The government will build a next-generation electronic payment system to prevent wage and construction payment arrears at construction sites. The core of the next-generation arrears-prevention system is a structure in which the client pays construction costs and wages directly.
At the Emergency Economic Headquarters meeting and the meeting of related ministers on strengthening economic and industrial competitiveness held on the 22nd, the government included this in the agenda for building and operating an electronic payment system to prevent illegal subcontracting and arrears in construction projects.
Because construction projects have a multi-tiered contracting structure that runs from the client to the prime contractor, subcontractor, and worker, if payment is blocked at any stage, subcontractors and workers can suffer from unpaid construction costs and wages. Wage arrears in the construction industry rose from 465.7 billion won in 2024 after 426.4 billion won in 2023, then recorded 402.8 billion won last year.
To build a next-generation arrears-prevention system by overhauling the national system Subcontract Guardian, the government will form a joint task force (TF) with related agencies including the Ministry of Strategy and Finance, the Ministry of Land, Infrastructure and Transport, and the Public Procurement Service.
The biggest feature of the next-generation system is that it implements a "client direct payment structure," in which the client pays construction costs, wages, and equipment fees directly to each recipient. Previously, it was common for the client to pay the construction cost to the prime contractor, who then paid the subcontractor and workers. In this process, if the accounts of the prime or subcontractor were seized or funds were used for other purposes, payment of wages and subcontract fees could be halted.
In the next-generation system, the shares for the prime contractor, subcontractor, and workers are separated from the payment claim stage. When a subcontractor files a claim dividing its construction cost and worker wages, the prime contractor checks it and submits it to the client together with its own claim. After the client gives final approval, payments are made directly to each recipient. Through this, the government plans to protect construction workers, equipment operators, and material suppliers, whose bargaining power over payments is weak.
Operation of the next-generation system will also be transferred from the Public Procurement Service to the Ministry of Land, Infrastructure and Transport (MOLIT), the ministry in charge of the construction industry. The decision reflects the judgment that more than 99.6% of Subcontract Guardian users are concentrated in the construction sector and that it is more efficient for a single ministry to operate both construction-industry systems and the electronic payment system. The Ministry of Land, Infrastructure and Transport (MOLIT) plans to link the next-generation system with KISCON, the Construction Industry Information Integrated Management System.
The next-generation system is expected to go into operation in 2028. Since the client direct payment scheme is set to be implemented earlier, starting in 2027, the government plans to use existing electronic payment systems such as Arrears e-Zero to reduce any policy gap.