When an employer in Korea fails to pay wages or severance, the state can pay part of it first in the employer’s place. This is the substitute payment (daejigeupgeum, formerly called chedanggeum). Article 7 of the Wage Claim Guarantee Act has two routes. The insolvency route applies when the employer enters rehabilitation or bankruptcy, or the Ministry of Employment and Labor recognises it cannot pay. The simple route applies when unpaid wages are confirmed by a judgment or similar order, or by the Ministry’s certificate of unpaid wages and employer. A Ministry notice sets the caps: on the simple route, 7 million won for wages and 7 million won for severance, 10 million won in total. On the insolvency route the cap runs from 2.2 million to 3.5 million won a month, depending on age when leaving. Our calculator gives a rough figure.
1. Simple route: wages 7 million won + severance 7 million won, 10 million won in total. Wages only if still employed.
2. Insolvency route: the last 6 months of wages and the last 3 years of severance, capped at 2.2 to 3.5 million won a month (or year) by age.
3. Deadlines: 6 months from the first certificate, 1 year from a judgment, 2 years from the insolvency decision.
Calculator
Updates as you type. Covers wages and severance only; shutdown allowance and maternity pay have their own caps (table below). We treat each unpaid month as the same amount, and count severance for the last 3 years pro rata to years of service (our method). The Ministry decides the real amount.
The two routes — Act Arts. 7, 7-2; Decree Art. 6
| Type | What the source says | Worth noting (ours) |
|---|---|---|
| Insolvency route | Rehabilitation, bankruptcy, or the Minister recognising inability to pay (Art. 7(1) 1–3). Covers the last 6 months of wages, severance for the last 3 years, and shutdown allowance and maternity-leave pay (last 6 months) | The Decree calls it the insolvency substitute payment |
| Simple route — left the job | A final judgment, payment order, settlement, conciliation or similar (item 4), or the Ministry’s certificate of unpaid wages and employer (item 5). Covers wages under Labor Standards Act Art. 38(2)1 (the last 3 months), severance for the last 3 years, and shutdown and maternity pay (last 3 months) | Art. 38(2)1 reads “wages for the last three months” |
| Simple route — still employed | Workers whose contract has not ended. Wages, shutdown and maternity pay for 3 months back from the last unpaid day before the claim or petition (Art. 7-2(2)) | Severance not included |
Article 7(3) bars paying twice for the same period; if one route has already paid, that amount is deducted from the other. Whatever the state pays, it takes over the worker’s claim against the employer up to that amount (Art. 8).
Caps — Ministry Notice No. 2021-81
| Item | Simple route | Insolvency route (by age on leaving, 10,000 won) |
|---|---|---|
| Wages | Wages, shutdown and maternity pay together: 7 million won | Under 30: 220 · 30s: 310 · 40s: 350 · 50s: 330 · 60+: 230 (per month) |
| Severance | 7 million won (leavers only) | Same as wages (per year) |
| Shutdown allowance | Inside the wages line | 154 · 217 · 245 · 231 · 161 (per month) |
| Maternity-leave pay | Inside the wages line | 310 at any age (per month) |
| Overall cap | 10 million won | No overall cap (item cap × period) |
The notice adds: wages, maternity pay and shutdown allowance are capped per month, severance per year; on the simple route, severance applies only to workers who have left (Art. 7(1) items 4 and 5).
Three sums — our example
| Case (our example) | Sum | Payment (our sum) |
|---|---|---|
| Simple, left: 3 million won unpaid for 3 months, severance 6 million won (2 years) | Wages 9 million → 7 million; severance 6 million; 13 million in all | 10 million won (overall cap) |
| Insolvency, aged 45: 4 million won for 4 months, severance 20 million won (5 years) | 3.5 million × 4 = 14 million; last-3-years share 12 million → 3.5 million × 3 = 10.5 million | 24.5 million won |
| Simple, still employed: 2.5 million won for 2 months | 5 million won (under 7 million) | 5 million won |
The “12 million won” in the second case is our rough share: 20 million won of severance spread over 5 years, 3 years of it. The real figure is recomputed from the average wage and service, so treat the calculator as an estimate. In the 40s band the insolvency maximum is 3.5 million × 6 = 21 million won for wages and 3.5 million × 3 = 10.5 million won for severance (our sum).
Who and by when — Decree Arts. 7, 9
| If | What to do | Worth noting (ours) |
|---|---|---|
| Employer | On both routes the employer must have run the business under the Act for 6 months or more (Decree Arts. 7, 8) | Exception via the main contractor for construction subcontractors (Art. 7(5)) |
| Insolvency — when you left | Within 3 years from the day 1 year before the rehabilitation, bankruptcy or recognition application | — |
| Simple — when you sue or petition | Lawsuit within 2 years, petition within 1 year, from the day after the last unpaid day | For those still employed, counted from the claim date |
| Claim deadline | Insolvency: 2 years from the decision · judgment: 1 year · certificate: 6 months from first issue · still employed: 1 year or 6 months | Read as no claim after the deadline |
Article 7(5) lets qualifying leavers get help from a certified labor attorney to prepare the claim, with costs that the state may cover. Late-payment interest is in unpaid wage interest calculator.
Checklist
- ☐ File a petition and get the certificate of unpaid wages
- ☐ Claim within 6 months of the first certificate
- ☐ The employer ran the business 6 months or more
- ☐ Simple route: 10 million won in total, or 7 million won in wages if still employed
- ☐ Arrears above the cap stay claimable from the employer
Questions that remain
Is the amount above the cap lost?
The Act only says the state takes over the claim up to what it paid (Art. 8). The rest reads as still owed by the employer (our note).
The notice dates from 2021 — is it still in force?
No. 2021-81 (effective 14 October 2021) is listed as current in the national law database. A change would come as a new notice, so check before claiming.
Sources
- Korean law database (law.go.kr) — Wage Claim Guarantee Act Arts. 7, 7-2, 8 — source (current text, effective 20 August 2026, Act No. 21376; checked 27 October 2026). Grounds (items 1–5), scope (last 6 or 3 months, last 3 years of severance), no double payment, labor attorney help, payments to current employees, subrogation.
- Korean law database — Wage Claim Guarantee Act Enforcement Decree Arts. 6–9 — source (effective 12 May 2026, Decree No. 36307; checked 27 October 2026). The two routes, setting the caps, eligible workers and employers, claim deadlines.
- Korean law database — Notice on caps for substitute payments — source (effective 14 October 2021, Ministry Notice No. 2021-81; checked 27 October 2026). Age-banded insolvency caps; 7, 7 and 10 million won on the simple route.
- Korean law database — Labor Standards Act Art. 38 — source (effective 8 October 2026, Act No. 21533; checked 27 October 2026). Para. 2 item 1, “wages for the last three months”.
- Not read. The rule on not paying small amounts; Ministry ordinances on forms; how Notice No. 2021-84 (current employees’ wage level) maps onto the current Decree.
- What we added. The “worth noting” column and the Korean everyday gloss.
Where to check further
- Regional employment and labor office — petitions and the certificate of unpaid wages.
- Korea Workers’ Compensation & Welfare Service — claims and payment.
Written on 27 October 2026. The content is from the source; the glosses are ours.
