Knowledge · HR & Labor

Wage Arrears · Complaints and Remedies

Unpaid Wages

📂HR & Labor⏱2 min read📊Practical🔗8 related

What are wage arrears?

In one line
Wages, severance pay, or other amounts left unpaid past the due date. Employees can seek relief through a labor office complaint, a criminal complaint, or a civil claim.
⚡ Summary in 3 lines
  • Payment principles and the duty to settle all dues upon departure apply
  • Remedies come through complaints, civil suits, and the government advance-payment scheme
  • Most causes are calculation errors, not intent

Wage arrears do not depend on whether the company has the money. The test is one thing only: was the full amount owed paid on the due date? If a company pays 90% and omits 10%, that 10% is arrears, and neither a miscalculation nor long-standing practice removes the duty to pay. So what changes in practice is not cash planning but the habit of documenting the basis of calculation every month.

There are three main routes to a remedy. A complaint to the labor office is an administrative procedure to secure payment, a criminal complaint seeks punishment, and a civil suit leads through a court judgment to compulsory enforcement. On top of these come the deadline of settling all dues within 14 days of the departure date, a three-year statute of limitations on wage and severance claims, and 20% annual late-payment interest on amounts owed to former employees. If the employer becomes unable to pay, a separate state advance-payment scheme steps in to cover part of the amount.

What inflates unpaid wages is usually not the amount but the basis of calculation. The base for overtime and night-shift pay is the ordinary wage, while the base for severance pay is the average wage. Mix the two up and a single error compounds across three years. The only exceptions to the full-payment principle are deductions grounded in law, such as taxes and the four major social insurances. If a company arbitrarily withholds loan repayments or damages, that amount counts as unpaid wages in full. Start by checking whether a bonus that is regular, uniform, and fixed has been left out of the ordinary wage.

The most common point of failure in practice is the settlement agreement. Many companies collect a pledge that says "I will raise no further objections" and consider the matter closed, but an advance waiver of wages below the statutory standard has no legal effect. The same applies to a comprehensive wage system: work beyond the agreed hours must be paid separately. If this is put off, a single complaint can spread into retroactive claims for the entire job group, the CEO can become a party to criminal proceedings, and a record of wage arrears will surface in government bids and external due diligence. Specific deadlines and requirements may be amended, so please check the latest laws and regulations.

Training that covers this term · HR & Leadership
Recommended courses · Recommended instructors · Quick quote
🧮 Mini quote · Based on instructor fees
About KRW 1.2 million (≈ US$900)2-hour talk · up to 20 people · Korean
Get a quote for these requirements →
💡 In plain English
It works like a supplier invoice. Even if you didn’t fail to pay but simply miscalculated, the other party still sees it as unpaid.
Why it matters in practice
Most companies reported for unpaid wages are not short of money; they got the calculation wrong. What separates them is whether they kept a pay statement every month.
Origin and sources

The Labor Standards Act sets out the principles of wage payment and the duty to settle all dues when an employee leaves, and it fixes the statute of limitations on wage claims. Korea also runs separate relief schemes, including a state advance-payment program for employees owed unpaid wages.

Source · Labor Standards Act Article 36 (Settlement of Money and Valuables), Article 43 (Payment of Wages), Article 49 (Statute of Limitations), etc.
An example

Company A is a food manufacturer with 68 employees, 40 of them production workers on two shifts. A production foreman who left after three years filed a complaint with the labor office two months after leaving. The fixed monthly bonus had been left out of the base for overtime pay, and 38 other employees had been calculated the same way. (Hypothetical example)

  1. When the HR manager and a labor attorney recalculated the last three years of payroll, they found an average shortfall of KRW 470,000 (≈ US$350) per person, KRW 17.8 million (≈ US$13,300) in total.
  2. At the in-person hearing, the labor inspector said, "Even if it wasn’t intentional, a shortfall is a shortfall." Before any corrective order was issued, the HR manager paid the complainant KRW 3.12 (≈ US$1) million, including late-payment interest.
  3. The CEO decided to “apply the same standard retroactively to the other 38 employees,” added the amount to this month’s pay, and listed it on the pay statement as a separate item: ‘Retroactive adjustment of ordinary wage’.
  4. A payroll assistant manager built a one-page A4 table of items included in ordinary wages, and the company changed its procedure so that every departure settlement is signed off by two people: one who calculates and one who checks.
  5. The complaint was withdrawn after three weeks. Over the next six months, none of the 27 departing employees’ settlements drew an objection, and settlements completed later than 14 days after departure fell from 3 per quarter to 0.
Related terms
Pay Statement ObligationThe obligation to give employees a statement showing the pay components, calculation method, and deductions whenever wages are paid.Average WageThe total wages paid over a set period before the triggering event, divided by the total number of days in that period. It is the basis for calculating severance pay, accident compensation, and more.Retirement Benefits · Severance PayA benefit paid when an employee who has worked continuously for a minimum period leaves. Employers must establish at least one of a severance pay plan or a retirement pension plan.Paid Annual Leave · Accrual and ExpiryPaid leave granted to employees who have worked a certain period, with the number of days determined by attendance rate and years of service.Labor Relations Commission · Remedy ApplicationsA quasi-judicial administrative body that mediates and rules on labor disputes. It handles remedy applications for unfair dismissal and unfair labor practices, and mediation of labor disputes.Labor Inspection · Inspection ResponseThe process in which labor inspectors from the Ministry of Employment and Labor check a workplace’s compliance with labor laws, through regular, ad hoc, and self-inspection methods.Wage Claim Guarantee · Substitute PaymentsA system in which the state pays a certain range of wages and severance pay on an employer’s behalf when the employer cannot pay, then seeks reimbursement from the employer.Unused Annual Leave Pay SettlementConverting annual leave days that expired unused into wages. Days for which the employer has properly completed the leave-usage promotion process are excluded from the payment obligation.
Training linked to this term
📚Workplace Harassment Prevention and Abuse-of-Power Prevention TrainingNanum Consulting Corporate Training · On-site/OnlineView course →
Need in-house training on this topic?
Get a curriculum and quote tailored to your needs right away.
Ask About Training
Last updated 13 Sep 2026 · Reviewed by John Kim

FAQ

The law requires payments to be settled within a set period after a trigger such as the employee’s departure, and the parties may agree to extend it. Deadlines are set by statute, so please check the latest regulations.
Options include filing a complaint with the Ministry of Employment and Labor, bringing a civil claim, and, where the requirements are met, using the state’s substitute payment program. Procedures and requirements may be amended, so please verify them.
Wage claims are subject to a statute of limitations, so after a certain period a claim may be barred. Still, it is risky for a company to rely on that alone, since the limitation period can also be interrupted.
The basics are documented calculation rules, a checklist for settling accounts at departure, issuing pay statements, and double-checking calculations. Many wage arrears stem from calculation errors, not intent.