Dispatch vs. Subcontracting · Illegal Dispatch
Dispatch vs. Subcontract
What Are Worker Dispatch and Subcontracting?
- The test is who gives the directions and orders
- Judged by how the arrangement actually works, not by what the contract calls it
- With subcontracting, route all instructions through the contractor's manager
The line between dispatch and subcontracting is drawn not in the contract but on the shop floor on Monday morning. The moment a principal's production manager tells a subcontractor's employee, 'Go to Line 2 today,' the arrangement starts to tilt toward worker dispatch in substance, whether the document is a subcontracting agreement or a service agreement. The evidence is not the contract but the daily records. Instructions in group chats, signature lines on work orders, approval history in attendance apps, and subcontractor employee accounts in the principal's ERP can all be submitted as evidence. A single instruction channel set up for convenience can come back years later as a duty of direct employment.
The law restricts dispatch on two levels. Worker dispatch is permitted only for the 32 types of work listed in the Enforcement Decree of the Dispatch Act, and direct production processes in manufacturing are prohibited in principle. An exception opens only for reasons such as maternity, illness, or a temporary vacancy, and then only for up to 3 months (one 3-month extension allowed). As a rule, a dispatch period that runs beyond 2 years triggers a duty of direct employment. To decide whether an arrangement is subcontracting or dispatch, courts look at five factors together: whether substantial direction and command over the work was exercised, whether the workers were integrated into the principal's business organization, whether the purpose of the contract was specifically defined, whether the contractor has its own independent equipment and expertise, and whether it makes its own HR and labor decisions. Because courts judge the whole picture rather than any single factor, avoiding just one is not enough, so tweaking a few documents will not protect you.
The most common misunderstanding is the idea that 'since we have to give safety instructions, work instructions are fine too.' Under the Occupational Safety and Health Act, a principal's safety and health measures are duties the law imposes, but instructions that set work sequence, placement, and pace are entirely different in nature. The second is the practice of principals interviewing partner-company employees. If the principal takes part in hiring, approves overtime, and notifies the partner of evaluation results, a clause stating that 'the contractor manages labor independently' will not hold up. When a problem actually surfaces, the principal must retroactively pay the wage gap with regular employees in a worker-status confirmation suit, and receiving dispatched workers from an unlicensed provider can bring up to 3 years in prison or a fine of up to KRW 30 million (≈ US$22,400). Always have a labor specialist assess any structure you design or revise.
Inwoo LeeLeadership, communication, and performance management expert
Kyungtae KimHR expert · organizational culture and HR strategy consultantThe Act on the Protection, etc. of Temporary Agency Workers restricts the permitted work and duration of worker dispatch, and provides for obligations such as direct hiring by the user enterprise when violated. The line between dispatch and subcontracting follows case-law doctrine, which judges by substance, such as the command-and-supervision relationship.
Company A, an auto parts maker, had 320 employees, plus 140 workers from 3 in-house subcontractors working alongside them on assembly and inspection lines. The principal's production management team had set up a group chat with the subcontractors' staff and had been assigning line positions every day for 8 years. When two subcontractor employees filed a lawsuit seeking confirmation of employee status, a 6-week labor audit began. (Hypothetical example)
- When a labor law firm's due-diligence team pulled 4,200 group-chat messages from the past year, they found 310 direct instructions from the principal's production-management head, such as 'Move 3 people from Team A to the inspection line tomorrow.'
- The HR director sat down with the heads of three partner companies and stated flatly, 'From now on, we will not give line-assignment instructions.' Seven on-site managers were stationed at the partner companies, and the instruction channel was handed over to them.
- It took three weeks to delete all 140 partner-company employee accounts left in the principal's attendance app and move overtime approval and leave sign-off to the partners' own systems.
- They stripped the 'manpower support' wording from the subcontract and rewrote it around deliverable-based criteria such as inspection pass rate and delivery deadlines. They also built the partners' investment in their own measuring equipment into the unit price.
- Of the 23 items flagged in the 6-week diagnosis, 19 were resolved within 6 months, and the 12 workers on two assembly processes where the line stayed blurry were converted to direct hires to narrow the scope of litigation.