Wage Claim Guarantee System (SubstitutePayment)
Substitute Payment
- Suppose the employee demands payment for unpaid wages, etc. due to the employer’s decision for bankruptcy declaration, initiation of rehabilitation procedures, etc. In that case, nevertheless of the third party’s reimbursement-related stipulation on Article 469 of the “Civil Act,” the “Wage Claim Guarantee System” ensures payment to the employee, as the Minister of Employment and Labor pays unpaid wages, etc., on behalf of the employer (Article 7(1) of the Wage Claim Guarantee Act).
※ “Wages, etc.” means wages, retirement allowances, business suspension allowances, and wages received before and after maternity leave under Articles 2, 34, and 46, and Article 74(4) of the Labor Standards Act (Subparagraph 3 of Article 2 of the Wage Claim Guarantee Act).
- The scope of overdue wages, etc., (hereinafter referred to as “substitute payment”) paid by the Minister of Employment and Labor on behalf of the employer is as follows (Main Text of Article 7(2) of the Wage Claim Guarantee Act):
· Previous three-month wages under Subparagraph 1 of Article 38(2) of the “Labor Standards Act.”
· Last three-year retirement benefits, etc. under Article 12(2) of the “Act on the Guarantee of Employee's Retirement Benefits.”
· Latest three-month business suspension allowance under Article 46 of the “Labor Standards Act.”
· Last three-month perinatal vacation payment under Article 74(4) of the “Labor Standards Act”
- However, pursuant to Article 6 of the Enforcement Decree of the Wage Claim Guarantee Act, the upper limit amount of substitute payment (hereinafter referred to as “insolvency payment”) under subparagraphs 1 through 3 of Article 7(1) of the Wage Claim Guarantee Act and the upper limit amount of substitute payment (hereinafter referred to as “simplified substitute payment”) under subparagraphs 4 and 5 of Article 7 (1) may be separately determined in consideration of the age, etc., of the employee at the time of retirement. If the amount of substitute payment is small, then it may not be paid. (Proviso to Article 7(2) of the Wage Claim Guarantee Act).
Procedures of Payment of Substitute Payment
Claiming forthe Substitute Payment
- Those intending to receive substitute payment shall claim for its payment to the Minister of Employment and Labor within the period under each following case (Article 9(1) of the Enforcement Decree of the Wage Claim Guarantee Act).
· For insolvency payment: Within 2 years from when the commencement of rehabilitation proceedings or declaration of bankruptcy (hereinafter referred to as “bankruptcy, etc.”) under subparagraph 1 or 2 of Article 7(1) of the Wage Claim Guarantee Act has been made, or when the fact of bankruptcy, etc., has been made according to subparagraph 3 of Article 7(1) of the Wage Claim Guarantee Act
· For substitute payment under subparagraph 4 of Article 7(1) of the Wage Claim Guarantee Act: Within 1 year from when the judgment, order, conciliation, or ruling under subparagraph 4 of Article 7(1) of the Wage Claim Guarantee Act has been made
· For substitute payment under subparagraph 5 of Article 7(1) of the Wage Claim Guarantee Act: Within 6 months from the initial issuance date of the Certificate of Overdue Wages, etc.
Application for Confirmation
- Those intending to claim insolvency payment, etc., shall obtain the Minister of Employment and Labor’s confirmation regarding the application date, retirement date, and age at the time of retirement when bankruptcy has been declared or when the insolvency, etc., has been confirmed. The claimant shall apply for confirmation along with claiming for the insolvency payment (Article 10(1) of the Enforcement Decree of the Wage Claim Guarantee Act).
- Persons intending to obtain confirmation of the reason to receive substitute payment for bankruptcy, etc., shall submit the Application for Confirmation of Substitute Payment, etc., along with the Claim for Insolvency Payment in accordance with Article 5(1) of the Enforcement Rules of the Wage Claim Guarantee Act to the head of the local employment and labor office (Article 10(3) of the Enforcement Decree of the Wage Claim Guarantee Act and Article 6 of the Enforcement Rules of the Wage Claim Guarantee Act).
Claim for the Bankruptcy Status Report by Trial
- If deemed necessary to confirm the reason for the substitute payment for bankruptcy, etc., the Minister of Employment and Labor shall take necessary measures, such as submitting relevant documents or reporting matters related to bankruptcy, etc., to the corresponding employer, bankruptcy administrator, administrator, caretaker, etc. (Article 10(2) of the Enforcement Decree of the Wage Claim Guarantee Act).
Confirmation Result Notice
- Upon receipt of the application for confirmation, the head of the local employment and labor office shall confirm the reason to make substitute payment for bankruptcy, etc., and notify the applicant of the result according to the Notification of Confirmation. (Main Text of Article 7(1) of the Enforcement Rules of the Wage Claim Guarantee Act).
※ However, if it is not possible to verify the facts, the reasons shall be notified by an irrevocable notice. (Proviso to Article 7(1) of the Enforcement Rules of the Wage Claim Guarantee Act)
Delivery of the Claim of Payment (Copy of the Notification of Confirmation Attached)
- Upon confirming that the applicant is qualified to be compensated with insolvency payment, the head of the local employment and labor office shall attach a copy of the Notification of Confirmation on the Claim for Insolvency Payment and deliver them promptly to the Korea Workers' Compensation & Welfare Service (COMWEL) (Article 7(2) of the Enforcement Rules of the Wage Claim Guarantee Act).
Payment of Substitute Payment
- COMWEL that has received the claim for payment shall pay the insolvency payment to the claimant within 7 days from the date of receipt of the Claim for Insolvency Payment, unless there is a compelling reason not to do so (Article 8(1) of the Enforcement Rules of the Wage Claim Guarantee Act).
- COMWEL that has received the claim for payment shall determine whether or not to pay the simplified substitute payment within 14 days upon receipt and shall pay the insolvency payment to the claimant, if any, unless there is a compelling reason not to do so (Article 8(2) of the Enforcement Rules of the Wage Claim Guarantee Act).
Subrogation of right of claim
- When the Minister of Employment and Labor pays the employee the substitute payment, he/she may exercise his/her right to claim unpaid wages, etc. to the employer within the limit of the amount paid (Article 8(1) of the Wage Claim Guarantee Act).