Labor Law Protections for Construction Workers
Bongsoo Jung (Korean labor attorney, KangNam Labor Law Firm)
I. Necessity of Protecting Construction Workers
The construction industry is an essential sector that forms the foundation of all industries and generates significant added value. It continues to play a critical part in the industrial development of our country. However, the construction sector has several vulnerabilities over other industries concerning employment relationships and worker protections. Notably, more than 50% of construction workers are daily workers. Although construction workers account for only 8% of the total industrial workforce, over 20% of all industrial accidents take place in that industry. Due to the nature of employment contracts in construction, which are typically valid only until the completion of a specific project, workers often face job insecurity and the risk of delayed payment of wages.
The structure of construction projects involves clients (project owners) and general contractors (primary construction companies). These general contractors subcontract various specialized tasks to multiple specialty construction firms, which, in turn, may engage numerous foremen to carry out the work. To protect construction workers within these multiple layers of subcontracting, the Framework Act on the Construction Industry and the Labor Standards Act were amended in 2007, with the changes taking effect in 2008. The amended Framework Act on the Construction Industry rejects the notion that foremen have “employer” status, recognizing only specialty construction companies and higher-tier contractors as employers. The Labor Standards Act, through special provisions regarding wage payments in the construction industry, holds the immediate upper-tier contractor jointly liable for unpaid wages if a subcontractor fails to pay daily construction workers. Despite these measures, there remain significant shortcomings in the protection of construction workers. This article aims to examine, in detail, the current protective measures for daily workers in the construction industry and the limitations of these protections.
II. Protective Measures and Limitations under the Labor Standards Act
1. General Application of the Labor Standards Act
In principle, the relevant provisions of the Labor Standards Act apply to daily workers in construction. However, in workplaces or businesses that employ four or fewer regular workers, only part of the Labor Standards Act applies, so this guideline is applied within that scope.
2. Labor Contracts
① When an employer intends to hire a construction worker on a daily basis, the employer must specify the wages, working hours, and other working conditions. In particular, the following must be specified in writing and issued to the worker: components of the wage, calculation method, payment method, prescribed working hours, holidays pursuant to Article 55 of the Act, and annual paid leave pursuant to Article 60.
② For daily workers in the construction industry, the employer must prepare and retain for three years important documents related to the labor contract, such as the employee registry and wage ledger. The employee registry shall include workers’ names, dates of birth, work histories and duties performed, dates of employment or employment renewals, contract periods (if specified), and other matters related to employment. However, for daily workers employed for less than 30 days, retaining the employee registry is not mandatory.
③ Even for daily construction workers employed for less than 30 days, the wage ledger must include the name, date of birth, date of employment, and duties performed.
④ When paying wages, the employer must issue a written wage statement to the daily worker that includes the total wage amount, calculation method, and details of any deductions made from the payment.
3. Method of Wage Calculation
Various allowances, etc., shall be paid as determined by the rules of employment or labor contract. In principle, the wage for daily workers is calculated on an hourly or daily basis. When calculating daily ordinary wages based on hourly wages, the hourly wage is multiplied by the prescribed number of working hours per day. Meanwhile, if the prescribed working hours per day include scheduled overtime or night work, and the labor contract shall include the corresponding additional wages, then the daily wage may be calculated using the inclusive back-calculation method.
■ Example: If a worker is contracted to receive KRW 100,000 for one day of work from 7:00 a.m. to 5:00 p.m. (with a break from 12:00 to 1:00 p.m.), the hourly wage is
KRW 100,000 / (8 + 1.5 hours) = KRW 10,526, and the daily ordinary wage is KRW 10,526 × 8 hours = KRW 84,210.
■ (Administrative Interpretation) Whether weekly holiday allowance applies to daily workers (Reference No. Gungi 68207-424, April 2, 1997)
Under the Labor Standards Act, a weekly paid holiday is to be granted to those who have worked all prescribed working days in a week. Therefore, daily workers whose contracts are made on a day-to-day basis and for whom it is not possible to determine prescribed weekly working days, may not be granted a weekly holiday in principle. However, since the purpose of the weekly holiday is to reduce fatigue accumulated over a week, to protect worker health, and to enable the pursuit of social and cultural activities through the use of leisure time, if a daily worker works continuously, the weekly holiday shall be granted and based on actual working days. If the worker has worked five full days, the weekly holiday shall be given. In this case, unless it was pre-agreed that the wage includes the weekly holiday allowance, the allowance must be paid separately from the wage.
