What the employer total-exposure calculator does
Resolving unpaid wages in South Korea usually requires more cash than the wage ledger’s unpaid principal.
Delayed-payment interest, state reimbursement after a substitute payment, an additional settlement proposal, professional costs, and a conditional civil-damages scenario can all exist at the same time.
This calculator records separate dates and balances for up to 20 workers, then compares immediate direct payment, direct equal installments, and a substitute-payment installment model on one consistent basis.
Losses this worksheet is designed to reveal
- Funding principal but omitting accrued 20% annual delayed-payment interest
- Treating a substitute payment as debt forgiveness and omitting state reimbursement
- Entering a settlement total as an extra amount and counting the same principal twice
- Offering an average installment without checking future interest or peak monthly cash
- Treating maximum three-times damages as certain, or ignoring the conditional exposure entirely
South Korean law used for the 2026 model
The legal references were checked against the National Law Information Center’s current law on August 30, 2026.
The current Labor Standards Act is law ID 001872, MST 283457, effective August 20, 2026, and the prescribed interest rate comes from Enforcement Decree Article 17.
The result is a planning estimate and does not legally determine worker status, wage status, severance, the true due date, an exclusion, or liability.
South Korean legal rules and their use in the 2026 employer wage arrears exposure model| Authority | Rule checked | Model treatment |
|---|
| Labor Standards Act Articles 36 and 43 | Separation amounts are generally due within 14 days, while employed workers’ wages are due on the regular payday | Uses the departure date plus 14 days or the entered payday |
| Labor Standards Act Article 37 and Enforcement Decree Article 17 | The prescribed delayed-payment interest rate is 20% per year | Principal × 20% × applicable days ÷ 365 |
| Act No. 20520 Supplementary Article 2 | The employed-worker expansion applies when the regular-payday nonpayment event arises on or after October 23, 2025 | Sets current and future interest to zero for an earlier employed-worker payday |
| Enforcement Decree Article 18 | Specified periods can be excluded for insolvency proceedings, legal payment restrictions, a proper dispute over whether wages exist, and related grounds | Accepts only a user-confirmed excluded-day count |
| Wage Claim Guarantee Act Articles 8 and 8-2 | After a substitute payment, the state is subrogated to the worker’s claim up to the payment amount and seeks reimbursement from the employer | Moves principal between creditors without adding it twice |
| Labor Standards Act Article 43-8 | A court may award damages within a maximum three-times range when statutory intentional, prolonged, or high-value arrears conditions apply | Shows a separate conditional wage-only stress scenario |
| Labor Standards Act Article 109 | The Act provides criminal penalties and a victim-objection rule with a statutory repeat-offender exception | Does not predict prosecution, sentence, or settlement effect |
The October 23, 2025 employed-worker change matters
The amendment effective October 23, 2025 expanded Article 37 delayed-payment interest beyond separated workers to wages unpaid after an employed worker’s regular payday.
Act No. 20520 Supplementary Article 2 applies that expansion only when the payday nonpayment event arises on or after the effective date, so an earlier employed-worker payday receives zero current and future interest rather than a calculation starting on October 23.
Enter the regular payday for an employed worker and the departure date for a departed worker; the latter model starts from the day after the statutory 14-day settlement period.
Documents and inputs to prepare
Collect the wage ledger, employment agreements, payroll transfers, separation records, and any substitute-payment or reimbursement notice before entering numbers.
Use labels such as Worker A instead of names, resident registration numbers, contact details, or health information.
Classify every amount as principal, accrued interest, an additional settlement proposal, state reimbursement, or a confirmed common cost before comparing scenarios.
