SME Suspension Allowance 90% Support Starts Today... Expanded Exceptions for 'New Hires'

Implementation of Employment Retention Subsidy Increase from 75% to 90%
Temporary 3-Month Raise Until End of June... Daily Cap Set at 66,000 KRW
Considering Dispatch and Service Companies... Specific Criteria for Exceptional New Hires Detailed

Asia Economy DB=Photo by Honam Moon munonam@

[Asia Economy Reporter Kim Bo-kyung] From the 28th, the expanded Employment Retention Subsidy, which supports up to 90% of leave and furlough allowances for small and medium-sized enterprises (SMEs), will be implemented. Initially, new hires were excluded from the subsidy, but specific criteria for exceptions in unavoidable cases have also been clarified.

According to the Ministry of Employment and Labor, the amendment to the Enforcement Decree of the Employment Insurance Act, which includes the plan to expand the level of Employment Retention Subsidy support, will take effect from the 28th.

The Employment Retention Subsidy is a system that supports labor costs (allowances) when companies facing business difficulties choose leave or furlough instead of employment adjustment. For priority support companies (SMEs), the support level for paid leave or furlough conducted by employers from April 1 to June 30 will be temporarily increased from 75% to 90%.

Even if employment retention measures were implemented previously, if the support period includes at least one month, the increased subsidy will be paid for that period.

For example, if a worker with a monthly salary of 2 million KRW is paid 1.4 million KRW as leave allowance, under this measure, the government will bear 1.26 million KRW and the company 140,000 KRW. However, the daily cap remains the same at 66,000 KRW, and the support level for large companies is maintained at 67%.

The Ministry of Employment and Labor has, in principle, excluded subsidies for new hires during the employment retention period to prevent replacement employment after leave or furlough. Exceptions have been allowed only in unavoidable cases.

This has led to criticism that indirectly employed workers, such as those in dispatch agencies, are excluded from government support. A representative example is indirect workers belonging to dispatch and service companies working at Incheon Airport. Dispatch and service companies, which operate through new contracts and hires, have been in a blind spot where they could not receive Employment Retention Subsidies despite their workers’ jobs being threatened by the impact of COVID-19.

Accordingly, the Ministry has specified the criteria for exceptional new hires. Employment Retention Subsidies will be provided if new hires are made due to the nature of the work or redeployment of existing personnel.

Within 10% of the employer unit, new hires during the employment retention period until September 30 will be recognized through a simple verification such as an employer confirmation letter. For new hires exceeding 10%, the matter will be carefully reviewed to decide on recognition. If false information is recorded in the employer confirmation letter, penalties such as a one-year payment suspension and up to five times additional collection may apply.

The revised new hire criteria will be applied from April 27 to September 30. Even if the employment retention plan report was submitted earlier, it applies if the subsidy application is submitted after the 27th according to that plan.

Kim Young-jung, Director of Labor Market Policy at the Ministry of Employment and Labor, said, "We hope this measure will contribute to employment stability by alleviating labor cost burdens for small business owners and SME employers struggling due to COVID-19."

Incheon International Airport Terminal 1 departure hall is quiet due to the impact of COVID-19. Photo by Moon Honam munonam@

Specific exceptional new hire criteria and cases are as follows.

▲ When voluntary resignations occur in essential skilled personnel areas making redeployment of existing staff impossible (nature of work)

▲ When a technician is hired to replace a resigned worker to meet registration standards required by law (legal compliance)

▲ When a foreign worker (E-9) arrives earlier than originally planned due to unforeseen circumstances by the employer (change in hiring timing)

▲ When a dispatch worker is directly employed by the user employer in accordance with the "Act on the Protection, etc. of Dispatched Workers" (direct employment of dispatch workers)

▲ When the resigned worker’s job is the same but commuting is difficult due to geographical distance, making redeployment impossible (regional distance)

▲ When new hires are necessary due to new business and redeployment of existing personnel is impossible (business expansion)

▲ When a worker who had been continuously employed as a daily worker obtains employment insurance coverage, which is considered a new hire on the surface (redeployment of existing personnel)

▲ When the resigned worker’s job differs and redeployment of existing personnel is impossible, leading to new hires (difference in job duties)

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