■ (Administrative Interpretation) Guidelines for Handling Inclusive Wages for Daily Construction Workers (Labor Policy Division, August 8, 2011)
(1) Pure daily workers who are not guaranteed continued employment and whose employment ends each day: Allowances that arise on a daily basis may be included in inclusive wages, but allowances that arise only after working for a period longer than one day may not be included. Allowances that can be included are: Overtime pay and night work pay. Allowances that cannot be included: paid weekly holiday allowance; holiday work allowance; Annual paid leave allowance; and Allowance for unused annual leave.
(2) Daily workers paid by the day, but expected to work for a certain period: If the conditions for payment of certain allowances are met during the scheduled working period, those allowances may be included in inclusive wages. However, annual paid leave allowance and unused annual leave allowance cannot be included, as doing so may violate the worker’s right to use leave.
■ In practice, for daily wage-based working hours, the inclusive wage system is commonly used, which includes the ordinary wage for prescribed work, overtime pay, and weekly holiday allowance.
4. Suspension Allowance
For daily workers in construction, if the labor contract is concluded on the relevant day and work has commenced, but then is suspended due to reasons attributable to the employer (e.g., suspended material supply, suspended electricity or water due to non-payment of utility bills), the employer shall pay the wage for the working hours before the suspension based on the hourly wage. For the suspended period, 70% of the amount the worker would have received if work had been performed shall be paid to the worker. However, in cases where work becomes impossible due to severe weather conditions, only the wage for the hours actually worked must be paid. In such cases, the suspension does not fall under reasons attributable to the employer, and therefore, the employer is not obligated to pay a suspension allowance.
■ (Administrative Interpretation): Payment of Severance Pay for Daily Construction Workers [Wage 68207-526, August 25, 1994]
A "daily worker" refers to a person who is hired on a one-day contract, and the labor contract is automatically terminated at the end of the agreed work on that day, with no continual employment relationship. Therefore, unless a new contract is concluded for the following day, the employer has no obligation to continue the employment. Accordingly, if a worker hired under a de facto daily labor contract suffers a work-related injury on the day of hire and becomes unable to provide labor, it is considered that the employment relationship has ended at that point. Thus, even if the worker undergoes medical treatment for more than one year, the employer has no obligation to pay severance pay.
5. Method of Wage Payment
The wage payment principles of the Labor Standards Act—paid in currency, paid directly, paid in full, and paid regularly—must be followed. For daily construction workers who are employed through a daily contract, wages must be paid immediately after the end of the working hours each day.
6. Protection of Wage Claims for Subcontracted Construction Workers
With abolition of the "site participant (foreman) system—known to have worsened problems such as reducing wages through multi-level subcontracting (effective from January 1, 2008, due to revision of the Framework Act on the Construction Industry)—this aims to prevent illegal subcontracting and protect the wages of construction workers. Violation of this provision is punishable by imprisonment of up to 3 years or a fine of up to KRW 20 million, and would constitutes a crime that requires a victim complaint to prosecute (i.e., an offense not prosecuted against the victim’s will). If the upper-tier contractor has a payment obligation toward the subcontractor, under certain conditions the law imposes an obligation to pay the amount corresponding to wages directly to the subcontractor’s workers (Article 44-3 of the Act).
(1) If wages are not paid to a daily construction worker by the subcontractor due to reasons attributable to the immediate upper-tier contractor, the subcontractor and the immediate upper-tier contractor are jointly and severally liable for the payment of wages (Article 44 of the Labor Standards Act).
(2) When a construction project involves two or more levels of subcontracting, and the subcontractor (who is not the construction project owner) fails to pay wages to the workers it employs, the immediate upper-tier contractor shall be jointly and severally liable with the subcontractor for paying the wages to the subcontractor's employees (Article 44-2 of the Labor Standards Act).
