New Legislation Guarantees Wages for Workers Even if Construction Companies Go Bankrupt

SEJONG, May 18 (Korea Bizwire) — Starting next year, workers’ wages are expected to be secured safely even if construction companies participating in public works fail and bank accounts are seized.

Government ministries, including the Ministry of Land, Infrastructure and Transport and the Public Procurement Service, announced measures on Friday to improve the direct wage payment system at a presidential committee on job creation Friday.

In June of last year, the government made it mandatory to directly pay wages for on-site workers to prevent overdue wages at public construction sites, following the criticism that the protection of on-site workers was insufficient.

First of all, construction companies will be allowed to secure wages for workers even if their bank accounts are seized due to bankruptcy or other irregularities.

Currently, the Act on the Promotion of Construction Industries excludes labor costs from seizure, but all labor costs can be seized if they are included with other items in the builder’s billing management account.

In response, the government will separate labor-cost accounts from the Public Procurement Service’s electronic payment system and apply them to all public works starting next year.

The government will also make it possible for an ordering body to directly pay for materials and equipment through a subcontractor.

Currently, it is difficult for an ordering party to grasp the flow of some construction costs, such as advance payments, in detail, but this will be supplemented so that this data can be verified in real time.

The electronic payment system of the Ministry of SMEs and Startups will also be improved.

The system was unable to prevent misuse because the ordering party directly pays workers through the special settlement deposit account, but advance payments were kept in the the account of the contractor, such as a construction company.

In response, the government plans to improve the handling of advance payments through deposit accounts from the second half of this year.

Individual billing systems for public institutions will also be revamped.

Starting next year, the Korea Rail Network Authority will establish a special account and make payments directly to subcontractors, workers and materials and equipment operators without going through the construction company’s accounts.

Some local governments that are using their own payment systems, including the Seoul Metropolitan Government and Gyeonggi Province, will also revamp their systems to use improved functions starting next year.

Lina Jang (linajang@koreabizwire.com)