Interest rate for delinquent employers also cut by up to 1 percentage point

Substitute pay to be disbursed within 7 days of application

470 billion won paid to 75,000 workers through July this year

A poster for the wage-arrears intensive clearance period [Ministry of Employment and Labor]
A poster for the wage-arrears intensive clearance period [Ministry of Employment and Labor]

The Korea Workers' Compensation and Welfare Service will offer living-expense loans at an annual rate of 1 percent to workers who have not received their wages ahead of Chuseok, and will shorten the disbursement period for substitute pay to within seven days.

The service announced Tuesday it will run a "wage-arrears intensive clearance period" through Oct. 31 to support the financial stability of workers whose wages have been withheld.

During the clearance period, the interest rate on living-expense loans for workers owed back wages will drop by 0.5 percentage points, from the standard annual rate of 1.5 percent to 1 percent.

Workers currently employed at businesses with outstanding wage arrears may apply for a living-expense loan if at least one month's wages have gone unpaid in the year before the application date. Workers who left such a business within six months before applying are also eligible, and may receive support at the same rate covering up to three months of final wages and three years of severance pay combined.

The reduced rate applies only during the clearance period and will revert to the standard 1.5 percent annually once it ends.

Interest rates on loans to help delinquent employers settle wage arrears will also be temporarily lowered. Businesses enrolled in industrial accident insurance for at least six months will be eligible for secured loans at up to 1.2 percent per year and unsecured or jointly guaranteed loans at 2.7 percent per year. Once the clearance period ends, rates will rise to between 2.2 and 3.7 percent annually.

The service also plans to disburse substitute pay to workers owed back wages within seven days of the application date. Substitute pay is a system under which the government pays workers their unpaid wages and other entitlements on behalf of the employer, then recovers the amount from the employer.

From the start of this year through the end of July, the service paid a total of 470 billion won ($342 million) in substitute pay to 75,000 workers owed back wages.

Park Jong-gil, president of the Korea Workers' Compensation and Welfare Service, said workers who have not received their wages ahead of a holiday "face a desperate situation every single day," adding that the service would "help stabilize the livelihoods of workers owed back wages through prompt disbursement of substitute pay and living-expense support."


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