LH to Make Early Construction Payments Ahead of Chuseok; Subcontracting Restricted for Up to Three Years in Cases of Nonpayment

[Financial News] Korea Land and Housing Corporation (LH) will bring forward the payment of approximately 600 billion won in construction payments at building sites ahead of Chuseok.
LH announced on the 16th that it would make construction payments early ahead of the Chuseok holiday. It will also strengthen sanctions against companies with payment arrears, as well as site management and supervision.
LH will significantly strengthen sanctions to eliminate nonpayment, which has long been identified as a chronic problem at construction sites. If payment arrears occur, the prime contractor will receive a quality deficiency notice and incur a penalty in future LH construction bids. The subcontractor will be designated as a "managed subcontractor" and barred from participating in subcontracts for up to three years. If the company refuses corrective action, LH plans to immediately notify the relevant regional employment and labor office and local governments of violations of the Framework Act on the Construction Industry, the Act on the Fair Transactions in Subcontracting, and other laws, and request strict action.
To ensure that partner companies and workers can spend the holiday without worrying about unpaid payments, LH is conducting a comprehensive inspection of construction sites nationwide from the 28th of last month through the 23rd of this month. The inspection will comprehensively review whether the public project owner’s direct wage payment system is being implemented, along with the scheduled amounts of wages and subcontracting payments, the receipt and payment status of progress payments, whether construction workers have been paid, whether equipment and material costs have been paid, and the status of payment arrears and complaints.
LH will ensure that approximately 591.6 billion won in construction payments scheduled for 361 sites identified through the inspection are properly disbursed before the holiday. If unpaid payments are discovered, it will immediately request that they be resolved and impose sanctions if the request is ignored. Sites where deteriorating liquidity at construction companies, complaints about payment arrears, or insufficient labor-cost payment records are identified will be classified as high-risk sites and placed under intensive management until Chuseok.
LH will also accelerate the construction payment process. It will shorten the processing period for construction payments made before Chuseok from a maximum of 19 days to within 10 days. The progress inspection period will be reduced from up to 14 days to seven days, while the payment deadline will be cut from five days to three. LH also plans to encourage prime contractors to make early subcontracting payments within five days.
LH will operate a "payment arrears response team" before and after the Chuseok holiday. When a report of unpaid payments or a complaint is received, the team will immediately assess the situation and coordinate with relevant departments and sites to confirm whether the issue has been resolved. It will also regularly monitor payment status, watch for abnormal signs such as delayed wage payments or indirect payments, and prevent payment arrears from becoming prolonged.
President Lee Seong-hoon said, "We will fundamentally prevent the possibility of payment arrears at construction sites so that construction workers and partner companies can receive their rightful compensation on time without difficulty. If arrears occur, we will resolve the issue immediately through strict punishment." He added, "We will continue to create construction sites free of payment arrears and an environment where people can work with confidence through continuous monitoring and fact-finding inspections."
[email protected] Lee Gyeong-su Reporter