Employer wage arrears calculator inputs and entry rules| Input | Meaning | Entry boundary |
|---|
| Calculation date | Separates accrued interest from the forward payment plan | Use the actual review date |
| Installment months | Number of payments in both installment models | 1 to 60 months |
| Unpaid wages and severance | Principal recorded for each worker | Severance is available only for a departed worker |
| Confirmed excluded days | Days confirmed to fall within an Article 18 exclusion | Do not estimate from memory |
| Substitute payment | Amount paid or being tested under the wage-claim guarantee system | Zero through that worker’s principal |
| Additional settlement | A proposed amount that does not duplicate principal, severance, or interest | No statutory standard amount |
| Article 43-8 multiplier | A conditional zero-to-three-times stress input | Applies only to selected unpaid wage, not severance |
Formulas and the three payment models
Core formulas
Worker principal = unpaid wages + unpaid severance
Employed-worker interest modeled = regular payday ≥ 2025-10-23
Accrued interest = floor(principal × 20% × applicable delayed days ÷ 365)
Remaining worker principal = principal − substitute payment
State reimbursement = substitute payment
Ending cash = prior cash + monthly payment capacity − monthly outflow
Interest is zero on the statutory due date and begins with one day on the following date.
For an employed worker whose regular payday was before October 23, 2025, the transitional rule makes both accrued and forward Article 37 interest zero in this model.
Installment principal is distributed in whole KRW, with remainder won assigned from the earliest month so the final sum exactly matches principal.
Forward interest applies only to remaining direct worker principal; the model never invents a rate or surcharge for the state reimbursement balance.
Immediate, direct installment, and substitute-payment installment model comparison| Scenario | Treatment | Decision signal |
|---|
| Immediate direct payment | Pays worker principal, accrued interest, and entered common costs on the calculation date | Shows the lump sum required now |
| Direct equal installments | Splits principal into whole-KRW payments and accrues future interest on the remaining worker balance | Shows installment interest and the peak month |
| Substitute-payment installments | Moves the entered substitute amount to a state reimbursement balance and installments the rest | Separates worker and state funding needs |
How to use the calculator step by step
- Enter the calculation date, liquid cash available now, realistic monthly repayment capacity, and the installment horizon being tested
- For each worker, select employed or departed and enter the regular payday or departure date, unpaid wages, and any unpaid severance
- Enter excluded interest days only after a professional or responsible authority confirms the relevant Enforcement Decree Article 18 period
- Allocate an actual or test substitute payment to the correct worker, then enter only a non-duplicative additional settlement proposal
- Compare total exposure, total interest, peak monthly outflow, and maximum cash shortfall across the three scenario cards
- Export or transcribe the worker and monthly tables into the working file used with the worker, labor office, labor attorney, lawyer, and compensation service
Worked calculation examples
Thirty days for an employed worker
Assume a January 1, 2026 regular payday, a January 31 calculation date, and KRW 3,650,000 of unpaid wages.
Thirty applicable days produce floor(KRW 3,650,000 × 20% × 30 ÷ 365), or KRW 60,000 of accrued interest.
KRW 2 million substitute payment
If unpaid wages are KRW 2 million and unpaid severance is KRW 3 million, entering a KRW 2 million substitute payment leaves KRW 3 million owed directly to the worker and KRW 2 million owed to the state.
Those creditor balances preserve the original KRW 5 million principal and are never added into KRW 7 million.
Reading a cash shortfall
If month-zero outflow is KRW 8 million and immediately available cash is KRW 5 million, the schedule reports its first shortfall in month zero and a KRW 3 million gap before later funding.
Each later month adds the entered monthly capacity and subtracts principal, state reimbursement, interest, and other costs, so a lower headline exposure can still have a difficult peak month.
Criminal settlement and conditional civil damages are different
A criminal settlement related to Article 109 and civil damages under Article 43-8 are not interchangeable amounts.
Korean law sets no universal criminal-settlement amount, and payment or a victim’s statement does not guarantee non-prosecution, a particular sentence, or mitigation.
The calculator therefore accepts only the additional amount the user is actually testing and never assigns a settlement percentage or predicts a criminal outcome.
Treat three times as a stress ceiling, not a forecast
Article 43-8 concerns specified intentional, prolonged, or high-value nonpayment conditions and leaves the amount within the statutory range to a court.
This page multiplies only selected unpaid wage, excluding severance, so a reviewer can see a conditional scenario without merging it into ordinary principal.
The court may consider the cause, duration and frequency of nonpayment, payment efforts, delayed interest already paid, and the employer’s financial position.
