Reward for Reporting Fraudulent Claims for Unpaid-Wage Substitute Payments to Rise from 100 Million to 200 Million Won

[Financial News] The cap on rewards for reporting fraudulent claims for unpaid-wage substitute payments will rise next year from the current maximum of 100 million won to 200 million won.
On the 6th, the government deliberated on and approved at a meeting of the State Council of South Korea an amendment to the Enforcement Decree of the Wage Claim Guarantee Act containing these provisions. Accordingly, from January 1 next year, the cap on rewards paid to people who report fraudulent claims for substitute payments will double, rising from the current maximum of 100 million won to 200 million won.
Under the substitute-payment system, the state first pays workers part of the wages they are owed on behalf of employers who have been unable to pay them, then collects reimbursement from the employers.
However, concerns have been raised persistently about the financial soundness of the Wage Claim Guarantee Fund, with the cumulative recovery rate for substitute payments remaining at just 30%. The Ministry of Employment and Labor pursued this amendment to the enforcement decree to encourage reports of fraudulent claims.
The government believes that, because substitute payments can be made through collusion between employers and workers, tips from informants play an important role in related investigations. It expects the higher cap on reporting rewards to encourage more reports.
This year, the Ministry of Employment and Labor has pursued a range of reforms to improve the substitute-payment system. In May, it introduced procedures for handling delinquent national taxes when collecting reimbursements, to emphasize employers’ responsibility to repay the amounts. That same month, it imposed credit sanctions for the first time on 2,057 employers who had failed to repay the amounts for an extended period.
In addition, the scope of “wages and other amounts” covered by insolvency substitute payments to workers with unpaid wages was expanded from the final three months to the final six months. The loan cap for employers willing to settle wage arrears was also raised from 150 million won to 200 million won.
Employment and Labor Minister Kim Young-hoon said, “This increase in the cap on reporting rewards is a measure to root out fraudulent claims for substitute payments.” He added, “Building on this amendment to the Enforcement Decree of the Wage Claim Guarantee Act, we will work to make the substitute-payment system more sustainable so that employers fulfill their responsibility to settle wage arrears and workers with unpaid wages receive robust protection.”
[email protected] Kim Jun-hyeok Reporter