Amendment to Wage Claims Guarantee Act enforcement decree approved
New rules target fictitious workers, inflated arrears claims
The maximum reward for reporting fraudulent claims on "daejigeupmgeum" — advance wage payments made by the state on behalf of employers — will double from 100 million won ($73,600) to 200 million won starting next year. The move aims to curb fiscal losses from collusive fraud schemes between employers and workers, amid a cumulative recovery rate that has stagnated at around 30 percent.
The Ministry of Employment and Labor said Tuesday that the Cabinet approved an amendment to the enforcement decree of the Wage Claims Guarantee Act. The higher reward ceiling takes effect Jan. 1, 2027.
The advance wage payment system allows the state to pay workers a portion of their unpaid wages upfront and then recover the amount from the employer. With the cumulative recovery rate stuck at around 30 percent, however, concerns have grown over the fiscal health of the Wage Claims Guarantee Fund, which finances the program.
According to the ministry, fraudulent claims often arise from collusion between employers and workers — for instance, by inserting fictitious workers into wage arrears filings or inflating the amount owed. Tip-offs from informants, the ministry said, play a decisive role in fraud investigations.
The reward ceiling was set at 50 million won when the reporting incentive was introduced in 2005, then raised to 100 million won in 2021. The latest amendment doubles it again.
Reports of fraud can be filed with the relevant regional employment and labor office within three years of the fraudulent claim. If an investigation confirms fraud, the recipient must return the payment and may face an additional surcharge of up to five times the fraudulent amount, as well as up to three years in prison or a fine of up to 30 million won. Reward payments are made only after any appeals process is complete and the disposition is finalized.
The ministry has also pursued broader reforms this year to strengthen recovery of advance wage payments and better protect workers owed back pay. Starting May 12, it introduced national tax delinquency procedures for collecting repayments, laying the groundwork for faster compulsory collection. On May 29, it carried out its first credit sanctions against 2,057 employers with long-outstanding debts.
Starting Aug. 20, the ministry expanded the wage coverage under the insolvency advance payment scheme from the final three months of unpaid wages to the final six months. It also raised the loan ceiling available to employers committed to clearing their arrears from 150 million won to 200 million won.
"This increase in the reward ceiling is a measure to root out fraudulent claims on advance wage payments," Ministry of Employment and Labor Minister Kim Young-hoon said. "We will ensure employers fulfill their responsibility to settle wage arrears, and we will strengthen the sustainability of the advance wage payment system so that workers owed back pay receive robust protection."
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