Labor Ministry Discovers Fraudulent Claims at Six Businesses, Totaling 420 Million Won

The Ministry of Employment and Labor building in Sejong City, South Korea. 2023.10.13[Photo=Yoo Dae-gil, dbeorlf123@ajunews.com]

The South Korean government has uncovered multiple cases of fraud involving the large payment system intended to protect workers facing wage arrears. On June 19, the Ministry of Employment and Labor announced that a three-year investigation, initiated in April 2022, identified fraudulent claims totaling 423 million won ($320,000) from six businesses involving 58 individuals.
The large payment system, established under the Wage Claim Guarantee Act, allows the government to provide financial assistance to workers whose livelihoods are threatened by unpaid wages, with the expectation that employers will reimburse the state. Last year, the government disbursed 684.5 billion won, and while the amount was projected to reach a record 724.2 billion won in 2024, it has since seen a slight decline. The cumulative total since 2021 has reached 3.179 trillion won.
Since 2022, the government has been conducting targeted investigations into fraudulent claims within the large payment system. This involves analyzing various data points, including the frequency of claims, the amounts requested, and the status of reimbursements, to identify businesses with a high risk of fraud.
The recent investigation revealed instances of false reporting of employment relationships, fraudulent claims of wage arrears, and submission of misleading documents. For example, a representative of a construction firm falsely reported subcontracted workers as employees of the main contractor to file a claim for unpaid wages, resulting in an improper payment of 122 million won. Additionally, some individuals conspired with their employees to falsely claim unpaid wages and severance pay, attempting to fraudulently obtain 22.8 million won or 20.8 million won.
The Ministry plans to conduct further investigations into fraudulent claims in the second half of this year. This will include not only criminal penalties but also efforts to recover the misappropriated funds and impose additional fines of up to five times the amount claimed. For businesses with anticipated claims exceeding ten employees, the submission of asset lists will be mandated. The ministry is also strengthening credit sanctions against employers who fail to repay their debts over an extended period. Since May, measures have been implemented to recover debts through national tax delinquency procedures and to enforce joint liability for main contractors and upper-tier subcontractors.
Kim Young-hoon, the Minister of Employment and Labor, stated, "The large payment system is designed to protect workers struggling due to wage arrears. We will respond strictly to criminal activities that abuse this system and enhance our efforts to recover misappropriated funds and debts."

* This article has been translated by AI.