Only 33% of Small Business Owners Apply for Employment Retention Subsidy... KCCI Proposes 100% Payment of Leave Allowance

Discussion, Survey of 245 Small Businesses... One in Three Companies 'Applied or Planning to Apply', 30% 'Unaware of the System'
80% of Applying or Planning Companies 'Face Difficulties in Utilization'... Biggest Difficulty is 'Complex Procedures' (47%)
Korea Chamber of Commerce Proposes 'Bold Budget Investment and Rapid Administrative Procedures' Including 100% Payment of Suspension Allowance

[Asia Economy Reporter Kim Hyewon] Only 33% of small business owners have applied for or plan to apply for the government's 'Employment Retention Support Fund.' Among them, 80% complained of difficulties in utilizing the system due to complicated procedures.

On the 19th, the Korea Chamber of Commerce and Industry surveyed 245 small businesses on the utilization of the Employment Retention Support Fund. The results showed that one out of three companies had applied for or planned to apply for the fund as their business became difficult due to the recent COVID-19 pandemic.

On the other hand, 29.8% of companies said they did not apply because they were unaware of the system, and 13.8% said they considered applying but gave up. Additionally, 22.9% responded that they had no plans to apply.

Small business owners who applied for or intended to apply for the Employment Retention Support Fund were also experiencing difficulties due to the complex preparation procedures and strict requirements of the support fund system.

Among companies that applied for the Employment Retention Support Fund, 79.5% said they experienced difficulties in utilizing the support fund system, while 20.5% said the system was unnecessary or that they had no particular difficulties in using it.

◆ 80% of applicants or prospective applicants say "there are difficulties in utilization"… Complicated procedures (46.4%), strict requirements (20.6%) in order

The most common difficulty factor was 'difficulty in preparation procedures' (46.4%). This was followed by 'strict support requirements' (20.6%), 'insufficient support level' (18.7%), 'post-receipt of support funds after employment retention measures' (12.4%), and 'rigidity in operation' (6.7%).

Complex documents and procedures are the biggest obstacles to applying for support funds for small business owners. Most are small-scale and lack the capacity to prepare documents and find it difficult to receive advice. To apply for the support fund, they must submit damage proof materials, consultation materials with workers, and proof of working hours. After applying, to actually receive the support fund, they must also submit materials that can verify attendance and payment of allowances.

Although the government has partially eased the employment retention support requirements, voices remain high that the standards are still too strict. To receive the support fund, companies must reduce the working hours of all employees by more than 20%, maintain employment for one more month after receiving the support fund, and if violated, the fund must be repaid. Many complain that it is difficult to meet these requirements. For example, a Japanese inbound travel agency has been reducing working hours since last year due to worsening conditions, but reducing an additional 20% is impossible. A representative of a household goods manufacturer said, "The immediate burden is large and the future is uncertain, but if we receive the support fund, we must maintain employment for one more month," adding, "If we fail to maintain employment, we must return the support fund, so realistically, we cannot even consider using it."

Although the support fund level for small and medium-sized enterprises has been raised to 90% of the suspension allowance, they still have to bear the remaining 10% and the four major insurance premiums (11.39% of the suspension allowance). Small business owners tend to decide on unpaid leave or reemployment promises and encouraged resignations rather than maintaining employment through paid leave.

The system requiring payment of suspension allowance first and then applying for the support fund after taking employment retention measures is also pointed out as an obstacle to applying for the support fund. Most small business owners considering applying for the fund are in a situation where it is difficult to secure operating funds.

Some small business owners also pointed out the rigidity of the system's operation. To resume work in the future, certain tasks must be handled during the employment retention period, but if employees on leave are assigned work or necessary personnel are hired, support is not provided. Also, the leave period before applying for the support fund is excluded from the support scope calculation.

The Korea Chamber of Commerce and Industry evaluated that the reason small business owners feel difficulties in utilizing the Employment Retention Support Fund system is that although the government partially expanded the support level, there are limits to applying it in the emergency situation of COVID-19. According to data released by the Ministry of Employment and Labor, while 1,514 companies applied for the Employment Retention Support Fund last year, as of April 14 this year, 50,053 companies had applied, exceeding 33 times the total of last year.

Despite the application volume increasing more than 100 times compared to usual, the procedure of reviewing documents case by case remains, causing administrative burdens and accumulating corporate dissatisfaction.

Also, since the fund is executed from the Employment Insurance Fund created by companies, not government budget, it is difficult to inject unlimited amounts into the Employment Insurance Fund, which has scale limitations. A Korea Chamber of Commerce and Industry official estimated, "Although the government increased the support scale from the initial 100 billion won to 500 billion won, considering that 430,000 people applied for the Employment Retention Support Fund by March, it will be exhausted within a month."

◆ KCCI proposes 'bold budget investment and administrative procedure acceleration' such as 100% payment of suspension allowance

The Korea Chamber of Commerce and Industry pointed out that reducing the employment retention burden on companies is the most urgent task. To this end, the suspension allowance paid by employers should be 100% compensated for both large and small-medium enterprises. The daily support limit should be raised from the current 66,000 won to about 70,000 won, and any additional costs incurred later should be covered by government budget.

Administrative procedures should also be expedited. Even if a large budget is allocated, if the actual support pipeline is blocked, the effect is greatly reduced. The support fund application documents should be drastically reduced, leaving only basic items, and the payment method should be switched to a 'prepayment and post-settlement' system. In this regard, the U.S. Paycheck Protection Program (PPP) is worth noting. The U.S. government provided a huge loan of 428 trillion won to support employment retention during COVID-19, and if used for employee wages, the amount is forgiven, and only the remainder is repaid later. It requires no detailed documents and provides funds in advance, so there is no burden of prepayment.

Jeon Insik, head of the Employment and Labor Policy Team at the Korea Chamber of Commerce and Industry, said, "Employment retention is essential to prevent a vicious cycle where employment insecurity leads to consumption contraction, but the labor cost burden due to the uncertain COVID-19 situation is also a big problem," adding, "To reduce companies' concerns and burdens, improvement of the system and its operation is urgent."

This content was produced with the assistance of AI translation services.