SMEs "Employment Retention Subsidy 90% Special Case Should Be Extended Until the End of This Year"

Korea Federation of SMEs Proposes to Ministry of Employment and Labor
Long-Term COVID-19 Pandemic Increases Labor Cost Burden for SMEs

Headquarters of the Korea Federation of SMEs

[Asia Economy Reporter Kim Daeseop] "Due to the novel coronavirus infection (COVID-19), vending machine delivery locations such as universities and exhibition halls have closed, causing our industry's sales to decrease by nearly 40-50% this year. We have been barely surviving by receiving the Employment Retention Subsidy for six months. In our workplace, 18 out of 40 workers are currently receiving the subsidy, and if the support level decreases, there is no alternative but restructuring," said Yoon Youngbal, Chairman of the Korea Vending Machine Operators Cooperative.

"Orders have sharply declined and payments for deliveries have not been received because the COVID-19 situation is worsening in major delivery destinations such as Europe and the United States, resulting in a sales decrease of over 20%. Currently, more than 20% of our total workforce is receiving the Employment Retention Subsidy, and if the support level decreases even slightly, I am not confident in maintaining the current workforce," said Park Pyeongjae, Chairman of the Korea Surface Treatment Industry Cooperative.

The Korea Federation of SMEs announced on the 16th that it has requested the Ministry of Employment and Labor to extend the special Employment Retention Subsidy support period at 90% until the end of this year.

The reason for requesting the extension of the 90% special Employment Retention Subsidy support period this time is due to concerns that the employment situation of small and medium-sized enterprises (SMEs) will worsen if the support period ends at the end of this month.

The government extended the special Employment Retention Subsidy support period, which covers up to 90% of the leave and furlough allowances paid by employers, from April to September this year.

However, as COVID-19 prolongs and the management of SMEs continues to deteriorate, the industry fears that if the support rate returns to the previous level after this month, the labor cost burden on small SMEs, which have not yet recovered their payment capacity, will become heavier, worsening the employment shock.

Kim Munsik, co-chairman of the Labor and Workforce Committee of the Korea Federation of SMEs and chairman of the Korea Gas Station Operators Cooperative, stated, "On the SME frontlines, there is confusion, with some mistakenly believing that the 90% special support period has also been extended along with the extension of the support period limit."

Co-chairman Kim emphasized, "If the special support period ends and the support rate returns to the previous level from October, SMEs that have not recovered their payment capacity will be unable to bear labor costs and will be forced to make employment adjustments, which could lead to a mass unemployment crisis. Therefore, the special support period must be extended at least until the end of this year."

Although the government’s livelihood stabilization measures announced on the 10th extended the Employment Retention Subsidy support period limit by 60 days, providing some relief, the extension of the 90% special support period was not included, causing considerable confusion on the ground, according to the Korea Federation of SMEs.

The Employment Retention Subsidy is a system that supports companies facing management difficulties to take leave or furlough instead of making employment adjustments. To prevent replacement hiring after leave or furlough, new hires during the employment retention period are excluded from subsidy eligibility; however, exceptions are allowed when new hiring is unavoidable. From January to March this year, the Employment Retention Subsidy support rate ranged from 50% to 75%.

Kim Ki-moon, chairman of the Korea Federation of SMEs, said, "Since many companies are barely able to cover labor costs even with the current level of Employment Retention Subsidy, active cooperation among related ministries such as the Ministry of Strategy and Finance is necessary to secure the budget for extending the special support period."

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