South Korea will push to make it mandatory for businesses with 100 or more employees to deposit funds for severance payments with external financial institutions starting in 2028 to prevent nonpayment, the finance ministry said Wednesday.
The Ministry of Finance and Economy discussed the plan during a meeting of economy- and science-related ministers, aiming to have affected businesses begin preparations in 2027 for full implementation the following year.
"Requiring businesses to deposit funds for severance payments with external institutions is the most effective and straightforward way to address structural problems related to nonpayment," the finance ministry said.
According to the ministry, unpaid severance benefits accounted for 41.1 percent, or 829.9 billion won ($621 million), of total reported unpaid wages.
"Through professional asset management, we aim to improve investment returns. We will also make efforts to protect workers' rights by clearly defining the responsibilities of fund operators," it added.
The policy will apply to companies with 10 to 99 workers in 2029, followed by those with nine or fewer workers from 2030.
Finance Minister Lee Hyoung-il said the labor ministry and financial authorities will join forces to ensure the stable management of the funds.
"The government will closely coordinate with the National Assembly to promptly carry out legislative procedures and follow-up measures," Lee said.
During the meeting, the finance minister also stressed the need for continued efforts to address disparities across various areas, building on the country's solid economic growth.
"The ultimate goal of economic growth is to improve people's quality of life," Lee said. "To bring tangible changes to people's lives and achieve growth for all, we must simultaneously pursue measures to address disparities." (Yonhap)
