During Disasters Like COVID-19, Large Corporations Share In-House Employee Welfare Funds with Partner Companies

Usage Allowed for 5 Years Within 30% of Basic Assets Total Amount
Benefit Amount per Partner Company Must Be at Least 50% of Primary Contractor Workers

[Asia Economy Reporter Kim Bo-kyung] Starting next year, subcontractors will be able to additionally use the reserve funds (basic assets) of in-house employee welfare funds established by primary contractors during disaster situations such as the novel coronavirus infection (COVID-19). Until now, subcontractors could only use a portion of the amount contributed by the primary contractor in that year, but the scope has been expanded. However, there is a condition that the benefit amount per subcontractor employee must be at least 50% of the benefit amount per primary contractor employee, so it is uncertain whether primary contractors will actively participate.

On the morning of the 29th, the government held a Cabinet meeting and deliberated and approved the amendment to the "Enforcement Decree of the Employee Welfare Basic Act" containing this content. The core of the amendment is that in the event of a disaster or business difficulties, up to 30% of the total basic assets based on the previous fiscal year can be used for five years.

This was prepared with the purpose of helping stabilize workers' lives and promoting coexistence between large and small and medium enterprises by utilizing in-house employee welfare funds amid concerns about suspension or reduction of in-house welfare projects due to management difficulties caused by the COVID-19 crisis. This is also included in the "Labor-Management-Government Agreement to Overcome the COVID-19 Crisis" signed last July.

In particular, this can be used when an in-house employee welfare fund corporation with basic assets of 3 million KRW or more per employee expands benefits to subcontractor employees and implements welfare projects. The benefit amount per subcontractor employee must be at least 50% of the benefit amount per primary contractor employee. For example, if the benefit amount per primary contractor employee is 1 million KRW, at least 500,000 KRW must be spent per subcontractor employee.

There are concerns that the fund may be depleted due to this. The in-house employee welfare fund is a project where the employer contributes a portion of the profits to establish a fund and uses it for employee welfare such as livelihood stabilization, housing funds, and scholarships. Since the legal basis was established in 1991, as of 2018, there are a total of 1,672 funds, and the reserve funds, or basic assets, amount to 10.7845 trillion KRW.

Among these, basic assets established by large enterprises with more than 1,000 employees account for more than 6 trillion KRW. The accumulation of over 10 trillion KRW in reserve funds is thanks to strict usage restrictions that require large enterprises to use up to 50% of the fund contributions for the year and small and medium enterprises up to 80%, with the remainder incorporated into basic assets to promote sustainable welfare projects.

An official from the Ministry of Employment and Labor said, "This is intended to create a social atmosphere of coexistence between large and small and medium enterprises in national disaster situations," and added, "Improving the welfare of subcontractor employees will ultimately benefit the primary contractors as well."

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