Unpaid Wages Become a Five-Year Offence in Korea on 8 October

On 8 October 2026 the maximum sentence for not paying wages in Korea doubles, from three years’ imprisonment or a KRW 30 million fine to five years or KRW 50 million. Nothing about what an employer owes changes on that date. Only what happens if it is late.

The interesting part is how the drafters did it, because the mechanism decides which of your pay items are caught.

The amendment moves the offence rather than raising the number

Most English-language summaries describe this as a straightforward increase in the statutory penalty. Read the amending act — Act No. 21533, promulgated 7 April 2026 — and it is a transplant.

Article 109 of the Labor Standards Act sets a maximum of three years or KRW 30 million. Article 107 sets five years or KRW 50 million, and has since 2018, when the fines across the penalty articles were re-based at KRW 10 million per year of imprisonment. Until now Article 107 covered forced labour, assault, brokerage of employment and the obstruction of a former employee’s re-employment. Wage arrears sat one tier down.

The amendment strikes eight provisions from Article 109 and inserts them into Article 107. They are Articles 36, 43, 44, 44-2, 46, 51-3, 52(2)2 and 56.

Article 46 travels too — the allowance owed when the employer suspends work — as do Articles 51-3 and 52(2)2, which settle pay under flexible and selective working-hour schemes. Companies that ran a compressed schedule through a quiet quarter and reconciled the hours afterwards should read those two carefully against how overtime is actually counted under the 52-hour week.

The victim’s-will rule moves with them, into a new Article 107(2), carrying the same carve-out that was added to Article 109 last October. Article 109(2) is deleted.

Retirement benefits reached the ceiling in July

The Employee Retirement Benefit Security Act got there three months earlier and with much less commentary. Act No. 21475, promulgated 17 March 2026 and in force since 1 July 2026, raised the penalty for non-payment of retirement benefits from three years or KRW 30 million to five years or KRW 50 million — the same destination, by a different route.

This matters for sequencing. Several widely circulated English summaries date the retirement-benefit increase to September 2026. The Korean statute register dates it to 1 July, and it is the register that a labour inspector works from. If your entity has an unresolved severance calculation open now, it is already in the heavier bracket.

The two clocks that create almost every case

Wage-arrears prosecutions overwhelmingly arise from two provisions, and neither requires bad faith.

Article 36 — the fourteen-day clock. When an employee dies or leaves, all wages, compensation and other money owed must be paid within 14 days of the entitlement arising. The parties may agree to extend it. Absent an agreement, the breach is complete on day fifteen.

Article 43 — the monthly clock. Wages must be paid in currency, directly to the employee, in full, at least once a month on a fixed date. Paying most of it, paying it late, paying it to someone else, or paying part of it in kind are each a breach of the same article.

Almost every case we see at a foreign-owned subsidiary starts in the first of these. A leaver’s final settlement — accrued leave, the last part-month, any bonus that has vested — is batched into the next scheduled payroll run because that is where the payroll runs. If the leaving date is the 20th and payroll is on the 25th of the following month, the company is outside the window before anyone has done anything wrong in substance.

Paying up no longer reliably closes the file

The reason wage arrears has historically been treated as a commercial problem rather than a criminal one is the victim’s-will rule: no prosecution may be brought against the employee’s express wishes. Pay, settle, and the file closes.

That exit narrowed on 23 October 2025. Where an employer’s name has been published on the Ministry’s defaulter register and the employer defaults again during the three-year disclosure period, the rule no longer applies and the prosecution proceeds regardless of what the employee wants. The same exclusion was written into the retirement-benefits act on 11 November 2025.

The register is not a distant prospect for a small entity. The Ministry designates a habitual defaulter where, in the preceding year, an employer owed a single worker three months’ wages or more, or defaulted five or more times with a total of KRW 30 million or more. Both the disclosure provision and the designation provision state expressly that where the employer is a company, the representative director is included.

The costs that sit outside the criminal case

The fine is rarely the largest number. Since 23 October 2025:

• Delay interest at 20% a year applies to wages owed to serving employees, not only to leavers. It used to attach only after departure.
• Punitive damages of up to three times the arrears may be awarded by a court where the non-payment was clearly deliberate, ran for three months or more in a year, or exceeds three months’ ordinary wage. Retirement benefits are excluded from this particular remedy.
• Credit reporting — a designated habitual defaulter’s arrears data goes to the credit information agencies, which affects lending and pricing.
• Public-sector exclusion — barred from subsidy and support schemes, and penalised in procurement pre-qualification and award scoring.
• Exit ban — a named defaulter with two convictions in three years can be refused departure from Korea until the arrears are cleared.

What else is dated between now and June 2027

The wage penalty is one item in a run of amendments with staggered effective dates. These are the ones that reach a payroll or a set of rules of employment.

The June 2027 change is the one to plan for rather than react to. Splitting annual leave into half-days interacts directly with how unused leave is valued, and a leave ledger built on whole days will need rebuilding — see how the unused annual leave allowance is calculated.

Is any of this a reason to change how you run payroll?

Honestly, for most well-run entities, no. A company that pays on the 25th every month, settles leavers inside a fortnight and calculates premium correctly is no more exposed on 9 October than it was on 7 October. The duty did not move. The ceiling did.

Where it does change the calculus is at the margins that used to be tolerated: the leaver settled “next cycle”, the disputed overtime parked pending a decision, the bonus deferred to a quarter with better cash. Each of those was a manageable commercial risk when the worst case was a KRW 30 million fine that a settlement would extinguish. With a five-year maximum, an interest clock running at 20%, treble damages available and the representative director named on a public register, the arithmetic is different.

If your Korean entity settles leavers on the monthly cycle rather than on a 14-day clock, that is the one thing worth fixing this quarter, and fixing it is a calendar change rather than a systems project. If you would rather the clock were somebody else’s responsibility, that is what our payroll outsourcing service is for. If you have four employees, a fixed payday and no overtime, you do not need us for this — you need a diary reminder.

Figures current as at 28 August 2026, read from the Korean statute register at the Ministry of Government Legislation and from the Ministry of Employment and Labor. Effective dates for amendments not yet in force are taken from the supplementary provisions of each amending act and can be affected by later legislation. This is general information about how the Labor Standards Act operates, not advice on any particular employer’s position.