South Korea to curb excessive subcontracting in public sector, enhance worker protections

The South Korean Ministry of Employment and Labor is taking a significant step towards rectifying the exploitative practices often found in public sector subcontracting. The upcoming guidelines, set to be released in the latter half of this year, signal a commitment to transforming the public sector into a model employer by eradicating multi-layered subcontracting and improving the welfare of subcontracted workers.

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Public sector projects where subcontracting occurs at amounts lower than the bid price is clear exploitation.

This initiative directly addresses President Lee Jae-myung's strong directive last July, where he denounced the practice of awarding subcontracts at rates lower than the initial bid as 'blatant exploitation.' He rightly pointed out how this process siphons off construction funds, compromises safety measures, and ultimately endangers workers' lives. The ministry's investigation into six sectors, including power, energy, and railways, revealed an average bid rate of 93.2%, indicating that while the initial bid rate might seem healthy, the subsequent subcontracting often leads to reduced wages for the lowest-tier workers.

The new measures will focus on several key areas. Firstly, the ministry plans to raise the minimum bidding rate, particularly for services like cleaning and facility management, by approximately 2%. This aims to ensure that a fairer portion of the contract value reaches the workers. Secondly, the guidelines will mandate the explicit declaration of labor costs in service contracts and require these costs to be paid through dedicated accounts, preventing any 'squeeze' on wages. Furthermore, the ministry intends to eliminate discriminatory practices in benefits and welfare provisions, such as meal allowances and holiday bonuses, between direct employees and subcontracted workers.

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In this process, construction costs evaporate, safety facilities are neglected, and eventually, workers lose their lives.

Crucially, the ministry is considering introducing a pre-screening system for subcontracting to prevent unnecessary outsourcing. Except for cases where new technologies or specialized expertise are genuinely required, the principle will be to prohibit subcontracting altogether. This move, coupled with the plan to guarantee contract periods of at least two years and ensure employment succession when contractors change, aims to provide much-needed stability and security for subcontracted workers. By integrating the adherence to these guidelines into public institutions' performance evaluations, the ministry intends to ensure the effectiveness and long-term impact of these reforms.

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We will create a pre-screening committee for subcontracting, including experts, and enhance effectiveness by reflecting adherence to the guidelines in the performance evaluation of public institutions.