Countdown to the Enforcement of the Loss Compensation Act... Concerns Over Fairness of Compensation Standards and Potential Backlash

Small Business Owners and Self-Employed Waiting for Compensation "Very Frustrated"
"Doubts About Proper Operation of Review Committee, Concerns It Won't Follow Government's Intent"
Ministry of SMEs and Startups "Doing Our Best to Start Compensation Applications and Payments from Late October"

A commercial building in the process of closing down.
[Photo by Yonhap News]

[Asia Economy Reporter Kim Jong-hwa] "They say they will provide compensation for losses, but nothing has been revealed about the criteria, the amount, or how to receive it, so it is very frustrating."

Yoon Young-sik (43, pseudonym), who runs a cafe in Itaewon, Seoul, said this in response to the news that the "Act on the Protection and Support of Small Business Owners" (Loss Compensation Act) will be enforced on the 8th.

The Ministry of SMEs and Startups has postponed decisions on detailed standards such as the calculation method, amount, and payment procedures for loss compensation until the "Loss Compensation Deliberation Committee" meeting scheduled for the 8th, as the enforcement date approaches in a week. According to the detailed standards to be prepared by the committee, significant aftershocks are expected, including disputes over fairness regarding compensation targets and resistance depending on inclusion or exclusion of certain businesses.

Unlike the previous fixed-amount support payments for small business owners based on certain ranges, loss compensation will provide customized compensation proportional to the damage scale of each business. Because of this, the Ministry of SMEs and Startups is making efforts to meet as many small business owners and self-employed individuals as possible before enforcement to gather their diverse opinions and reflect them in the system.

In September alone, the Ministry held seven meetings with about 20 small business and self-employed organizations, including the Korea Federation of Small and Medium Business and the National Federation of Merchants. Small business owners attending the meetings suggested ▲ compensation for simplified taxpayers who have difficulty providing evidence, ▲ consideration of fixed costs when calculating compensation, ▲ establishment of a prompt compensation payment procedure, and ▲ separate support measures for industries facing management crises such as travel agencies. The Ministry plans to reflect these suggestions as much as possible.

Additionally, to ensure sufficient discussion of small business owners' opinions, the Ministry appointed two private members to the Loss Compensation Deliberation Committee from recommendations by the Korea Federation of Small and Medium Business and the National Federation of Merchants, one member each. The committee is composed of the Ministry of SMEs and Startups Vice Minister as chairperson, senior officials from seven ministries including the Ministry of Economy and Finance, Ministry of the Interior and Safety, Ministry of Health and Welfare, Ministry of SMEs and Startups, Office for Government Policy Coordination, National Tax Service, Korea Disease Control and Prevention Agency, and seven private members.

There are considerable obstacles to overcome before the Ministry’s plan to start paying compensation from as early as the 28th can be realized. The compensation period covers from the law’s promulgation on July 7 to the end of September. Therefore, starting today (the 1st), data collected and reported by local governments nationwide must be analyzed, and once the committee sets detailed standards, loss compensation must be calculated individually by region and business, raising concerns about an overwhelming workload. The Ministry expects to shorten the process by launching a "rapid compensation" website similar to the National Tax Service’s year-end tax adjustment simplification system once the detailed standards are finalized.

However, the path to compensation payments still seems long. Professor Kim Tae-gi of Dankook University’s Department of Economics said, "There is doubt whether the deliberation committee itself can operate normally." He added, "Protests and even extreme resistance such as self-harm have occurred. Since the committee members representing various sectors may have differing views, the process is unlikely to proceed smoothly according to the government’s wishes."

In response, a Ministry of SMEs and Startups official from the Loss Compensation Task Force said, "The deliberation committee will be held on the day the law is enforced to review detailed standards, which will be immediately announced by the minister," and added, "We will do our best to start accepting compensation applications and payments from the end of October."

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