Labor Shortage and Regulatory Burdens... SMEs Walking a Thorny Path

Temporary Suspension and Extension of Various Regulations Set to End by Year-End
Burden of 52-Hour Workweek Implementation and COVID-19-Induced Foreign Workforce Shortage, etc.

The end of the grace period for the 52-hour workweek system, a shortage of foreign workers on site, and the expiration of the exemption for regular inspections of hazardous chemical handling facilities under the Chemical Substance Control Act (Hwagwanbeop) are all signaling a thorny path ahead for small and medium-sized enterprises. Photo by Asia Economy DB

[Asia Economy Reporters Daeseop Kim, Chulhyun Kim] As various regulations that were temporarily deferred or postponed are set to end by the end of this year, a thorny path is anticipated for small and medium-sized enterprises (SMEs). Issues faced by SMEs remain challenging, including the end of the grace period for the 52-hour workweek system, a shortage of foreign workers on-site, and the expiration of the grace period for regular inspections of hazardous chemical handling facilities under the Chemical Control Act (Hwagwanbeop).

According to the SME sector on the 6th, the grace period for the 52-hour workweek system granted to workplaces with fewer than 300 employees will end at the end of this year. The SME sector has continuously requested the government and the National Assembly to prepare supplementary legislation for flexible working hours and selective working hours systems, but no solution has been found yet. At a meeting between Lee Nak-yeon, leader of the Democratic Party of Korea, and SME representatives held last month at the Korea Federation of SMEs in Yeouido, Seoul, there were repeated requests for prompt legislative improvements to the working hours system. The SME sector proposed ▲expanding the unit period for the flexible working hours system (from 3 months to 6 months) ▲extending the settlement period for the selective working hours system (from 1 month to 3 months) ▲improving the special extended working hours system to a reporting system ▲allowing additional extended working hours on a monthly or yearly basis with labor-management agreement, similar to Japan.

Ongoing Crisis Situations Including 52-Hour Workweek, Foreign Worker Shortage, and Expiration of Chemical Control Act Grace Period

SMEs are suffering from chronic labor shortages. Last year, they experienced significant confusion due to insufficient preparation ahead of the 52-hour workweek system implementation. Although temporary measures such as a one-year grace period were provided, the fundamental problems remain unresolved. The SME sector points out that a uniform 52-hour workweek system that does not reflect the realities of the workplace cannot restore competitiveness. Especially, even if the COVID-19 pandemic subsides, the issue of working hours is widely recognized in the industry as a major obstacle to economic recovery. An industry insider remarked, "Moreover, with the recent spread of non-face-to-face (untact) work styles such as telecommuting and remote work, the current rigid working hours system limits the ability to respond to changes in the workplace."

The shortage of foreign workers on-site due to the impact of COVID-19 is also severe for SMEs. This year, the manufacturing sector planned to introduce 30,130 foreign workers, but only 2,234 had entered the country by March, and entry has been suspended since April due to COVID-19. As a result, foreign workers whose stay period has expired are leaving the country, and with delays in the arrival of replacement workers, SMEs are facing a serious labor shortage. According to a recent survey by the Korea Federation of SMEs, 64.1% of SMEs experienced production disruptions due to the suspension of foreign worker entry. In this survey, 27.8% of companies stated that "if rapid entry is possible, we are willing to bear the cost of self-quarantine," indicating the urgency of the situation on the ground. If the delay in foreign worker entry due to COVID-19 prolongs, the efforts of SMEs to overcome the pandemic may be nullified by the production labor gap. Lee Sang-nyeong, Director of the Korea Foam Plastic Industry Cooperative, emphasized, "Even amid the COVID-19 situation, the prompt resumption of foreign worker entry necessary for revitalizing SMEs must be promoted."

Requirements of Small and Medium Enterprises Regarding the Chemical Substances Control Act. Source = Korea Federation of SMEs

The Chemical Control Act issue is also a burden for related SMEs. Although the grace period for regular inspections of hazardous chemical handling facilities, which was scheduled to end this month, has been extended by three months until the end of this year, SMEs are demanding further support such as a one-year grace period for regular inspections and on-site consulting support. In particular, among the standards for facilities under the Chemical Control Act, facilities that load and unload hazardous chemicals must have containment curbs installed around the floor perimeter. However, for businesses established before the enforcement of the Chemical Control Act, it is difficult to comply with the length and width standards of the containment boxes due to limited site space, which is an area that needs improvement.

Seo Seung-won, Executive Vice President of the Korea Federation of SMEs, said, "SMEs do not have personnel specialized in environmental laws such as the Chemical Control Act, and the laws themselves are numerous and complicated with detailed provisions in notifications, making them difficult to understand. The government needs to prepare alternatives suitable for the field and simultaneously expand on-site consulting support that grants SMEs sufficient time to comply with the law."

No Min-seon, Head of the Future Strategy Research Group at the Korea Institute for Small and Medium Enterprises, stated, "There may be improvements after Chuseok with government support, but the crisis situation for SMEs, especially small business owners, continues, so improvements on various pending issues are necessary. Uncertainty remains high, and many SMEs are unable to plan for next year even in the second half of the year. To alleviate this uncertainty, the government must send a clear policy signal that it will firmly support SMEs and small business owners."

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