Notices

A system long demanded by construction labor groups to prevent wage arrears at construction sites?the direct payment system by project owners?will be expanded to private construction projects beginning next year. Under the system, project owners will directly pay wages to construction workers, thereby preventing wage arrears that can occur as payments pass through general contractors and subcontractors.

According to the National Coalition for Proper Construction Practices on August 23, an amendment to the Framework Act on the Construction Industry, proposed by Democratic Party lawmaker Yeom Tae-young, passed the National Assembly on August 20. The amendment requires project owners of private construction projects exceeding a certain size to use an electronic payment system through which wages and other construction-related payments are made directly. This expands to private construction projects a system that has previously applied to public construction projects. The amendment will take effect on January 1, 2027.

Until now, at private construction sites, construction payments made by project owners have passed through general contractors and subcontractors before reaching workers. During this process, construction funds have sometimes been diverted for other purposes. Wage payments could also be blocked when a contractor’s bank account was seized.

The introduction of the direct payment system is expected to reduce these intermediate stages. Through the electronic payment system, project owners will make payments separately to construction workers, subcontractors, and construction equipment rental providers. The significance of the reform lies in its shift from a policy focused largely on punishing wage arrears after they occur to one designed to prevent wage arrears from occurring in the first place.

Wage arrears in the construction industry have remained persistently high. According to the Ministry of Employment and Labor, the total amount of unpaid wages nationwide exceeded KRW 2 trillion for two consecutive years, with the construction industry alone accounting for KRW 416.6 billion in unpaid wages last year. This represents a substantial increase from KRW 261.5 billion in 2021.

Labor organizations and civic groups, including the National Coalition for Proper Construction Practices, have argued that rather than relying on payment orders or punishment after wage arrears occur, the more fundamental solution is to restructure the payment process so that the money reaches workers directly.

The direct payment system has already demonstrated positive results in the public sector. According to the L-ESG Evaluation Institute, the electronic payment system known as “Chebul e-Zero”, operated by the Korea National Railway, has processed approximately KRW 16 trillion in construction payments across more than 400 construction sites over the past five years, with no reported cases of wage arrears.

Rep. Yeom said, “The passage of this amendment marks a turning point from merely punishing wage arrears to creating a structure in which wage arrears cannot occur in the first place.”

He added, “As this achievement was made together with civil society, I will continue to closely oversee the revision of the relevant enforcement decrees and enforcement rules, as well as follow-up legislation, so that the new system can be implemented smoothly at construction sites.”

By Eom Jae-hee Published: August 24, 2026, 6:30 a.m. eom@labortoday.co.kr

Source: Maeil Labor News (매일노동뉴스)