The Insolvency Wage Guarantee Fund Now Covers Six Months of Unpaid Wages, Effective August 20 -- How to Get Paid When Your Employer Shuts Down
When a company you work for suddenly shuts its doors, unpaid wages are usually the first worry. Many workers give up, assuming there's no one left to collect from once the company is gone. That's exactly the situation the Insolvency Wage Guarantee Fund (formerly called "chedangeum") is designed for. As of August 20, 2026, the range of wages this fund covers has doubled. Here's what changed and who qualifies.
What the Insolvency Wage Guarantee Fund Is — Don't Confuse It With the Simplified Fund
The wage guarantee fund is a system in which the state (through the Korea Workers' Compensation and Welfare Service) pays unpaid wages and retirement benefits on behalf of an employer first, then later seeks reimbursement from that employer. There are two main types. The Insolvency Wage Guarantee Fund applies to workers at businesses that received a court bankruptcy or rehabilitation ruling, or a "de facto insolvency" recognition from a regional labor office. The Simplified Wage Guarantee Fund, by contrast, is a separate program for cases where a company simply didn't pay wages without going out of business — it can be claimed with just a final court judgment or a regional labor office's confirmation of unpaid wages. The expansion covered here applies specifically to the insolvency fund.
What Changed — From the Final Three Months to the Final Six
Before this change, the wage portion payable through the Insolvency Wage Guarantee Fund was capped at the final three months before retirement. For businesses that receive a de facto insolvency recognition or a bankruptcy/rehabilitation ruling on or after August 20, that range expands to the final six months. "Wages" here includes not just regular pay but also leave allowances and maternity leave pay. However, the retirement benefit portion is still capped at the final three years, as before — this expansion only affects the wage portion, which is an important distinction.
The Payment Cap Rose Too
With the coverage range widened, the overall payment cap also rose from 21 million won to as much as 31.5 million won. That said, this is strictly an upper limit — the actual amount paid is calculated based on your final wage level, length of service, and the actual unpaid amount, so not everyone receives the maximum. The Workers' Compensation and Welfare Service calculates the exact figure during the application process.
Who Qualifies — Your Retirement Date Is the Key Factor
Not everyone who retired from an insolvent company qualifies for the Insolvency Wage Guarantee Fund. You must have retired within the period starting one year before the date the insolvency recognition (or bankruptcy filing) was requested, and ending three years after that date. In other words, workers who left the company long before it effectively collapsed, or who apply long after the insolvency process has fully concluded, may fall outside these requirements. Check both your own retirement date and when the company's insolvency was officially recognized.
How to Apply — From the Regional Labor Office to the Workers' Compensation and Welfare Service
The process has two steps. First, you request de facto insolvency recognition from the regional employment and labor office that has jurisdiction over the company's location, confirming that the company is effectively insolvent (this step is skipped if a court has already issued a bankruptcy or rehabilitation ruling). Once recognized, you use that result to file a claim for payment with the Workers' Compensation and Welfare Service. Once the paperwork is complete, processing typically takes one to two weeks, and the application deadline is within two years of the bankruptcy ruling or the insolvency recognition date. Missing that deadline means you can't receive payment even if you meet every other requirement, so timing matters.
If Your Company's Insolvency Was Already Recognized, the Expansion May Not Apply Retroactively
This expansion generally applies to businesses that receive de facto insolvency recognition or a bankruptcy/rehabilitation ruling on or after the effective date of August 20. If the company you worked for had already completed the insolvency recognition process before that date, you should check directly with the Workers' Compensation and Welfare Service or your regional labor office whether the six-month range applies to your case. Rather than assuming it automatically applies, confirm your employer's recognition date first.
Other Worker Protections Worth Knowing About
Several other systems are worth checking alongside the wage guarantee fund when you're leaving a job. If you were suddenly dismissed without proper cause, it's worth separately confirming when dismissal notice pay is actually owed. If an occupational illness surfaces well after you've retired, the workers' comp claim process after retirement also has its own deadline. And if years at a desk job have led to serious wrist pain, the criteria for recognizing carpal tunnel syndrome as an industrial accident is another separate program you can apply for. It's worth checking one by one whether any of these apply to you alongside the wage guarantee fund.
Steps to Follow
- Confirm whether the company you worked for has entered bankruptcy/rehabilitation proceedings or has effectively shut down.
- Check whether your retirement date falls within one year before to three years after the de facto insolvency recognition request date.
- If there's no court ruling, first request de facto insolvency recognition from the regional employment and labor office.
- Once recognized, file a claim for payment with the Workers' Compensation and Welfare Service (application deadline: within two years).
- Since the wage range that applies (three months or six months) may depend on whether your employer's insolvency recognition date falls before or after August 20, confirm directly with the agency.
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