🚨 Ghost Workers

Today Korean Social News for Beginners | 2025.10.28

0️⃣ Disguised Subcontracting and 3.3% Contract Problems

📌 Hidden Labor Reality in Gyeonggi Province Logistics Centers… People Becoming 'Ghost Workers'

💬 In logistics centers across Gyeonggi Province, a practice called the "3.3% contract" is spreading, where workers are disguised as independent contractors instead of employees. Research shows many workers are working without employment contracts in complex subcontracting structures and receiving no legal protection such as workers' compensation or retirement benefits. Experts are calling for real action and stronger enforcement by the provincial government to fix the structures where disguised subcontracting and illegal worker dispatch have become normal. The Ministry of Employment and Labor plans to start intensive labor inspections on disguised contractor agreements next month, but critics say Gyeonggi Province's response remains insufficient despite having one-third of the nation's logistics warehouses.

💡 Summary

• Ghost workers are people classified as independent contractors but actually working as employees without legal protection.
• The 3.3% contract and disguised subcontracting are spreading in logistics centers, being misused to avoid labor law protection.
• Real action from government and local authorities is needed to solve multi-level subcontracting and illegal dispatch problems.

1️⃣ Definition

Ghost workers are people who are classified on paper as independent contractors or freelancers, but actually work under an employer's direction and supervision like regular employees, yet are not legally recognized as workers. Most are hired through outsourcing or subcontracting agreements and are classified as business income earners for tax purposes, having 3.3% tax withheld from their pay.

However, because they are not legally considered workers, they receive no protection from labor laws, minimum wage laws, or industrial accident compensation laws. They have no employment contracts, no enrollment in the four major insurances, and cannot enjoy basic worker rights like retirement pay or annual leave. Recently, this problem has appeared in various industries including logistics centers, delivery platforms, and security and cleaning services.

💡 Why is this important?

• Workers who are actually employees receive no legal protection, violating basic worker rights.
• Companies are spreading unfair practices of distorting employment types to cut labor costs.
• Workers cannot receive compensation for work injuries and are excluded from social safety nets, making retirement planning difficult.
• This is a structural problem threatening a healthy employment ecosystem and fair labor market order.

2️⃣ Current Status and Structure of Ghost Worker Problems

📕 3.3% Contract Reality in Logistics Centers

• Disguised contracts have become normal in Gyeonggi Province logistics centers. Key facts include:

  • About one-third of the nation's logistics warehouses are concentrated in Gyeonggi Province, making the problem serious.
  • Research confirms many workers are working without employment contracts.
  • Workers are registered as independent contractors on paper, with only 3.3% income tax withheld.
  • In reality, work hours, methods, and job content are controlled by the company.
  • The Ministry of Employment and Labor plans to start intensive labor inspections next month, but questions remain about effectiveness.

• Multi-level subcontracting makes problems worse. Key issues include:

  • Complex structures form: main contractor - 1st subcontractor - 2nd subcontractor - 3rd subcontractor.
  • At each level, middlemen take their cut, greatly reducing what workers actually receive.
  • When accidents or problems occur, responsibility is unclear, making victim relief difficult.
  • Main contractors avoid direct employment responsibility while keeping actual control.
  • Subcontractors are small, so even when they violate labor laws, they often escape proper punishment.

📕 Problems with Disguised Subcontracting and Illegal Dispatch

• Employment relationships are hidden through disguised subcontracting. Key features include:

  • On the surface it looks like an outsourcing contract, but workers actually receive employer direction and supervision.
  • Work hours, locations, and methods are all decided by the main contractor or first subcontractor.
  • Workers have almost no independence or discretion in performing their work, making them practically the same as regular employees.
  • But contracts are written as "service contracts" or "subcontracting contracts" to avoid legal responsibility.
  • Courts judge based on reality and recognize disguised subcontracting as employment relationships, but the burden of proof lies with workers.

• Direct employment duties are avoided through illegal dispatch. Key problems include:

  • The Dispatch Worker Protection Act prohibits dispatch in certain industries like manufacturing direct production processes.
  • But companies disguise it as subcontracting and use workers the same way as dispatch.
  • Workers work at the main contractor's workplace under the main contractor's instructions, but legally belong to the subcontractor.
  • If judged as illegal dispatch, the main contractor must directly employ workers, but lawsuits are long and difficult.
  • Actually detected cases are just the tip of the iceberg; most remain hidden.

📕 Real Harm to Workers

• Workers cannot receive basic labor rights. Key harms include:

  • Cannot receive weekly holiday pay, annual leave, or retirement benefits under labor laws.
  • Not covered by minimum wage laws, so receiving less than minimum wage is hard to challenge.
  • Not enrolled in the four major insurances (national pension, health insurance, employment insurance, industrial accident insurance).
  • Cannot receive workers' compensation even when injured or sick at work.
  • Hard to form or join labor unions even when treated unfairly.