Substitute payments: creditor changes, principal does not multiply
A substitute payment can give a worker earlier access to covered wages or severance, but Wage Claim Guarantee Act Article 8 transfers the claim to the state up to the amount paid.
The model reduces direct worker principal by that amount and creates an equal state reimbursement balance, preserving total principal exactly.
It retains accrued Article 37 interest through the calculation date but applies future 20% wage interest only to remaining direct worker principal.
Any interest, surcharge, collection cost, offset, or repayment schedule stated by the government must be read from the actual notice and entered as a confirmed additional collection amount if appropriate.
Do not use the substitute input as an eligibility estimate
The page does not test business coverage, worker eligibility, recognized wage periods, statutory caps, application deadlines, insolvency status, or the amount the agency will approve.
Use zero until an amount is documented, or label it clearly as a comparison scenario outside the official claim file.
Other enforcement risks to review separately
Habitual arrears
Article 43-4 uses separate preceding-year duration, event-count, and amount tests that can affect support and public-procurement treatment.
Public disclosure and credit data
Repeated convictions, high arrears, and other statutory facts can trigger procedures beyond the payment amount shown here.
Travel-ban request
Article 43-7 can become relevant to an employer whose name has been publicly disclosed under the statutory process.
Payment evidence
Keep worker-level transfers, calculations, agreements, and state notices so every payment has one creditor and one legal classification.
The calculator does not score any disclosure, credit-reporting, subsidy, tender, travel, prosecution, or sentence outcome.
Confirm worker counts, unpaid periods, totals, conviction history, disclosure status, and procedural notices with the responsible authority and qualified advisers.
Practical interpretation checklist
- Freeze a dated ledger copy. Keep the exact wage ledger and transfers used for the calculation date
- Define the additional settlement amount. Check that it excludes principal, severance, interest, and state reimbursement already shown elsewhere
- Never guess excluded days. Tie every excluded period to evidence and case-specific review
- Use true surplus cash. Deduct tax, rent, current payroll, and other essential obligations before entering monthly capacity
- Do not treat the star as advice. It marks the lowest modeled exposure under current inputs, not worker consent or agency approval
- Escalate complex files. Multiple workers, criminal proceedings, state subrogation, or an Article 43-8 claim warrant professional review
Frequently asked questions
Is there a statutory percentage for a criminal settlement?
No. Korean wage law does not set one standard criminal-settlement percentage. Enter only an additional proposal that is separate from wage principal, severance, and interest, then obtain case-specific advice on wording and effect.
Does a substitute payment erase the employer’s principal liability?
Not in this model. The direct worker balance falls, but the same amount becomes a state reimbursement balance because the state is subrogated to the claim up to its payment. Use the actual Korea Workers’ Compensation & Welfare Service notice.
Does worker consent to installments stop 20% interest?
The calculator does not assume that a proposal or informal consent stops interest. It keeps applying simple interest to remaining direct worker principal. Confirm any agreement and Enforcement Decree Article 18 exclusion separately.
Is the selected three-times amount a likely court award?
No. It is a user-selected stress scenario. Eligibility, the damage base, and the multiplier depend on statutory conditions and a court’s review of the facts, payment efforts, interest already paid, and the employer’s assets.
Can an employed worker have 20% delayed-payment interest?
Yes, the amendment effective October 23, 2025 extended Article 37 delayed-payment interest to wages left unpaid after an employed worker’s regular payday. Supplementary Article 2 applies the expansion only when the nonpayment event arises on or after that date, so this model assigns zero current and future interest to an earlier employed-worker payday. The calculator still cannot decide wage status, the true due date, or excluded periods.
Official sources and update boundary
These official sources were checked on August 30, 2026, and the model should be reviewed whenever a relevant effective date, rate, or enforcement provision changes.
The Ministry of Employment and Labor’s wage-arrears page is a starting point for complaint, accusation, and substitute-payment routes; it does not replace a case-specific decision from the labor office, compensation service, prosecutor, or court.
Separate principal, interest, and creditor before funding a payment plan
Reconcile every worker’s due date and substitute-payment notice before relying on the result.
Take the calculator tables and source records together when obtaining advice on an installment agreement or criminal and civil response.