The government’s approach to illegal subcontracting at construction sites has changed. Penalties have been raised to the maximum allowed by law, and the cap on rewards for reporting violations has been completely removed. On June 16, 2026, the Cabinet approved amendments to the Enforcement Decree of the “Framework Act on the Construction Industry,” which will take effect immediately upon promulgation. The core of the changes is simple: to make the penalties for illegal subcontracting far greater than the profits gained from it, while simultaneously lowering the barriers to internal reporting.
In this article, we will summarize what has changed, why the government has shifted its focus to “encouraging reporting” at this time, and the structural challenges in the industry that these changes reveal.
What’s Happening: Removal of the Reward Cap and Strengthened Penalties
Why Now: Bridging the “Limitations of Detection” Through Reporting
The Underlying Challenge: The Unrecorded Workplace
This amendment centers on two pillars: the “carrot” of increasing reward amounts for reports and the “stick” of strengthening administrative penalties. Both pillars go well beyond existing standards.
Whistleblower Rewards: Removal of the 2 Million Won Cap
Previously, even when unfair practices were reported, rewards were capped at 2 million won. Going forward, this cap will be abolished, and rewards will be calculated based on up to 30% of the imposed administrative fine. The difference is clear from an example provided by the Ministry of Land, Infrastructure and Transport. In a case where an administrative fine of 189 million won was imposed, the reward would have been limited to 2 million won under the previous standards, but under the revised standards, it will increase to 56.7 million won.
The requirements for submitting evidence have also been relaxed. Previously, whistleblowers were required to directly submit specific evidence proving the illegal act, but going forward, they will be eligible for a reward if the illegal act is confirmed during the investigation or enforcement process based solely on the whistleblower’s statement and circumstantial evidence. The Ministry of Land, Infrastructure and Transport plans to pay rewards according to the revised standards even for reports received before the new rules take effect, provided that administrative sanctions are finalized.
Administrative Penalties: Minimum Imposition Rate 4% → 24%
The severity of penalties has also been raised to the legal maximum. This reflects criticism that the current enforcement decree’s standards for business suspension and fines were far below the legal maximum, resulting in insufficient deterrent effects. The business suspension period will be adjusted from the current 48 months to a minimum of 8 months and a maximum of 1 year, while the minimum fine rate will increase from 4% to 24% of the subcontracting amount. Taking the example of a project with a subcontracting amount of 2.5 billion won that was subcontracted in its entirety to a single party, the administrative fine will increase approximately threefold, from the previous 240 million won to 750 million won.
The period during which companies are barred from participating in public construction projects has also been extended. It will increase from the current 18 months to a minimum of 8 months and a maximum of 2 years. For lump-sum subcontracting, participation in public construction projects will be restricted for 1 year after the first violation and for 2 years after two or more violations.
The trend toward stricter penalties is nothing new. However, what is noteworthy about this amendment is that it combines expanded compensation with relaxed evidence requirements. This reflects the nature of the violation—illegal subcontracting.
Illegal subcontracting typically takes the form of side agreements or verbal contracts. Since these are not documented, detection through on-site inspections alone is difficult, and even when a report is filed, it is practically challenging for the whistleblower to directly provide “evidence.” Lowering the evidentiary standard to the level of testimony and circumstantial evidence and removing the cap on reward amounts can be interpreted as a strategy to uncover violations that are difficult to detect from the outside through reports from insiders.
Kim Seok-gi, Director General of the Construction Policy Bureau at the Ministry of Land, Infrastructure and Transport, also highlighted this point. He emphasized that illegal subcontracting through side agreements or verbal contracts is often difficult to detect through on-site inspections alone, making active reporting by industry professionals crucial. The aim is to strengthen penalties and expand whistleblower rewards to instill the perception in the industry that the penalties outweigh the illegal gains.
The fact that the system places such emphasis on reporting also implies, when viewed from another angle, that what actually happens on-site is not routinely documented. Since the contractor and the actual construction entity are different but this fact isn’t verified by data, the system ultimately relies on tips from individuals. While stricter penalties and increased rewards raise the cost of violations, “exposing” these violations after the fact still depends on someone’s courage.
This is where Digital Presso sees an opportunity. If the difficulty in detecting violations stems fundamentally from a “lack of records,” then an environment where the construction process is automatically recorded and accumulated could serve as a different starting point.
Digital Presso’s comprehensive construction site platform, RenameDP, is a service focused on automatically compiling construction records from the field. When photos are taken on-site, location and time metadata are automatically mapped and saved as records, and site-specific communications and work details are accumulated as data. On sites where such records are routinely accumulated, contractors operating legally can use their own work as evidence, and discrepancies between contracts and actual construction become easier to identify.
Of course, a single recording tool cannot immediately eliminate the practice of illegal subcontracting. However, by gradually reducing the reliance on sanctions and reports through “transparent records” at the front end, this approach aligns with efforts to strengthen the regulatory framework. If you are considering digitizing your site records, we encourage you to explore this solution from this perspective.
This amendment, which raises the upper limit for penalties, sends a clear signal. However, it appears that we will come closer to the goal of a “fair construction order free of illegality” only when a system is established to accurately record and verify what happens on-site, in tandem with the severity of the penalties.
The Electric Times, “Upper Limit on Rewards for Reporting Illegal Subcontracting Abolished… Administrative Penalties Significantly Strengthened,” 2026 — https://www.electimes.com/news/articleView.html?idxno=369153
Ministry of Land, Infrastructure and Transport, “Cabinet Approves Partial Amendment to Enforcement Decree of the Framework Act on the Construction Industry” (June 16, 2026, cited in the article)
This content was produced by Digital Presso Co., Ltd. and references the above materials. Please refer to the original text for further details.
