Wages in subcontracted work must be carved out and paid monthly — effective 1 January 2027 | the principal checks payment
How wages are paid in subcontracted work changes. From 1 January 2027, a principal must separate the wage portion of the contract sum and pay it monthly, check whether the subcontractor paid its workers the previous month, and report non-payment to the Minister of Employment and Labor.
Conditions used in the video
- Effective date
- 2027-01-01
- Promulgated
- 2026-04-07
- Basis
- Labor Standards Act Article 44-4 (new)
- Payment cycle
- monthly
- Principals covered
- State, local governments, public institutions, local public corporations, local government-invested bodies, and other principals
- Industry, size, duration
- not yet set by Presidential Decree
Results
- Now · wage portion inside the contract sum
- not identified
- From 2027-01-01
- carved out, paid monthly
- Deposit at a designated bank
- counts as payment
- Principal's duty
- check the previous month's wage payment
- If unpaid
- report to the Minister of Employment and Labor
- Subcontractor's limit
- no use other than wages
Why it works this way
Today the contract sum is paid as one lump. How much of it is the wage owed by the subcontractor to its own workers is not identified, so money spent elsewhere leaves no trace. The more tiers a subcontracting chain has, the harder it is to see whether wages reached the bottom.
Labor Standards Act Article 44-4(1) and (3) (effective 2027-01-01).
- Contract sumpaid as a single amount
- Wage cost separatedthe cost of wages owed to the subcontractor's workers is carved out
- Paid monthlydeposit at a bank designated by the Minister counts as payment
In a chain, the immediately upper subcontractor and the lower subcontractor are treated as principal and subcontractor (paragraph 2).
Payment is not the end of it. The principal must check whether the subcontractor paid its own workers in the previous month, and the subcontractor must submit records of that payment in the manner the principal sets.
Labor Standards Act Article 44-4(4), (5) and (6).
- Principalchecks whether the subcontractor paid wages last month
- If non-payment is foundreports it to the Minister of Employment and Labor
- Subcontractormay not use the wage cost for anything other than paying wages
The month before the first payment of the wage cost is excluded from the check.
Subparagraphs 1 through 5 list the State, local governments, public institutions, local public corporations and local government-invested or -funded bodies. Subparagraph 6 is "any other principal not falling under subparagraphs 1 through 5". This is not a public-sector-only scheme; private principals are included.
Paragraph 1 delegates the industry, contract size and duration to a Presidential Decree.
- Settledthe structure (carve-out, deposit, check, report, use restriction)
- Not settledwhich industries, above what amount, over what duration
- Further delegationmethods and procedures go to Ministry of Employment and Labor rules (paragraph 7)
The decree and the ministerial rules have to appear before a given site knows whether it is covered.
This video and page describe a measure that has been promulgated but has not taken effect. Details may change through a decree or notice.
In short, from 1 January 2027 the wage portion is separated out of the contract sum and paid monthly with the principal checking payment, and the actual scope is left to a Presidential Decree.
The legal basis
Drawn from government announcements and the statutes themselves as primary sources, covering only the relevant part.
Labor Standards Act Article 44-4(1) (Separate payment of wage costs in subcontracted work)
In force Effective 2027-01-01 (promulgated 2026-04-07; Addenda Article 1 proviso)
A principal falling under any of the following subparagraphs shall, where it subcontracts a project falling within the industry, monetary scale and duration prescribed by Presidential Decree, separate out and pay monthly the portion of the contract sum corresponding to the wages the subcontractor must pay its own workers ("wage cost"). 1. The State 2. Local governments 3. Public institutions 4. Local public corporations and local public agencies 5. Bodies invested in or funded by local governments 6. Any other principal not falling under subparagraphs 1 through 5
What this means
Subparagraph 6 captures private principals. Reading this as a public-sector scheme is wrong. Actual application is confined to projects caught by the industry, size and duration set in the Decree.
Labor Standards Act Article 44-4(4) and (5)
In force Effective 2027-01-01
Where a principal pays the wage cost separately, it shall check whether the subcontractor paid wages to its own workers in the previous month. … Where the check shows that the subcontractor did not pay wages, the principal shall report that fact to the Minister of Employment and Labor.
What this means
The duty does not stop at splitting the money. It puts a checking and reporting obligation on the principal, so the party awarding the work has to see whether wages reached the bottom.
Labor Standards Act Article 44-4(6)
In force Effective 2027-01-01
A subcontractor shall not use the wage cost received under paragraph 1 for any purpose other than paying wages to its own workers.
What this means
The use of the wage cost is fixed by statute. This is the provision that blocks diverting it to materials or overheads.
Run it on your own numbers
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Open the Unpaid Wages & Late-Payment Interest
Frequently asked
Does this only apply to public projects?
No. Subparagraph 6 of paragraph 1 is "any other principal not falling under subparagraphs 1 through 5", so private principals are included. Which industries, sizes and durations are actually caught is set by Presidential Decree.
Can I tell now whether my site is covered?
Not yet. The industry, monetary scale and duration are delegated to a Presidential Decree that has not been issued.
Does the principal pay the workers directly?
No. The principal pays the subcontractor, but with the wage portion separated and paid monthly. Deposit at a designated bank counts as payment.
What about multi-tier subcontracting?
Where the work is subcontracted one or more times, the immediately upper subcontractor and the lower subcontractor are treated as principal and subcontractor respectively (paragraph 2).
Results are estimates based on the inputs and on the rules as at the stated date. They may differ from a lender's actual assessment, and the rules change often. Take professional advice before any decision that matters.