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The ‘wage claim guarantee system’ refers to a system in which the government pays (substitute payment) wages, etc., that have not been received by retired and incumbent workers on behalf of the employer.

What is "wage claim guarantee system"?

"Wage claim guarantee system" refers to a system in in which the Minister of Employment and Labor pays the worker's unpaid wages on behalf of the employer if the employee retires when ① the employer falls under any of 1 to 5 below, and the contract is still ongoing when ② the employer falls under 4. And 5, (hereinafter referred to as "incumbent worker") requests payment of unpaid wages, severance pay, maternity leave, and salaries during maternity leave (hereinafter referred to as "wages, etc."), notwithstanding Article 469, 「Civil Act」. (Refer to Articles 7(1) and 7-2(1), 「Wage Claim Guarantee Act」)

1. Decision to commence rehabilitation procedures: when there is a decision to commence rehabilitation procedures;

2. Decision to declare bankruptcy: when there is a decision to declare bankruptcy

3. Recognition of insolvency, etc.: when the Minister of Employment and Labor deems that the employer is unable to pay unpaid wages, severance pay, or business suspension allowance in accordance with the requirements and procedures for recognition of insolvency, etc. Set out in Article 5, 「Enforcement Decree of the Wage Claim Guarantee Act」.

4. Judgment, etc. To pay unpaid wages, etc.: when there is a final judgment on the employer to pay unpaid wages, etc. To workers (Article 24, 「Civil Execution Act」), a final payment order (Subparagraph 3, Article 56, 「Civil Execution Act」), litigation settlement, acknowledgment of a claim, etc. Having the same effect as a final judgment (Subparagraph 5, Article 56, 「Civil Execution Act」), mediation (Article 28, 「Civil Mediation Act」), a decision in lieu of mediation (Article 30, 「Civil Execution Act」), a decision to recommend implementation (Article 5-7(1), 「Small Claims Trial Act」), etc

5.Issuance of a confirmation of unpaid wages, etc. And employers in arrears of wages: when the Minister of Employment and Labor issues documents (hereinafter referred to as "confirmation of unpaid wages, etc. And employers in arrears of wages") certifying unpaid wages, etc. And the employer in arrears of wages against the worker, and the employer's unpaid wages are confirmed

What is "substitute payment"?

- General "substitute payment", which refers to the amount of wages, etc. to be paid by the Minister of Employment and Labor on behalf of an employer pursuant to the standard above, shall be as follows: (Article 7(2), 「Wage Claim Guarantee Act」 and Article 6(1), 「Enforcement Decree of the Wage Claim Guarantee Act」)

Division

Description

Bankruptcy substitute payment

• Substitute payment according to 1. to 3. Above among substitute payments paid to retired workers

Simple substitute payment

• Substitute payment according to 4. and 5. above among substitute payments paid to retired workers

• Substitute payment to incumbent workers

To receive a substitute payment, eligible workers and employers must meet certain standards.

Workers eligible for payment

- Bankruptcy substitute payment and simplified substitute payment are paid to the following workers. (Article 7(4), 「Wage Claims Security Act」, Article 7,「Enforcement Decree of the Wage Claim Guarantee Act」, and Subparagraph 1, 「Standards of Wages of Incumbent Workers Subject to Substitute Payments such as Overdue Wages」)

Division

Standards

Bankruptcy substitute payment

• Bankruptcy substitute payment is paid to workers who have retired from the business within 3 years from the date 1 year before the date according to the following classification

√ if there is 1. A decision on the commencement of rehabilitation procedures or 2. A decision on bankruptcy above, the date of application

√ if the court declares bankruptcy ex officio after an application for commencement of rehabilitation procedures under the 「Debtor Rehabilitation and Bankruptcy Act」, the date of application or declaration

√ In case of the above 3. Recognition of insolvency, etc., the date of application for the recognition of insolvency, etc (if the last day of the application period is a public holiday and an application is made on the day following a public holiday, it refers to the last day of the application period, and if there are two or more applications for a single factual relationship that served as the basis for the recognition of insolvency, etc., it refers to the date of the first application)

Simple substitute payment

• Substitute payment according to 4. Above: a worker who files a lawsuit (hereinafter referred to as "lawsuit, etc.") Regarding a judgment, order, mediation or decision, etc. (hereinafter referred to as "judgment, etc.") Falling under 4. Above within two years from the day following the date of retirement from the business

• Substitute payment according to 5. Above: a worker who files an appeal, petition, complaint, or accusation (hereinafter referred to as "appeal, etc.") Against the employer on the grounds of arrears in wages, etc. Within 1 year from the day following the date of retirement from the business

• Substitute payment paid to incumbent workers: paid to incumbent workers who meet all of the following standards

√ Must be a worker whose employment contract with the relevant employer has not been terminated at the time a lawsuit, appeal, etc. Is filed (excluding daily workers with a contract period of less than 1 month)

√ During the period stipulated in Article 7-2(2), 「Wage Claim Guarantee Act」, the average amount of ordinary wages specified in the labor contract must be less than 110% of the minimum wage (hourly wage)

√ Must have filed a lawsuit, appeal, etc. against the employer within the period according to the following categories

① If the employer falls under 4.: within 2 years from the day following the date on which the latest arrears in wages, etc. Occurred before the date of filing a lawsuit, etc.

② If the employer falls under 5.: within 1 year from the day following the date on which the latest arrears in wages, etc. Occurred before the date of filing an appeal, etc.

