Unpaid amounts disbursed up 24.6% from last year; regulator renames center to ease reporting burden

Some 28.9 billion won ($21.3 million) in overdue payments owed to small and medium-sized subcontractors was released ahead of the Chuseok holiday, the Korea Fair Trade Commission said Friday. Major companies also made early payments totaling about 2.24 trillion won to subcontractors before the holiday.

The Fair Trade Commission said it operated unpaid subcontracting payment resolution centers at 12 locations nationwide for 50 days from Aug. 5 to Sept. 23, and the figures reflect the results of that effort.

The Korea Fair Trade Commission at Government Complex Sejong in Eojin-dong, Sejong [Newsis]
The Korea Fair Trade Commission at Government Complex Sejong in Eojin-dong, Sejong [Newsis]

A total of 173 small and medium-sized subcontractors received overdue payments through the centers. The amount disbursed rose 24.6 percent from 23.2 billion won during last year's Chuseok period. The number of consultations also rose 75 percent, from 193 cases last year to 338 this year.

The commission set up resolution centers at its headquarters, six regional offices, the Korea Fair Trade Mediation Agency, the Construction Subcontracting Dispute Mediation Council and the Korea Federation of SMEs. It actively encouraged prime contractors to voluntarily settle payments and reach agreements with subcontractors from the consultation stage onward.

In one case, a subcontractor that had completed tile work on a new apartment construction project but had not received full payment filed a complaint with the center. The commission informed the prime contractor of its legal obligation to pay under the Subcontracting Act, resulting in the release of 507 million won in overdue payments.

In another case, a subcontractor that had carried out landscaping work at an industrial complex without receiving payment was guided through the dispute mediation process. The project owner ultimately agreed to pay approximately 434.46 million won in outstanding fees.

The commission also asked major companies to pay subcontracting fees early. In response to its request that payments originally scheduled after Chuseok be made before the holiday, 108 companies made early payments totaling about 2.24 trillion won to 16,175 small and medium-sized subcontractors.

The results came amid a name change the commission made in September, when it renamed the existing "Holiday Unfair Subcontracting Reporting Center" to the "Holiday Unpaid Subcontracting Payment Resolution Center." The change was intended to address a tendency among subcontractors to avoid filing complaints out of concern over potential repercussions — such as losing business — because the word "reporting" evoked associations with sanctions against prime contractors.

For cases filed during the center's operating period in which payments exceeded the legally mandated 60-day deadline from the date of delivery, the commission plans to push for prompt voluntary corrections, including payment of overdue amounts with late-payment interest.

Companies that do not comply voluntarily will face on-site investigations and strict enforcement measures. The commission also plans to conduct ongoing inspections of unfair subcontracting practices to establish a culture in which payments are made on time.


y2k@heraldcorp.com