(3) In the case of a construction contract, if any of the following conditions are met, the immediate upper-tier contractor shall, within the limits of the payment obligation it owes to the subcontractor, directly pay the amount corresponding to the wages to the workers employed by the subcontractor if those workers request it (Article 44-3 of the Labor Standards Act). The applicable conditions are as follows: ① The subcontractor and the upper-tier contractor have agreed that the upper-tier contractor may pay the wages directly to the workers on behalf of the subcontractor, and have determined the methods and procedures for such payment; ② It has been confirmed that the subcontractor has wage payment obligations to the workers it employs; ③ The subcontracted workers hold enforceable documents proving their wage claims against the subcontractor, such as a notarized document, finalized payment order, recommendation for execution, or other equivalent enforceable legal documents.
■ The immediate upper-tier contractor is jointly and severally liable with the subcontractor for the payment of wages to the workers employed by the subcontractor.
(Supreme Court Decisions: 2020Da296321, rendered July 8, 2021; 2024Do4055, rendered June 27, 2024)
Article 44-2 of the Labor Standards Act stipulates that when subcontracting occurs at least twice in the construction industry, and a subcontractor (who is not a construction business operator under the Framework Act on the Construction Industry) fails to pay wages to the workers it employs, the immediate upper-tier contractor of that subcontractor shall be jointly and severally liable with the subcontractor for the payment of those wages. Article 109 of the same Act further provides for penalties against immediate upper-tier contractors who violate this provision.
Accordingly, an immediate upper-tier contractor subject to Article 44-2 of the Labor Standards Act bears such joint and several liability even without direct fault on its part, merely due to the subcontractor’s failure to pay wages. If the subcontractor fulfills its wage payment obligations, the liability of the upper-tier contractor is also extinguished. Where subcontracting has occurred more than twice in the construction industry and a subcontractor who is not a construction business operator fails to pay wages to its workers, the immediate upper-tier contractor is liable regardless of whether it is at fault or whether it has already paid the subcontractor.
7. Working Hours
Excluding break times, weekly working hours shall not exceed 40, and daily working hours shall not exceed 8 (Article 50 of the Labor Standards Act). Actual working hours are calculated by excluding break times. By agreement between the parties, extended work of up to 12 hours per week is allowed (Article 53 of the Act). For extended, night, and holiday work, an additional 50% of the ordinary wage must be paid (Article 56 of the Act).
8. Breaks, Holidays, and Leave
When the working period is 4 hours, a break of at least 30 minutes must be given during working hours. When the working period is 8 hours, a break of at least 1 hour must be given during working hours. In cases where labor contracts are made on a daily basis, if the worker works continuously for 5 days through repeated daily contracts, the employer must provide 1 paid holiday and 1 unpaid holiday. Even if the worker meets the requirement for receiving a paid weekly holiday by working 5 consecutive days, if the employment relationship ends the day before the scheduled weekly holiday, the paid holiday does not have to be granted. For workers who have attended work for at least 80% of the days over one year, 15 days of paid leave (annual leave) must be granted. Even for workers who have worked for less than one year, if they have worked all prescribed working days for one month, they must be granted 1 day of paid leave (annual leave).
■ Issue of Granting Paid Holidays to Daily Construction Workers (Labor Policy Division-6257, November 12, 2014)
The Act on the Establishment of Labor Day designates May 1st as Labor Day and states that it is to be treated as a paid holiday under the Labor Standards Act.
A paid holiday refers to a day on which wages are paid as if the worker had worked, even though the worker is not obliged to work. Labor Day can be considered a paid holiday only if it falls within the labor contract period, assuming a normal employment relationship. In the case of daily workers whose contracts are concluded on a day-to-day basis, the need to grant a paid holiday normally does not arise. However, if it can be recognized that the labor contract has been repeatedly renewed, and the worker has been continuously employed before and after Labor Day, then Labor Day must be granted as a paid holiday.
