Subcontracting Banned in Public Sector… Wages for Contract Workers to Be Paid Separately

Subcontracting (secondary contracting) will be banned in principle across the public sector, including central administrative agencies, local governments, offices of education, and public institutions.

When public institutions disburse payments to primary contractors, they must separately allocate and pay workers' wages.

The Ministry of Employment and Labor announced today (Sept. 8) that it has formulated the "Guidelines for the Protection of Contract Workers in the Public Sector" containing these measures, which will take effect starting tomorrow.

First, the guidelines permit primary contracting (first-tier contracting) in the public sector, but subcontracting (second-tier contracting)—whereby a primary contractor has another company perform the assigned tasks through subcontracting, service agreements, or consignment—is banned in principle.

Subcontracting will be allowed only exceptionally when exceptions are prescribed by statutes or ordinances, when utilizing new technologies or expertise, or when tasks such as temporary or intermittent work make direct execution by the primary contractor significantly difficult.

To determine whether a case qualifies for permitted subcontracting, the primary contractor must form an adequacy review committee consisting of at least five total members, with at least 40% being external members, to review and decide on the necessity, appropriateness, and impact on workers of the subcontract.

Even if the primary contractor determines that subcontracting is appropriate, it must go through the approval of the ordering agency that originally commissioned the work.

Management of labor costs due to contract workers will also be strengthened.

First, primary contractors must clearly itemize labor costs in the calculation details of the subcontracting agreement and disclose the details in a manner accessible to workers.

Ordering agencies must require primary contractors to open a separate account exclusively for labor costs and disburse labor costs separately into that account.

It is explicitly specified that labor costs must be used exclusively for workers' wages (base pay, allowances, bonuses) and retirement benefit reserves, and cannot be used for the company's general administrative expenses or retained earnings.

The guidelines also address issues where frequent changes in contracting companies or repeated short-term contracts lead to job instability for workers.

The guidelines require ordering agencies, barring special circumstances, to guarantee contract periods of two years or longer when entering into contracts.

Contract periods must also be set identically to the workers' employment contract periods.

Maintaining and succeeding workers' employment, barring special circumstances, will serve as a bidding condition for contracting companies.

Administrative measures have also been streamlined across all stages of contract labor, including bidding, contracting, implementation, and post-management.

Contracting companies must submit a pledge to fulfill workers' employment conditions at the bidding stage.

Furthermore, the guidelines specify that when calculating prices for contracted tasks, prevailing wage rates must be applied for simple labor services, and even for job categories without prevailing wage rates, efforts must be made to ensure prices do not fall below those of similar job categories.

When selecting contractors, ordering agencies must closely examine the adequacy of the labor condition implementation plan and explicitly state labor protection items such as contract periods, employment maintenance and succession, and information disclosure in the contract.

Even after contract conclusion, ordering agencies must frequently check whether the items specified in the implementation pledge and contract are being fulfilled and keep records for two years.

If a primary contractor violates the implementation pledge or conditions, the contract may be rescinded and subsequent bidding restricted.

The guidelines also include provisions stating that when ordering agencies and contract workers work in the same location, facilities such as cafeterias and restrooms, basic working environments including heating, cooling, and seating, and administrative support necessary for task performance must be established equally.

When performing the same or similar tasks at a single workplace, shift-work systems must be operated identically.

Communication and cooperation channels, such as joint consultative bodies, must be established between ordering agencies and primary contractors to discuss matters regarding working conditions, working environments, and welfare on a quarterly basis.

All public sector institutions must conduct self-inspections at least once a year to ensure these guidelines are properly observed.

Compliance with the guidelines will be reflected in management evaluations of public institutions and local public enterprises.

The Ministry of Employment and Labor stated that it plans to conduct workplace inspections and continuously monitor areas requiring additional improvements in cooperation with relevant ministries.

Minister of Employment and Labor Kim Young-hoon stated, "Regardless of differing working methods and employment forms, the value and rights of labor remain the same," adding, "Starting with the public sector, we will build a workplace where contract workers are treated fairly and can work happily, and expand this to the private sector."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.