What does the construction subcontract payment guarantee gap calculator check?
This calculator checks whether a subcontract payment guarantee received from the main contractor meets the amount and period required by Korean law.
This calculator is based on Korean rules: Korea-based 2026 rules under the Fair Transactions in Subcontracting Act and the Framework Act on the Construction Industry, with amounts in KRW.
Article 13-2 of the Subcontracting Act requires a main contractor that entrusts construction work to guarantee payment to the subcontractor within 30 days of the contract date.
The required amount is not the full contract price; it follows a formula based on the advance payment, the construction period and the progress payment cycle.
The same KRW 600 million contract can need several times more cover when it is paid at completion rather than monthly.
The page is designed for specialty contractors, contract administrators and the main contractor’s subcontract managers who need to reconcile the same figures.
It reflects the 2026 amendment that narrowed the exemptions and compares it with the guarantee delivery duty under the Framework Act on the Construction Industry.
The default values are an illustrative example and do not describe any real company, contract or guarantee.
Why amount, deadline and period are checked together
Even when the amount is right, a guarantee delivered after the 30-day deadline or ending before completion leaves the subcontractor exposed.
Conversely, a late guarantee with sufficient amount and period calls for a different next step.
The calculator separates the shortfall, delivery state and period gap so you can decide what to request first.
Key features
Statutory guarantee formula
The calculator selects one of three formulas: four months or less, more than four months with a cycle within two months, and more than four months with a longer cycle.
Amounts are rounded up to whole KRW, and fractional months are calculated exactly as entered.
Shortfall against the guarantee received
It shows the shortfall, any surplus and the coverage ratio against the required amount.
When the duty is exempt, the shortfall under the duty is shown separately as zero.
2026 exemption rules
The contract date before or after 2026-08-11 decides whether the former-decree direct-payment and payment-system exemptions or the current KRW 10 million remaining-payment exception apply.
Two statutory tracks
It evaluates Subcontracting Act Article 13-2 and Framework Act Article 34 with Enforcement Rule Article 28 separately, and uses the required amount if either track imposes the duty.
30-day deadline and period gap
It calculates day 30 from the contract or change date with a weekend reference date and compares it with the delivery date and today.
For notes and note substitutes it also checks cover until maturity.
Cycle comparison and saved review
A table compares monthly, two-month, three-month and completion payment patterns.
The verdict and open checks can be saved as a TXT file or printed.
Payment guarantee formula (Subcontracting Act Article 13-2)
The items of Subcontracting Act Article 13-2(1) and Construction Industry Enforcement Rule Article 28(1) use the same structure.
The base below is the subcontract amount minus the contractual advance payment, and the period and cycle are counted in months.
Item 1 · construction period of four months or less: guarantee = subcontract amount − contract advance
Item 2 · more than four months, payment cycle within two months: guarantee = (subcontract amount − contract advance) ÷ construction period × 4
Item 3 · more than four months, payment cycle over two months: guarantee = (subcontract amount − contract advance) ÷ construction period × payment cycle × 2
Four months and two months are inclusive limits.
Exactly four months uses item 1, and a cycle of exactly two months uses item 2.
For a non-integer period such as 4.5 months, the calculator divides by the entered value and also shows the amounts for the rounded-down and rounded-up whole months.
Month counting can depend on the contract and practice, so agree the basis with the main contractor.
Lump-sum payment and MOLEG interpretation 10-0432
In interpretation 10-0432 of 2010-12-23, the Ministry of Government Legislation (MOLEG) answered that a job longer than four months paid in one lump sum at completion treats the payment cycle as the whole period and applies item 3.
The guarantee then equals twice the base and is calculated as written even if it exceeds the contract amount minus the advance.
The calculator flags this case with a note.
Exemptions changed by the 2026 amendment
Subcontracting Act amendment Act No. 21340 was promulgated on 2026-02-10 and took effect on 2026-08-11.
The proviso to Article 13-2(1) previously exempted cases set by presidential decree in light of the contractor’s finances and the size of the works; it now covers only a single job of KRW 10 million or less.
Addenda Article 2 applies the amended rule to subcontracts concluded or renewed after it took effect.
Decree Article 8, effective the same day, deleted paragraph 1 and added the remaining-payment exception of KRW 10 million or less in paragraph 2.