9. Dismissal and Severance Pay
Daily construction workers, in principle, enter into labor contracts on a daily basis, so once the work for that day is completed, the contract is terminated, and no dismissal actually occurs. Even if the labor contract is repeatedly renewed, if the worker has not worked continuously for three months, the requirement to issue a notice of dismissal does not apply.
■ (Administrative Interpretation: End of Employment Relationship for Daily Workers at Construction Sites – Labor Standards 68207-113, Sep. 22, 1999)
A “daily worker” is one who is hired under a one-day contract and whose labor contract ends with the completion of work for that day, meaning there is no obligation for the employment relationship to continue. Therefore, for daily workers, there is no guaranteed labor contract for the next day. However, even if a worker is nominally a daily worker, if the employment continues for a considerable period without a fixed term at a construction site, and it is generally expected that the worker will continue to be employed until the project is completed unless there are special circumstances otherwise, the employment relationship can be considered to be expected to continue until project completion. Thus, the facts must be examined, and a judgment made according to the following criteria:
If a daily worker suffers an occupational accident and is unable to provide labor, the employment relationship ends at that point. However, if the worker has continued to work without a specific agreement (i.e., the work relationship has been sustained), then the worker is not considered a daily worker in substance, and the labor relationship continues until the project is completed.
10. Criteria for Calculating Working Days
When a daily worker has worked the prescribed working hours in a day under Article 2 of the Labor Standards Act, the worker is considered to have worked one working day. If the daily working hours fall short of the prescribed working hours, the total hours worked are accumulated, and once they reach the prescribed working hours for one day, are counted as one working day. The number of working days is calculated based on the actual days worked during the period of employment. If there are agreed paid holidays between the parties, they are counted according to the agreement.
■ (Administrative Interpretation: Whether Daily Workers Are Considered to Have Continuously Worked – Labor Standards 68207-1631, Dec. 11, 1996)
Whether a daily worker is considered to have worked continuously should be determined based on the form of the contract, the actual employment conditions, and whether the subordinate relationship continues. If the daily worker has had many days off consecutively or sporadically over one month or one year, it is difficult to deem the worker to have worked continuously, unless there are special circumstances otherwise.
11. Regulations for Protecting Construction Workers
(1) Obligation to Install Sanitary and Welfare Facilities: The employer must install or provide access to toilets, dining areas, and change rooms at construction sites where the total contract amount is KRW 100 million or more. Violation results in a fine of up to KRW 5 million (Article 7-2 of the Act on the Employment Improvement, Etc. of Construction Workers).
(2) Separate Payment and Confirmation of Wages and Deductions: For construction projects with a contract amount of KRW 50 million or more, the employer must separately pay the portion of the cost corresponding to workers' wages, apart from other construction costs. Wage-related costs must be paid monthly, and violations are punishable by a fine of up to KRW 3 million (Article 7-3 of the same Act).
(3) Skilled Construction Worker Grading System: The Minister of Land, Infrastructure and Transport shall classify construction workers engaged in construction projects worth KRW 50 million or more by skill level based on their experience, qualifications, and training, and must issue a certificate upon request.
III. Protective Measures and Limitations of the Retirement Mutual Aid Scheme (Act on the Employment Improvement, Etc. of Construction Workers)
1. Overview of the Retirement Mutual Aid Scheme
The Retirement Mutual Aid Scheme refers to a system in which a construction employer, after enrolling in the retirement mutual aid program, pays a “mutual aid contribution” corresponding to the number of working days of participating daily construction workers each month to the Construction Workers Mutual Aid Association (hereafter referred to as the “Association”). The Association accumulates these contributions and later, when the daily construction worker retires from the construction industry, pays a “retirement mutual aid benefit” by adding a prescribed amount of interest to the principal amount contributed.
This system considers the nature of frequent movement between workplaces and helps provide retirement security for construction workers, thereby improving working conditions and welfare and encouraging new workers to continue to enter the industry. As the construction workforce ages, this system serves as a measure to retain existing workers and attract new ones.
2. Companies and Workers Subject to Enrollment in the Retirement Mutual Aid Scheme
A construction employer engaged in a construction project subject to mandatory enrollment must enroll in the retirement mutual aid scheme within 14 days from the project commencement date. Projects subject to mandatory enrollment include:
(i) Public works ordered by the state or local government with an estimated project cost of KRW 100 million or more; (ii) Similar public institution projects with an estimated cost of KRW 100 million or more; and (iii) Private projects with an estimated project cost of KRW 5 billion or more (as of February 2025).
