Sangui: "4 out of 10 Companies Face 'Employment Adjustment Situations' but Strive to Maintain"

KCCI Survey of 301 Domestic Companies... Actual Layoffs Only 9%
"Employment Retention Difficult with Corporate Will Alone... Urgent Need to Expand Government Support Measures"

[Asia Economy Reporter Ki-min Lee] Due to the impact of the novel coronavirus infection (COVID-19), 4 out of 10 domestic companies are in a situation where employment adjustment is necessary, but only about 1 company has actually reduced employment. This means that companies are making every effort to maintain employment.

The Korea Chamber of Commerce and Industry (KCCI) recently conducted a ‘Corporate Perception Survey on Employment and Wages Due to the COVID-19 Situation’ targeting 301 domestic companies, and announced on the 9th that 40.5% of the participating companies responded that employment adjustment was necessary due to reasons such as decreased sales caused by COVID-19.

However, according to KCCI’s survey results, only 9.0% of companies actually reduced their workforce, and the majority of companies are maintaining employment through measures such as adjusting working hours or temporary closures and leaves (18.6%).

Despite poor management conditions, 12.9% of companies bore the burden of maintaining employment without any adjustment measures. A KCCI official analyzed, "Companies are aware that if skilled personnel are lacking when the situation improves, it will cause problems in work processing and competitiveness, and employees also understand the company’s circumstances, so many willingly participate in temporary closures and similar measures."

Efforts by companies to maintain employment are also reflected in employment indicators. While the unemployment rate in the United States, which was initially around 4%, has remained above 10% since April as COVID-19 intensified, South Korea has consistently maintained an unemployment rate in the 4% range even after the spread of COVID-19.

On the other hand, responding companies showed considerable burden regarding new hiring. When asked about this year’s ‘hiring schedule,’ more than half of the respondents answered that they ‘gave up new hiring’ (19.3%) or ‘postponed the hiring schedule’ (31.2%). Regarding the ‘scale of new hiring,’ 40.7% responded that they had ‘reduced or were considering reducing’ the originally planned scale.

The impact of COVID-19 also affected companies’ wage decisions. Regarding the ‘progress of this year’s wage decisions,’ 55.5% of responding companies said they ‘completed it in the first half of the year,’ which was later than in previous years. Among companies that need to conduct wage negotiations in the second half, only 36.3% said they ‘plan to raise wages,’ while 54.8% said they ‘plan to freeze wages,’ exceeding half.

Professor Junmo Cho of the Department of Economics at Sungkyunkwan University pointed out, "So far, wage negotiations have been conducted mainly by companies relatively less affected by COVID-19, so there seems to be no apparent problem. However, many companies have postponed wage negotiations for the second half, and the possibility of a second COVID-19 shock cannot be excluded, raising concerns about conflicts in the industrial field over wage decisions."

Companies appear to be determined to make every effort to maintain employment in the second half of the year as well. When asked, ‘If the COVID-19 situation continues in the second half, what will you do?’ 62.8% of companies responded that they would ‘maintain the current situation without additional employment adjustments.’ Only 6.0% responded that ‘workforce reduction is inevitable.’

However, realistically, maintaining employment is not easy with just the will of companies. Many companies are worried about operating funds as liquidity within companies decreases immediately, and the timing of the second COVID-19 shock is uncertain. Moreover, companies still complain about difficulties in utilizing government employment retention support programs.

KCCI urged the prompt implementation of the ‘Tripartite Agreement’ reached last month. The agreement includes provisions such as extending the support period and easing the eligibility requirements for employment retention subsidies, which provide practical help for companies to maintain employment.

Jeon In-sik, head of the Employment and Labor Policy Team at KCCI, emphasized, “Companies’ intention to continue maintaining employment in the second half is based on the belief that the government will continue the policies it has been promoting,” and added, “The government must clearly demonstrate its commitment through policies to support companies maintaining employment so that their efforts do not weaken.”

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