Standards of employers

- An employer against whom an employee is eligible to receive a general substitute payment shall be the one to whom any ground prescribed below. (Article 7(4), 「Wage Claim Guarantee Act」 and Article 8, 「Enforcement Decree of the Wage Claim Guarantee Act」)

Division

Standards

Bankruptcy substitute payment

• Employers from whom workers can receive bankruptcy payments are the ones who are subject to the 「Wage Claim Guarantee Act」 pursuant to Article 3, 「Wage Claim Guarantee Act」and have been in the business for more than 6 months and then have any of the reasons 1. to 3. above.

Simple substitute payment

• Substitute payment according to 4. Above: the payment is limited to retired workers who have been employed by employers who have met all of the following standards.

√ In accordance with Article 3, 「Wage Claim Guarantee Act」, the employer has been subject to the 「Wage Claim Guarantee Act」and has been in the business for at least 6 months until the date the worker retires

√ The employer has received a judgment, etc. For failing to pay wages, etc to the worker concerned

• Substitute payment according to 5. Above: the payment is limited to retired workers who have been employed by employers who have met all of the following standards.

√ In accordance with Article 3, 「Wage Claim Guarantee Act」, the employer has been subject to the 「Wage Claim Guarantee Act」 and has been in the business for at least 6 months until the date the worker retires

√ Unpaid wages, etc. Must have been confirmed with a confirmation of unpaid wages, etc. And employer in arrears of wages issued by the Minister of Employment and Labor

• Substitute payment paid to incumbent workers: the payment is limited to incumbent employees employed by business owners who meet all of the following standards.

√ In accordance with Article 3, 「Wage Claim Guarantee Act」, the employer has been subject to the 「Wage Claim Guarantee Act」and has been in the business for at least 6 months until the date on which the latest arrears in wage, etc. Occurred before the date on which the relevant worker files a lawsuit, appeal, etc.

√ The employer must have received a judgment, etc. For failing to pay wages, etc. To the worker concerned, or, unpaid wages, etc. Must have been confirmed with a confirmation of unpaid wages, etc. And employer in arrears of wages issued by the Minister of Employment and Labor

The employer who is a subcontractor of a construction works (hereinafter referred to as “subcontractor that is not a constructor”) shall have operated the relevant business for at least 6 months until the retirement date of the relevant employee: provided, that where an employer who is a subcontractor of a contract for construction workhas not operated the relevant business for at least 6 months until the retirement date of the relevant employee, the immediate upper tier contractor of the subcontractor who is not a constructor (where the immediate upper tier contractor is not a constructorreferring to the constructor under the same subparagraph who is at the lowest tier among the upper tier contractors; hereinafter the same shall apply) shall have operated the relevant business for at least 6 months until the retirement date of the relevant employee. (Article 8(5), 「Enforcement Decree of the Wage Claim Guarantee Act」)

Substitute payment has a certain payment range and upper limit.

Scope of substitute payments paid to retired workers

- The scope of wages, etc. to be paid by the Minister of Employment and Labor on behalf of an employer shall be as follows: (Main text of Article 7(2), 「Wage Claim Guarantee Act」)

· Wages for the last 3 months and retirement benefits for the last 3 years

· Business suspension allowance (limited to the last 3 months)

· Benefits during maternity leave (limited to the last 3 months)

Scope of substitute payments paid to incumbent workers

- In order to stabilize the livelihood of employees who have not received wages, etc. from their employers (including retired employees), the Minister of Employment and Labor may make loans to them for living expenses at the request of such employees. (Article 7-2(2), 「Wage Claim Guarantee Act」)

· Based on the date on which an incumbent worker files a lawsuit for judgment, etc., or files an appeal, petition, complaint, or accusation against the employer regarding the unpaid wages, unpaid wages among wages to be paid for 3 months retroactively from the date on which the latest arrears in wage occurred

· Business suspension allowances not paid from the business suspension allowances that should be paid during the above period

· Benefits not paid during the period of maternity leave that should be paid during the above period

※ The general substitute payment to incumbent workers is paid only once while the worker works for one business (Article 7-2(4), 「Wage Claim Guarantee Act」)

Upper limit of substitute payment

- The maximum of the substitute payment set by the Minister of Employment and Labor is as follows: (Articles 7(1), 7-2(1), 「Wage Claim Guarantee Act」, Article 6(3), 「Enforcement Decree of the Wage Claim Guarantee Act」 and 「Announcement of the Upper Limit for Substitute Payment of Overdue Wages, etc.」).

Age at the time of retirement Item	Less than 30 years old	30 years old or older and less than 40 years old	40 years old or older and less than 50 years old	50 years old or older and less than 60 years old	60 years old or older
Wage	2.2 million won	3.1 million won	3.5 million won	3.3 million won	2.3 million won
Retirement benefits, etc.	2.2 million won	3.1 million won	3.5 million won	3.3 million won	2.3 million won
Business suspension allowance	1.54 million won	2.17 million won	2.45 million won	2.31 million won	1.61 million won
Salary during maternity leave	3.1 million won

※ Remark: wages, salaries during maternity leave, and business suspension allowances are based on 1 month's worth, and retirement benefits, etc. Are based on 1 year's worth

Item	Upper limit
Wages, salaries during maternity leave, and business suspension allowances	7 million won
Retirement benefits, etc.	7 million won

※ The total upper limit is 10 million won, and retirement benefits, etc. Are applied only to the payment to retired workers under Subparagraph 4 and 5, Article 7(1), 「Wage Claim Guarantee Act」

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