Workers subject to enrollment are daily or temporary workers with less than one year of contract period employed at a business or site enrolled in the retirement mutual aid scheme. However, the following are excluded from this requirement to register in the program:
(i) Workers with fewer than 4 hours per day of prescribed working hours or fewer than 15 hours per week; (ii) Regular workers employed without a fixed term; and (iii) Workers employed for more than one year under a fixed-term contract.
3. Full Implementation of the Electronic Card System to Protect Workers' Rights
Starting January 1, 2024, all construction projects subject to enrollment in the retirement mutual aid scheme (i.e., public projects of at least KRW 100 million and private projects of at least KRW 5 billion) must adopt the Electronic Card System.
The “Construction Worker Electronic Card System” involves installing electronic card terminals at construction sites to electronically record workers’ check-in and check-out times. These records are used to report retirement credit contributions.
Business operators of applicable construction projects must install and operate card terminals that support electronic card tagging. Construction workers must obtain their electronic cards from a financial institution and use them to check in and out (Ministry of Employment and Labor Press Release, January 2, 2024).
4. Obligation to Notify Workers of Enrollment and Pay Contributions
An employer enrolled in the Retirement Mutual Aid Scheme must post the information in writing in a location easily visible to all workers.
By the 15th of each month, the employer must submit to the Association: (i) A report specifying the number of working days and the amount of contributions paid for each worker; and (ii) Supporting documents proving the contributions were paid. If a construction employer hires a temporary construction worker (a worker on a contract of no more than 1 year), they must pay a daily retirement contribution of KRW 6,500 per day to the Association.
5. Payment of Retirement Mutual Aid Benefits and Relationship to Severance Pay
The Association pays retirement mutual aid benefits when a worker with 12 or more months of contributions (i.e., at least 252 working days) retires from the construction industry. The benefit is paid by adding interest to the total amount of contributions. If a daily construction worker has worked continuously for at least one year at a specific construction site, they are entitled to severance pay regardless of the amount contributed to the Retirement Mutual Aid Scheme (Wage and Welfare Division-3538, December 24, 2009).
IV. Industrial Accident Compensation Insurance and Employment Insurance
1. Application of the Industrial Accident Compensation Insurance Act
Industrial accident compensation insurance applies to all businesses or workplaces that employ workers. In particular, the scope of application has been expanded from “workers” to “persons providing labor” through amendment of the Industrial Accident Compensation Insurance Act. In the construction industry, industrial accident insurance is collectively subscribed to by the primary contractor, and the cost is included in the total construction contract amount, with the primary contractor responsible for payment. Industrial accident compensation insurance applies to all businesses except household employment activities and businesses in agriculture, forestry, fisheries, and hunting that employ fewer than five regular workers. In the event of a work-related injury or illness that requires at least four days of treatment at a medical institution, the worker must submit a medical treatment application to the local branch of the Korea Workers' Compensation & Welfare Service, with confirmation from the medical institution and the employer. Other benefits under this insurance include: medical care benefits, temporary disability benefits, permanent disability benefits, survivor benefits, funeral expenses, nursing care benefits, etc.
2. Application of the Employment Insurance Act
Employment insurance applies to all businesses or workplaces that employ workers.
However, as with industrial accident compensation insurance, it excludes household employment and businesses in agriculture, forestry, fisheries, and hunting that employ fewer than five regular workers. For construction projects, employment insurance applies to daily construction workers employed at sites where the total project cost is KRW 20 million or more (Article 8 of the Act). To be eligible for unemployment benefits, an insured individual must: (i) Have worked at least 180 days within the 18 months prior to the date of unemployment; (ii) Be involuntarily unemployed.
In principle, those employed or who started self-employment after the age of 65 are not eligible for unemployment benefits. However, under the current Employment Insurance Act, if a person was continuously employed by the same employer before turning 65, unemployment benefits are granted.
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