A 5% Surcharge on Operating Profit: A Dangerous Sign of Punishment-First Thinking

A proposed amendment to the Occupational Safety and Health Act that would impose surcharges of up to 5% of operating profit has passed a standing committee of the National Assembly. The bill would levy surcharges of up to 5% of operating profit on companies with three or more industrial accident deaths per year. Although it has not yet passed the plenary session, it is already stirring controversy amid concerns about a slowdown in the construction sector.

While 5% may appear to be merely an accounting ratio, when applied to companies it could result in cash outflows ranging from tens of billions to trillions of won. One estimate found that if this standard were applied to the 22 companies where accidents causing three or more deaths occurred after the Serious Accidents Punishment Act took effect in 2022, surcharges could total about 690 billion won over the past three years, or an average of 230 billion won per year. In other words, some large construction and manufacturing companies could face liabilities of tens of billions or even hundreds of billions of won from a single accident.

The problem is that the surcharge is linked to the scale of operating profit. The amendment stipulates that the surcharge be calculated at up to 5% of operating profit. Even for the same fatal accident, a company with 1 trillion won in operating profit could be charged up to 50 billion won, while a company with 10 billion won in operating profit could be charged up to 500 million won. If the surcharge is calculated based on the operating profit of the corporation as a whole, then even if the accident occurred at a specific workplace, profits from unrelated divisions such as overseas operations would also be included in the basis for sanctions. This has raised fairness concerns, as the performance of divisions unrelated to the accident would determine the scale of the penalty.

The overlapping imposition of criminal punishment and surcharges is also giving rise to legal controversy. The Serious Accidents Punishment Act and the Occupational Safety and Health Act already provide for criminal penalties and fines, and they even allow prison sentences for management personnel responsible. If a surcharge linked to operating profit is added on top of this, it creates a structure of excessive punishment in which both criminal punishment and administrative sanctions are imposed for the same accident.

As sanctions overlap, companies’ legal burdens and uncertainty grow even greater. Since companies make decisions by taking into account not only safety risks but also regulatory and legal risks, concerns are also being raised that this structure could lead to business contraction and avoidance of high-risk sectors.

The construction and manufacturing industries are tightly interconnected through subcontracting SMEs, regional partner firms, and on-site employment. If the regulatory burden rises sharply, its impact could spread in a chain reaction beyond prime contractors. The regulatory environment ultimately affects investment decisions. This is why industry is concerned that incentives for overseas investment may grow stronger.

If the goal is to improve industrial safety, the key lies not in repeatedly increasing punishment but in designing incentives. Clear standards, assigning responsibility in proportion to the seriousness of an accident, and differentiated application that reflects the characteristics of each industry all strengthen motivation for compliance in the field. Rationally defining the scope of management responsibility and strengthening support for safety infrastructure, technology, and training are the foundation of long-term accident prevention.

Everyone agrees on the goal of preventing serious industrial accidents. But trying to solve the problem simply by strengthening punishment is a misguided approach that forgets site-centered autonomy and responsibility. Safety cannot be secured merely by increasing punishment. What is needed is an institutional design that enables workplaces to manage risks and assume responsibility on their own. Only when autonomy and responsibility function on the basis of predictable laws, the principle of proportionality, and a responsibility structure that reflects industrial characteristics can safety truly become sustainable.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 영업이익 5% 과징금, 처벌 만능주의의 위험한 신호

Author: Sung-no Choi

Date: 2026-02-19

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=28613