The government will abolish the cap on rewards for reporting unfair practices to root out illegal subcontracting at construction sites. Previously, rewards for reporting illegal subcontracting were capped at 2 million won, but going forward, informants can receive up to 30% of the penalty surcharge, opening the door to rewards of tens of millions of won.
The Ministry of Land, Infrastructure and Transport said on the 16th that a partial amendment to the Enforcement Decree of the Framework Act on the Construction Industry with these details was approved at a Cabinet meeting. The amendment takes effect upon promulgation. An official at the Ministry of Land, Infrastructure and Transport (MOLIT) said the amendment was prepared to eradicate illegal subcontracting, a chronic practice at construction sites.
The amendment expands rewards for reporting unfair practices such as illegal subcontracting. Previously, rewards for reporting unfair practices were paid up to a maximum of 2 million won. However, the cap on reward payments will be abolished going forward.
The Ministry of Land, Infrastructure and Transport (MOLIT) will calculate rewards at up to 30% of the penalty surcharge imposed for unfair practices. For example, under the previous system, for a report that resulted in a penalty surcharge of 189 million won, the reward cap was 2 million won, but going forward, the informant will be able to receive 56.7 million won.
In addition, if illegal acts are confirmed during investigation and enforcement based solely on the reporter's specific statements and circumstances, reward payments will be allowed.
The Ministry of Land, Infrastructure and Transport (MOLIT) will also strengthen administrative sanctions for illegal subcontracting. Currently, under the Enforcement Decree of the Framework Act on the Construction Industry, the standards for business suspension and penalty surcharge imposition and the period of restrictions on participation in subcontracting for illegal subcontracting are far below the legal maximums, which has been insufficient to deter violations.
Accordingly, in the amendment, the Ministry of Land, Infrastructure and Transport (MOLIT) raised the business suspension standard from the current four to eight months to at least eight months and up to one year, and significantly raised the minimum penalty surcharge rate from the current 4% of the subcontract amount to 24%.
The period restricting participation in public works subcontracting for construction businesses that engaged in illegal subcontracting will also be expanded from the current one to eight months to at least eight months and up to two years.
Kim Seok-gi, director general for Construction Policy at the Ministry of Land, Infrastructure and Transport (MOLIT), said, We will establish a "fair construction order without illegality" by strengthening sanctions so that the perception takes root on sites that the disadvantages far outweigh the gains from illegal subcontracting, and by expanding rewards for reporting.