• Economic and social instability is serious. Key problems include:

  • Employment is unstable, working with anxiety that contracts can be terminated anytime.
  • Income is irregular and low, making life difficult and family support challenging.
  • Cannot prepare for retirement, facing high risk of poverty after retirement.
  • Excluded from social safety nets, living vulnerable to illness or accidents.
  • Mental stress and anxiety are high, but counseling or support is hard to access.

💡 Core Issues of Ghost Worker Problems

1. Disguised Contracts: Reality is employment relationship but legal protection avoided through contract format
2. Multi-level Subcontracting: Complex subcontracting structure makes responsibility unclear and causes middleman exploitation
3. Illegal Dispatch: Tricky employment type to avoid direct employment duties
4. Burden of Proof: Workers bear the burden of proving they are employees
5. Supervision Gap: Simple labor inspections cannot grasp reality or make improvements in this structure

3️⃣ Solutions and Future Tasks

✅ Strengthening Government and Local Response

• Labor inspections and law enforcement must be strengthened. Key measures include:

  • The Ministry of Employment and Labor's intensive inspections must be real investigations, not just formal checks.
  • Penalties for disguised subcontracting and illegal dispatch must be strengthened to increase deterrence.
  • Main contractor responsibility must be strengthened to prevent them from condoning subcontractor violations.
  • Anonymous reporting systems must be activated and reporter protection thorough to encourage whistleblowing.
  • Companies caught must face real sanctions like restrictions on public procurement participation.

• Gyeonggi Province needs institutional responses. Key tasks include:

  • Organizational restructuring like establishing a Labor Bureau to strengthen dedicated departments for labor issues.
  • Regular provincial-level reality surveys to continuously identify problems.
  • Procedures to review employment types and working conditions in logistics center permit processes must be introduced.
  • Ordinances to protect worker rights must be enacted and support budgets secured.
  • Integrated support systems must be built through cooperation with local labor groups and legal support organizations.

✅ Strengthening Corporate Social Responsibility

• Main contractor responsibility must be clarified. Key measures include:

  • Labor law compliance must be a required evaluation standard when selecting subcontractors.
  • Systems must be improved so main contractors also bear joint responsibility for subcontractor illegal acts.
  • Main contractors must be required to regularly inspect and improve subcontractor worker conditions.
  • Unfair trade or excessive price cuts that pressure subcontractors to reduce labor costs must be prohibited.
  • Labor rights protection performance in subcontracting structures must be reflected in ESG management evaluations.

• Transparent employment structures must be created. Key measures include:

  • Subcontracting levels must be limited to fundamentally prevent multi-level subcontracting.
  • All worker employment information must be registered in computer systems for transparent management.
  • Direct employment must be the principle for work that is actually regular and continuous.
  • When making 3.3% contracts, actual business owner status must be strictly examined.
  • When illegal employment structures are detected, immediate conversion to direct employment must be forced.

✅ Supporting Worker Rights Protection

• Legal support and rights relief must be expanded. Key measures include:

  • Free legal counseling and lawsuit support to help workers find their rights.
  • Ways to ease or shift the burden of proof in worker status confirmation lawsuits must be examined.
  • Labor Commission trial functions must be strengthened for quick and fair rulings.
  • Class action lawsuits or public interest lawsuits must be activated to reduce individual worker burdens.
  • Victim relief procedures must be simplified and processing times shortened.

• Worker education and awareness improvement are needed. Key measures include:

  • Standards for judging whether one is a worker or business owner must be promoted in easy-to-understand ways.
  • Education about rights under labor laws and relief methods must be provided.
  • Manuals explaining disguised contract problems and response methods must be distributed.
  • Labor union membership and formation must be supported to build collective response capacity.
  • Platforms where workers can share information and show solidarity must be provided.

4️⃣ Related Terms Explained

🔎 Disguised Subcontracting

• Disguised subcontracting is an actual employment relationship disguised as a subcontracting contract.
  • Disguised subcontracting means a form that looks like a subcontracting contract (work outsourcing) on the surface, but actually hides an employment relationship where workers work under employer direction and supervision. This is a means to avoid the reality of employment contracts and may constitute illegal dispatch under labor laws.
  • The key standard for distinguishing subcontracting from employment relationships is "whether there is employer direction and supervision." First, subcontracting aims for work completion and contractors independently perform work. Second, employment relationships involve providing labor under employer direction and supervision and receiving wages. Third, who decides work hours, locations, and methods is an important judgment standard.
  • Courts judge based on reality, not contract format. Even if contracts say "subcontracting" or "service," if the employer actually sets work hours, instructs work methods, and directly supervises work, it is recognized as an employment relationship. When found to be disguised subcontracting, employers are punished for labor law violations and workers can reclaim their rightful rights.

🔎 Illegal Dispatch

• Illegal dispatch means dispatch forms prohibited by law.
  • Illegal dispatch means when companies that did not directly employ workers actually direct and supervise them, violating the Dispatch Worker Protection Act. The dispatch law prohibits worker dispatch in certain industries like manufacturing direct production processes and construction sites, and dispatch exceeding 2 years is illegal even in allowed industries.
  • Major types of illegal dispatch include: First, using dispatch in industries where dispatch is prohibited. Second, using dispatch workers beyond 2 years even in allowed industries. Third, disguising as subcontracting or service but actually constituting dispatch. Fourth, conducting dispatch business without getting dispatch permission.
  • When illegal dispatch is confirmed: First, user employers must directly employ dispatch workers. Second, dispatch workers can demand direct employment from user employers. Third, user employers can face up to 3 years imprisonment or fines up to 30 million won. Fourth, worker status can be confirmed through Labor Commissions or courts.