Subcontracting Act guarantee exemptions before and after 2026-08-11| Exemption | Amount test | Concluded before 2026-08-11 | Concluded or renewed from 2026-08-11 |
|---|
| Single job amount | KRW 10,000,000 or less | Exempt (former Decree Article 8(1)1) | Exempt (proviso to Act Article 13-2(1)) |
| Owner direct-payment agreement within 30 days | - | Exempt (former item 3) | Not exempt under the Subcontracting Act |
| Owner pays directly through a payment management system | - | Exempt (former item 4, FTC-listed system) | Not exempt under the Subcontracting Act |
| Remaining payment after an increase (excluding amounts paid) | KRW 10,000,000 or less | No rule | No guarantee needed (Decree Article 8(2)) |
A contract concluded before the amendment can fall under the new rule if it was renewed on or after 2026-08-11.
Whether a change only adjusted price or period, or started a new contract term, depends on the wording of the contract.
When a pre-amendment contract has a change date on or after 2026-08-11, the calculator asks you to check whether it was a renewal.
Two guarantee duties: Subcontracting Act and Construction Industry Act
Subcontracting Act Article 13-2
It applies to construction entrustment between a main contractor and subcontractor that meet the Act’s size tests.
The guarantee is given in cash (including cashier’s cheques) or by a guarantee from a statutory institution such as a construction mutual aid association, an insurance company, the Korea Credit Guarantee Fund or a bank.
Decree Article 8(3) adds the electrical, ICT and fire-industry mutual aid associations, the Korea Housing and Urban Guarantee Corporation (HUG) and institutions designated by the Fair Trade Commission.
Framework Act Article 34
A licensed contractor that subcontracts construction works must deliver a subcontract payment guarantee to the subcontractor under the Ministry of Land, Infrastructure and Transport ordinance.
Enforcement Rule Article 28 sets the same formula and delivery within 30 days of the subcontract date, and exempts, among others, a single subcontract of KRW 10 million or less (paragraph 3, item 4) and a direct-payment agreement among owner, contractor and subcontractor (item 5).
Issuers notify issuance, reissuance and termination, and the owner may verify delivery and demand correction.
The two laws differ in scope and exemptions.
Even between small firms outside the Subcontracting Act, Framework Act works still require a separate check of the guarantee delivery duty.
Conversely, for a contract from 2026-08-11 a three-party direct-payment agreement may exempt the Framework Act duty while the Subcontracting Act duty remains.
The calculator shows both tracks side by side and judges the shortfall by the required amount if either track imposes the duty.
The Framework Act amendment scheduled for 2027-01-01 (Act No. 21894) adds electronic payment system and guarantee fee support provisions to Article 34.
Re-check the provisions in force when reviewing contracts from 2027.
The 30-day delivery deadline and the guarantee period
Trigger date and day 30
The guarantee duty must be performed within 30 days of the subcontract date.
Civil Act Article 157 excludes the first day, so a contract of 2026-09-01 reaches day 30 on 2026-10-01 (Thursday).
When an exempt contract becomes subject to the duty through an increase, the 30 days run from the day the exemption ended, that is, the change date.
Weekends and public holidays
If day 30 is a Saturday or Sunday, Civil Act Article 161 ends the period on the next day.
A contract of 2026-08-20 reaches day 30 on 2026-09-19 (Saturday), so the calculator shows 2026-09-21 (Monday) as the reference deadline.
Public holidays are not modelled; check substitute holidays yourself.
End of the guarantee period
The guarantee must last until the works are completed.
When payment is made by promissory note, cover must last until maturity; for note substitutes such as corporate purchase cards, receivables-backed loans or purchase loans, until the repayment date.
The calculator shows how many days are missing when the guarantee ends before the required end date.
Blanket guarantees and change contracts
The Subcontracting Act also allows a blanket guarantee covering all works during the period or a whole fiscal year.
For a blanket guarantee, confirm that the limit allocated to this job reaches the formula amount.
When the contract amount increases, request a reissued guarantee for the increment.
Step-by-step use
- Select the governing rules and contract type. Choose only what you have confirmed: Subcontracting Act coverage, Framework Act construction works, or a public long-term continuing contract.
Leaving an item unconfirmed marks the result as provisional.
- Enter the contract date and any exemption claimed. If the main contractor relied on a direct-payment agreement or a payment system, enter that reason and the agreement date.
- Enter the contract amount and the advance. For a change contract, enter the new amount and change date; if a contract of KRW 10 million or less was increased, also enter the amount paid by then.
- Enter the construction period and payment cycle. Use 1 for monthly or 3 for quarterly progress payments, or select lump sum at completion.
- Copy the guarantee received. Transcribe the issuer, guaranteed amount, delivery date and start and end dates from the original guarantee.
- Review the result and open checks. Check the verdict, shortfall, delivery state, period check and notes, then save the TXT file as support for your request to the main contractor.
