Easier Access to Employment Retention Subsidies for Dispatch Companies and Small Businesses with Fewer Than 10 Employees (Comprehensive)

Cabinet Meeting Approves Amendment to the Enforcement Decree of the Employment Insurance Act
"Reflecting Opinions of Related Organizations and Field... Closing Blind Spots"
Relaxation of 15% Sales Decrease Requirement Compared to Previous Year
Extension of Post-Report Period for Leave and Suspension from 3 to 30 Days

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] Starting from January next year, the requirements for the Employment Retention Subsidy system will be relaxed, making it easier for dispatch and service contractors to receive subsidies.

Dispatch and service contractors send personnel to various workplaces, making it difficult to meet the requirement for support of leave allowance (a reduction of working hours by more than 20%). Going forward, working hours and leaves will be considered on a per-workplace basis. Additionally, the one-month layoff prevention period after receiving the subsidy will be applied only to the 'relevant workers' instead of all employees, reducing the burden of applying for the Employment Retention Subsidy.

The post-reporting period will be extended from 3 days to 30 days, and workplaces with fewer than 10 employees will newly be included in the unpaid leave support target, which is expected to benefit small and micro enterprises with limited administrative capacity.

Eliminating Blind Spots in Subsidy... Effective January 1 Next Year

On the morning of the 22nd, the Ministry of Employment and Labor announced at the Cabinet meeting held at the Government Seoul Office that the 'Enforcement Decree of the Employment Insurance Act' revising the Employment Retention Subsidy system to eliminate blind spots will be deliberated and approved, and will take effect from January 1 next year.

The Employment Retention Subsidy is a system that compensates employers who maintain employment despite business difficulties by reimbursing up to 90% of paid leave and suspension allowances. As of the 10th of this month, a total of 2.1 trillion KRW was paid to 760,000 workers in about 71,000 companies this year. From next year, approximately 97,000 dispatched workers (based on last year) are expected to newly benefit.

An official from the Ministry of Employment and Labor stated, "We improved the Employment Retention Subsidy to be more easily utilized by reflecting suggestions from related organizations such as the Korea Federation of SMEs and opinions from employment centers on the ground."

According to the revised enforcement decree, the requirement for worker leave, which was an obstacle for dispatch and service contractors to receive subsidies, has been relaxed. Currently, subsidies are only available if the total working hours of personnel dispatched to multiple workplaces are reduced due to leave or other reasons. This will be changed to a per-workplace basis. It will be possible to apply for subsidies for personnel at workplaces that have stopped operations due to leave.

Also, when a workplace implements leave or suspension, the dispatch company can apply for subsidies for the relevant workers without separately proving the inevitability of employment adjustment. The one-month layoff prevention period that must be observed after receiving the subsidy will also apply only to the relevant workers who underwent employment retention measures.

Due to the decrease in tourists caused by COVID-19, the Tancheon Parking Lot in Songpa-gu, Seoul is filled with tour buses. Photo by Mun Ho-nam munonam@

Considering the COVID-19 pandemic, the post-reporting period will be extended from 3 days to 30 days. To receive the Employment Retention Subsidy, employers must submit an employment retention plan in advance or report within 3 days afterward. However, it was difficult to comply in cases of sudden suspension due to gathering bans or restriction orders, so the period was extended to within 30 days. Retroactive application will also be made for cases of leave or suspension due to gathering ban orders this month. For example, a business that suspended operations from the 8th due to an escalation in social distancing levels but submitted the post-report on January 4 next year will be able to receive the Employment Retention Subsidy for the entire suspension period.

Reducing Employer Burden... Unpaid Leave Support for Workplaces with Fewer Than 10 Employees

The requirement that sales must decrease by 15% compared to the previous year to receive the Employment Retention Subsidy will also be relaxed. This is to prevent disadvantages to employers whose sales have already decreased due to COVID-19. Next year, subsidies can be received based on sales compared to 2019.

The standard for reduced working hours will also change. Previously, to receive the subsidy for leave measures, employers had to reduce the average actual working hours by more than 20% over three months, 4 to 6 months prior.

However, since employers had to submit evidence of the average monthly working hours over three months, it was difficult for small businesses to prove this, and there was an administrative burden in submitting evidence. To reduce the administrative burden on employers and expedite subsidy payments, the standard was changed to reduce working hours based on scheduled working hours. Employers only need to submit employment rules, collective agreements, or labor contracts specifying scheduled working hours, which is expected to significantly reduce administrative burden.

Measures to prevent abuse of the Employment Retention Subsidy system will also be implemented. Cases were found where workers were hired just before implementing leave or suspension to apply for subsidies. Therefore, regulations were revised to allow employment retention measures only for workers who have been enrolled in employment insurance for more than 90 days. However, since many businesses have rapidly deteriorated due to COVID-19, this regulation will not be applied until the COVID-19 infectious disease crisis alert is lifted.

Meanwhile, the government decided to include workplaces with fewer than 10 employees in the unpaid leave support target after exhausting the Employment Retention Subsidy. From next year, workplaces with fewer than 10 employees will be able to receive unpaid leave support if they have exhausted the 180-day paid Employment Retention Subsidy support period. However, the validity period is limited until December 31, 2022, and extension will be considered depending on the situation.

Previously, to receive unpaid leave support, employers had to implement paid leave for more than 3 months, but going forward, if more than 20% of insured workers take paid leave for more than 3 months, unpaid leave support can be received.

Minister of Employment and Labor Lee Jae-gap stated, "We will continue to listen carefully to voices from the field to ensure there are no difficulties in utilizing the system and continuously improve support systems including the Employment Retention Subsidy."

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