🔎 3.3% Contract

• The 3.3% contract is a business income tax withholding method.
  • The 3.3% contract means when individual business owners provide services and receive payment, a total of 3.3% is withheld - 3% income tax plus 0.3% local income tax. This is a rate applied to business income, used when processed as business income rather than earned income.
  • Problems with 3.3% contracts arise when people who are actually workers are classified as business owners. First, they receive no protection from labor laws or minimum wage laws. Second, they are excluded from the four major insurances and cannot enjoy social safety nets. Third, they cannot receive basic rights like weekly holiday pay, annual leave, or retirement benefits. Fourth, they struggle to get compensation even when industrial accidents occur.
  • The distinction between workers and business owners is judged by reality, not contract type. If someone receives employer direction and supervision, works at fixed times and locations, and has no discretion in work methods, they are workers even with a 3.3% contract. In such cases, workers can reclaim rights through worker status confirmation lawsuits, and employers can be punished for law violations.

🔎 Workers Under Labor Standards Act

• Workers under the Labor Standards Act are people who provide labor for wages.
  • Article 2 of the Labor Standards Act defines workers as "persons who provide labor to a business or workplace for wages, regardless of job type." Regardless of contract name or form, those who actually receive employer direction and supervision are considered workers.
  • Key standards for judging worker status include: First, subordination to use. Whether one works under employer direction and supervision is most important. Second, wage nature. Whether one receives wages as compensation for labor. Third, continuity of labor provision. Whether labor is provided continuously, not temporarily. Fourth, exclusivity. Whether one can engage in other businesses is also considered.
  • Many of those called ghost workers likely legally qualify as workers. Even if contracts say "subcontracting" or "outsourcing," even if they have business registration certificates and pay 3.3% tax, if work hours are fixed, they receive supervisor instructions, and have no discretion in work methods, they are workers. Courts and Labor Commissions judge based on this reality, so rights can be recovered through worker status confirmation.

5️⃣ Frequently Asked Questions (FAQ)

Q: How can I tell if I'm a ghost worker?

A: Judge based on how you actually work, not contract type.

• If several of these items apply, you may be a ghost worker. First, work hours are fixed and you face disadvantages if late. Second, the company or supervisor specifically instructs work content and methods. Third, you have almost no discretion or decision-making power in performing work. Fourth, you don't get paid based on work completed but receive fixed amounts based on time or days. Fifth, it's hard to do other work simultaneously; you must work at just one place. Sixth, you use company tools or equipment and don't bear the costs yourself.
• If you have a 3.3% contract but several items above apply, you likely legally qualify as a worker. In this case, you can consult with the nearest labor office, labor attorney, or labor union about worker status confirmation procedures. For evidence, it's good to secure attendance records, texts or emails containing work instructions, and wage deposit records.

Q: If I get injured as a ghost worker, can I get workers' compensation?

A: It's difficult in principle, but you can receive compensation if recognized as a worker.

• With a 3.3% contract or subcontracting contract, workers' compensation processing is difficult because you're not enrolled in industrial accident insurance. But if you actually qualify as a worker, there are ways to receive compensation. First, when applying for workers' compensation, you can claim you are a worker. If the Korea Workers' Compensation & Welfare Service investigates and judges you as a worker, you can be recognized for compensation. Second, even if the service denies it, you can fight through the Industrial Accident Insurance Review Committee or administrative litigation. Third, you can separately file a worker status confirmation lawsuit to first confirm you are a worker, then apply for workers' compensation.
• However, this process takes time and money and is hard to handle alone, so legal support is needed. It's good to get help from free legal aid organizations or labor groups. Also, evidence like hospital records immediately after the accident, accident reports, and witness statements must be secured as much as possible. As time passes, securing evidence becomes harder, so quick response is important.

Q: Won't I face disadvantages if I report ghost worker problems?

A: Reporter protection systems exist, but retaliation concerns are also real.

• Labor laws and dispatch laws have provisions prohibiting disadvantageous treatment of reporters. If employers fire or treat someone unfavorably due to reporting, they face criminal punishment and the dismissal is invalid. Anonymous reporting is also possible, and the Ministry of Employment and Labor has a duty to protect reporter identities. If you face disadvantages after reporting, you can apply for relief to the Labor Commission and claim damages.
• But realistically, after reporting you may be ostracized at work or have contracts not renewed. Especially in small workplaces, it's easy to identify reporters and retaliation risk is high. Therefore, secure sufficient evidence before reporting, and if possible, report collectively with coworkers for safety. Also, reporting with help from labor unions or civic groups makes protection easier. Don't worry alone - consult with experts or support organizations and respond carefully.

View Table of Contents

• Go to Guide