Worked examples of guarantee amount and shortfall
Assume a KRW 600 million subcontract, a KRW 60 million contract advance and a KRW 150 million guarantee received.
The base is KRW 540 million, and only the period and payment cycle change.
Statutory guarantee and shortfall by construction period and payment cycle on a KRW 540 million base| Scenario | Period | Cycle | Formula | Guarantee | Shortfall |
|---|
| ★ Monthly payments (default example) | 10 months | 1 month | Item 2 | KRW 216,000,000 | KRW 66,000,000 |
| Quarterly payments | 10 months | 3 months | Item 3 | KRW 324,000,000 | KRW 174,000,000 |
| Lump sum at completion | 10 months | 10 months | Item 3 | KRW 1,080,000,000 | KRW 930,000,000 |
| Short works | 4 months | 1 month | Item 1 | KRW 540,000,000 | KRW 390,000,000 |
| Fractional period | 4.5 months | 1 month | Item 2 | KRW 480,000,000 | KRW 330,000,000 |
| Four-month cycle | 6 months | 4 months | Item 3 | KRW 720,000,000 | KRW 570,000,000 |
The default example divides KRW 540 million by 10 and multiplies by 4, giving KRW 216 million.
The KRW 150 million received covers 69.44% of the requirement, leaving a KRW 66 million shortfall.
Quarterly settlement of the same contract needs KRW 324 million under item 3, and lump-sum payment at completion raises it to KRW 1.08 billion.
The longer the cycle, the more unpaid exposure the subcontractor carries, so the guarantee grows with it.
The subcontractor’s performance bond is 10% of the contract amount, KRW 60 million.
Small jobs of KRW 10 million or less
A KRW 9 million contract is exempt under the Subcontracting Act proviso and Construction Industry Enforcement Rule Article 28(3)4.
VAT treatment can move the amount across the KRW 10 million line, so check the contract wording between KRW 9.09 million and KRW 11 million.
When an increase creates the duty
A KRW 9 million contract of 2026-09-01 increased to KRW 25 million on 2026-10-10 must be guaranteed by day 30 from the change date, 2026-11-09 (Monday).
If KRW 16 million had already been paid by the change, leaving KRW 9 million, Decree Article 8(2) removes the Subcontracting Act guarantee requirement.
Three situations on a construction site
A subcontractor receives its first guarantee
Check that the guaranteed amount, period and beneficiary match the contract.
If a ten-month job with monthly payments is guaranteed for only about a quarter of the contract price, you can test the formula shortfall at once.
Attach the shortfall and the cited articles to a letter requesting an increased guarantee.
A main contractor prepares a guarantee
The main contractor’s contract or subcontract administrators can calculate in advance the amount and period to request from the issuer.
For contracts from 2026-08-11, a direct-payment agreement alone no longer removes the Subcontracting Act duty, so make sure the guarantee was not skipped out of past habit.
Remember that delivering within 30 days is also what lets the main contractor call on the subcontractor’s performance bond.
A design change increases the contract amount
Enter the new amount and change date to see the pre-change formula amount and the increment separately.
Leaving the old guarantee unchanged creates a gap equal to the increment, so use the figure to set the reissue request.
If the period was also extended, check that the guarantee end date now runs past the new completion date.
What to do when the guarantee is short or missing
- Withhold the performance bond: if the main contractor does not provide the guarantee, the subcontractor may decline to provide its performance bond (Article 13-2(9)).
The main contractor cannot exercise its claim on the performance bond until it has provided the payment guarantee (paragraph 10).
- Ask for direct payment: if the main contractor fails its guarantee duty, the subcontractor may ask the owner to pay the subcontract price directly (Article 14(1)4).
- Claim on the guarantee: when events such as suspension of the contractor’s current account, default, bankruptcy, closure, a rehabilitation filing, licence cancellation or suspension, or two or more missed subcontract payments occur, the subcontractor may claim from the issuer.
The issuer must pay within 30 days once the claim documents are complete, and Decree Article 8(4) and (5) allow a 30-day hold for missing evidence or disputed progress amounts, extendable once by up to 15 days by agreement.
- Mediation and complaints: consider mediation by the Subcontract Dispute Mediation Council of the Korea Fair Trade Mediation Agency (Article 24) or a complaint to the Fair Trade Commission.
Breach of the guarantee duty can lead to a penalty surcharge of up to twice the subcontract price (Article 25-3) and a fine of up to twice the subcontract price (Article 30).
In Supreme Court judgment 2010Da106283 of 2011-08-25, a subcontract payment guarantee case, the court indicated that the due date of the subcontract price follows the parties’ agreement where one exists.
