Key energy costs, including electricity, heat, and fuel, will now be included in the written documentation for subcontract payment adjustments. The reasons for exceptions to payment guarantees in construction subcontracting will be narrowed, eliminating provisions such as direct payment agreements with clients to minimize gaps in the payment guarantee system.
The Fair Trade Commission announced that a revised enforcement decree for the Subcontracting Act passed the Cabinet meeting on the 28th.
With the expansion of the payment adjustment criteria from 'major raw materials' to 'major energy,' related information must now be documented in writing. This includes the identification of major energy costs, benchmark indicators for these costs, and the reference points for calculating fluctuations in energy costs.
The gaps in the payment guarantee system for construction subcontracting will also be reduced. Previously, exceptions were made for small projects under 10 million won, direct payment agreements with clients, or the use of electronic payment systems. Going forward, payment guarantees will be mandatory for all construction subcontracting transactions, excluding only small projects.
To encourage reporting of unfair subcontracting practices, the scope of eligible whistleblowers will be expanded. Those previously excluded from receiving rewards for reporting violations can now receive compensation if they provide evidence of legal violations by the main contractor related to other subcontractors.
Incentives for using standard subcontract agreements will also increase. In addition to the existing reduction of two penalty points for using standard agreements in over 90% of cases, a new provision will allow for a reduction of 2.5 points for 100% compliance.
The upper limit for penalties on repeated violations will be raised. The maximum penalty increase limit will be adjusted from 50% to 100%, taking into account the number of past violations.
The revised enforcement decree will take effect on the 11th of next month after being promulgated following presidential approval. However, the increased penalty limit for repeated violations will be applied immediately upon promulgation.
A Fair Trade Commission official stated, "The amendment to the enforcement decree for the Subcontracting Act will lay the groundwork for subcontractors to receive payments more reliably from main contractors. We expect a more equitable subcontracting order to be established through the expanded use of standard agreements and strengthened deterrents against repeated legal violations."
The Fair Trade Commission announced that a revised enforcement decree for the Subcontracting Act passed the Cabinet meeting on the 28th.
With the expansion of the payment adjustment criteria from 'major raw materials' to 'major energy,' related information must now be documented in writing. This includes the identification of major energy costs, benchmark indicators for these costs, and the reference points for calculating fluctuations in energy costs.
The gaps in the payment guarantee system for construction subcontracting will also be reduced. Previously, exceptions were made for small projects under 10 million won, direct payment agreements with clients, or the use of electronic payment systems. Going forward, payment guarantees will be mandatory for all construction subcontracting transactions, excluding only small projects.
To encourage reporting of unfair subcontracting practices, the scope of eligible whistleblowers will be expanded. Those previously excluded from receiving rewards for reporting violations can now receive compensation if they provide evidence of legal violations by the main contractor related to other subcontractors.
Incentives for using standard subcontract agreements will also increase. In addition to the existing reduction of two penalty points for using standard agreements in over 90% of cases, a new provision will allow for a reduction of 2.5 points for 100% compliance.
The upper limit for penalties on repeated violations will be raised. The maximum penalty increase limit will be adjusted from 50% to 100%, taking into account the number of past violations.
The revised enforcement decree will take effect on the 11th of next month after being promulgated following presidential approval. However, the increased penalty limit for repeated violations will be applied immediately upon promulgation.
A Fair Trade Commission official stated, "The amendment to the enforcement decree for the Subcontracting Act will lay the groundwork for subcontractors to receive payments more reliably from main contractors. We expect a more equitable subcontracting order to be established through the expanded use of standard agreements and strengthened deterrents against repeated legal violations."
* This article has been translated by AI.
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