[2021 National Audit] "Small Business Loss Compensation Must Guarantee Minimum Amount"

Assemblyman Dongju Lee Advocates for 'Minimum Amount Guarantee' in Small Business Loss Compensation
Compensation Standards to Be Calculated at Ministry of SMEs and Startups' Loss Compensation Deliberation Committee on the 8th

On the 6th, the streets of Myeongdong, Seoul, appeared lifeless due to the prolonged impact of COVID-19. Prime Minister Kim Boo-kyum stated at the Cabinet meeting that day regarding the compensation system for small business owners affected by COVID-19 quarantine measures, "We will ensure that small business owners can receive compensation by the end of this month at the latest." However, he added, "The compensation targets are losses directly caused by quarantine measures such as gathering bans and business hour restrictions enacted after the law was promulgated on July 7," and noted, "Unfortunately, losses before that date and indirect losses are not covered, so it may fall short of the expectations of small business owners." / Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Kim Heeyoon] There have been calls to guarantee a minimum compensation amount for small business owners who suffered losses due to the government's gathering bans and business restrictions amid the prolonged COVID-19 pandemic. Voices are also rising that it is difficult to assess the extent of small business owners' damages solely based on the decline in sales.

On the 7th, Lee Dongju, a member of the Democratic Party of Korea, stated at the Ministry of SMEs and Startups' audit, "According to the loss compensation calculation method under review by the Ministry, if the average daily sales decrease compared to the same period in 2019 is not significant, the average daily loss amount, that is, the daily compensation amount, could be just a few tens or hundreds of won," adding, "Such small business owners might receive actual compensation of only a few tens of thousands or thousands of won."

Lee continued, "One might think that if sales did not decrease, there is no loss, but the reality is different," explaining, "Small business owners try to defend their sales by doing deliveries they never did before, opening earlier, and selling takeout until late. In such cases, even if sales are maintained, it cannot be considered that there is no loss."

This is because they spend more costs and work longer hours with higher intensity, and in fact, many complaints like this were received during previous small business support fund disbursements, Lee added.

Assemblyman Dongju Lee. Photo by Assemblyman’s Office

The Ministry of SMEs and Startups plans to hold a Loss Compensation Deliberation Committee meeting on the 8th to finalize detailed standards such as the compensation calculation method and payment procedures.

According to the Ministry, the scope of loss compensation was decided on the 6th. It targets industries subject to the government's direct quarantine measures, such as gathering bans and business hour restrictions. This applies to cases where serious business losses occurred due to measures prohibiting gatherings inside business premises, either fully (gathering ban) or partially restricting operating hours (business hour restrictions).

The government's provisional plan for the loss compensation calculation method currently under review compares sales from July 8 to September 30 this year with sales from the same period in 2019 to calculate the average daily sales decrease, then multiplies it by the number of days of business restrictions or bans to determine the total sales decrease. The final loss compensation amount is calculated by reflecting operating profit margins, labor and rent cost ratios, and damage recognition rates.

The Ministry also reportedly expressed concerns that dissatisfaction over compensation amounts may arise since the compensation is calculated based on tax data.

Amid ongoing challenges to the calculation method, Lee proposed introducing a minimum guaranteed loss compensation amount that pays a minimum sum to all small business owners subjected to gathering bans or business restrictions regardless of sales decline, with additional payments proportional to the sales decrease.

Lee emphasized, "Gathering bans or business restrictions inherently cause damage to small business owners. This cannot be understood solely by the numbers of sales decline," adding, "If administrative measures are imposed by the government, there should be at least minimum compensation regardless of sales fluctuations."

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