When the insured event is disputed, organise the contract’s progress-payment and due-date clauses together with the actual payment record.
Tips and cautions before you calculate
- Use the same VAT basis as the contract.
If the guarantee and the contract amount use different bases, the shortfall is distorted.
- Deduct only the advance stated in the contract.
Do not deduct progress payments already received from the base.
- Confirm that the issuer is a statutory institution and that the subcontractor itself is the beneficiary.
- Public long-term continuing contracts are assessed from the first contract date and the total works amount, so the calculator holds the verdict for review.
- If the guarantee was provided in cash, select cash as the issuer and enter the amount received.
- The result does not replace legal advice or an issuer’s payment decision.
If a dispute is likely, consult a lawyer or the Korea Fair Trade Mediation Agency.
Frequently asked questions
Does a contract advance payment reduce the guarantee amount?
Yes.
Each item of Subcontracting Act Article 13-2(1) starts from the subcontract amount minus the advance payment stated in the contract.
Deduct only the contractual advance; do not deduct an advance that was never agreed or progress payments already received.
How much must be guaranteed with monthly progress payments?
When the construction period exceeds four months and the payment cycle is two months or less, item 2 applies.
Divide the contract amount minus the advance by the number of months and multiply by 4.
A ten-month job with a KRW 540 million base needs KRW 216 million.
Is a guarantee needed when payment is due only at completion?
Yes.
MOLEG interpretation 10-0432 treats the payment cycle as equal to the whole construction period when a job longer than four months is paid in one lump sum at completion, so item 3 applies.
The result is twice the base and is applied as written even when it exceeds the base.
Does an owner direct-payment agreement replace the guarantee?
Not for subcontracts concluded or renewed on or after 2026-08-11: a direct-payment agreement no longer exempts the Subcontracting Act duty.
Contracts concluded earlier may still be exempt under the former decree if the agreement was made within 30 days of the contract.
The three-party direct-payment exemption in Construction Industry Enforcement Rule Article 28 is checked separately.
What happens if a contract of KRW 10 million or less is later increased?
The guarantee is due within 30 days of the day the exemption ended.
For contracts from 2026-08-11, however, Decree Article 8(2) removes the duty when the remaining payment after deducting amounts already paid is KRW 10 million or less.
Enter the change date and the amount paid by then.
How is the 30-day delivery deadline counted?
Under Civil Act Article 157 the first day is excluded, so day 30 is the contract date plus 30 days.
If day 30 falls on a Saturday or Sunday, Civil Act Article 161 moves the end to the next day, and the calculator shows the following Monday as a reference.
Public holidays are not modelled, so check the calendar separately.
What can the subcontractor do without a guarantee?
Under Article 13-2(9) the subcontractor may withhold its performance bond, and under Article 14(1)4 it may ask the owner to pay the subcontract price directly.
Mediation by the Subcontract Dispute Mediation Council at the Korea Fair Trade Mediation Agency or a complaint to the Fair Trade Commission may also be considered.
Keep every request in writing, for example by certified letter.
Can the result be filed as a claim with the guarantee issuer?
No.
The calculator compares the statutory formula with the contract data you enter.
Actual payment depends on the guarantee terms, the insured event, the claim documents and the issuer’s review.
Reconcile the original contract and guarantee and obtain professional advice.
Official sources and 2026 check date
The provisions were checked directly through the Korean National Law Information OPEN API as in force on 2026-10-25.
Subcontracting Act Articles 13-2 and 14 follow MST288625, Act No. 21857, effective 2026-10-02.
The exemption change follows Addenda Article 2 of Act No. 21340 (MST283169, effective 2026-08-11).
Subcontracting Act Decree Article 8 follows MST288455, Presidential Decree No. 36562, effective 2026-08-11, and the former Article 8(1) was checked in MST287201.
Framework Act on the Construction Industry Article 34 follows MST273435 (effective 2025-11-27), and Enforcement Rule Article 28 follows MST282375 (effective 2026-01-02).
MOLEG interpretation 10-0432 and Supreme Court judgment 2010Da106283 were also checked in the original text through the same API.
When the law changes, re-check the exemptions, issuer scope, delivery deadline and formula together.
Article 13-2 in the Subcontracting Act version scheduled for 2027-09-09 (Act No. 21905) was confirmed to be unchanged.
Check your payment guarantee now
Keep the subcontract, any change contract and the payment guarantee at hand and enter the amounts and dates exactly.
Seeing the shortfall, 30-day deadline and period gap together makes the request to the main contractor clear.
A saved review supports a request for an increased guarantee, an owner direct-payment request or a mediation application.
Calculate the guarantee gap