly seizing their assets—just as the authorities do when seizing and auctioning off assets of tax delinquents who have not paid their taxes.

The Ministry of Employment and Labor announced that, starting from May 12, it will enforce the revised Wage Claim Guarantee Act reflecting these changes. The wage claim guarantee system allows the state to pay overdue wages to workers in cases where an employer fails to do so, and subsequently recover the amount from the employer.

Until now, the government followed civil enforcement procedures to collect reimbursements, which involved complex steps such as asset investigations, provisional seizures, and securing court rulings—leading to lengthy collection periods. According to the government, the previous process took an average of 290 days. From now on, by applying the national tax delinquency disposition procedure, the authorities will be able to proceed directly with compulsory collection through payment notices, demands for payment, seizures, and auctions. As a result, the average recovery period is expected to be shortened by 132 days to approximately 158 days.

The government considers the recurring issue of delayed wage payments not merely as a labor-management conflict but as a livelihood crime that directly impacts people’s lives. In particular, in multi-tier subcontracting structures such as the construction industry, there have been numerous cases where upper-tier contractors evade responsibility after subcontractors shut down or disappear. This system reform is seen as a measure to help prevent wage arrears by holding primary contractors accountable for overdue wages paid by the state on their behalf.

There is also growing anticipation for improved recovery performance with the new system. Up to now, due to insufficient enforcement power, the cumulative recovery rate for advance payments has remained at around 30 percent. In one manufacturing workplace, for example, workers were paid 990 million won in bankruptcy advance payments, but even after seven years of civil enforcement, only a portion was recovered, and approximately 320 million won was ultimately written off. A government official stated, “With the introduction of the delinquency disposition procedure, we can speed up asset seizures and auctions to raise the recovery rate.”

The scope of liability in subcontracting structures will also be expanded. Under the previous Labor Standards Act, even if a subcontractor delayed wage payments, the immediate upper-tier contractor was only partially responsible for paying workers’ wages, and there was no clear obligation to repay advance payments made by the state. As a result, if a subcontractor had no assets, it was difficult for the government to recover the funds it had disbursed. Going forward, upper-tier contractors will also be jointly liable for repayments, effectively imposing joint and several liability for reimbursing the advance payments. Accordingly, the Korea Workers’ Compensation & Welfare Service will now be able to issue payment notices, demands for payment, and proceed with asset seizures and auctions against these parties as well.

The government is also planning further institutional improvements to protect workers with overdue wages. From August 20, the scope of advance payment coverage for retired workers at bankrupt workplaces will be expanded from the current last three months’ wages to the last six months’ wages. There are also plans to raise the upper limit for wage arrears settlement support loans to 1 billion won. Minister of Employment and Labor Kim Young-hoon said, “We will continue to strengthen the safety net for protecting workers with overdue wages and further reinforce the accountability of delinquent employers.”