Government Reduces Labor Cost Support for Social Enterprises... Shift from 'Uniform Promotion to Selective Support'

Ministry of Employment, 4th Basic Plan for Social Enterprises (2023-2027)
"Minimal Employment Creation Effect, Continued Fraudulent Subsidy Claims"
Direct Support Integrated with General SMEs System

The government has decided to significantly reduce the budget for labor cost support for social enterprises. Additionally, it will shift from uniform support to differentiated support based on performance. This decision is based on the judgment that "various side effects have occurred as a result of the uniform development policy," such as the minimal long-term employment creation effect despite labor cost support and the continuous occurrence of cases of fraudulent receipt of subsidies.

On the 1st, the Ministry of Employment and Labor announced the 4th Basic Plan for Social Enterprises (2023?2027), which includes these details.

Since 2008, the government has been establishing a "Basic Plan for the Development of Social Enterprises" every five years to foster and systematically support social enterprises. Based on this, it has directly supported labor costs, social insurance premiums, and project development expenses to ensure the stable settlement of social enterprises, and provided support such as priority purchasing by public institutions, tax benefits, and management consulting to strengthen competitiveness and sustainable growth.

Kim Seong-ho, Director of Employment Policy at the Ministry of Employment and Labor, explained, "As a result of the support so far, social enterprises have contributed to solving social problems to some extent through significant quantitative growth, employment of vulnerable groups, and expansion of social services. However, most social enterprises are small in scale, and 66% are job-providing types that offer jobs to vulnerable groups, resulting in insufficient provision of diverse social services." In fact, as of 2022, social enterprises with fewer than 10 employees accounted for 60.2%, those with 30 to 99 employees accounted for 10.6%, and those with 100 or more employees accounted for only 2.9%.

Cases of fraudulent receipt of subsidies have also continued to occur. According to the Ministry of Employment and Labor, Company B in the manufacturing sector falsely prepared labor-related documents such as employment contracts and attendance records for five workers and fraudulently received about 75 million KRW in labor cost subsidies.

Accordingly, the Ministry of Employment and Labor has decided to completely overhaul the support policy from "fostering" to "self-sustaining" to enhance the sustainability of social enterprises. First, indirect support such as market access and consulting will be strengthened, while direct support such as labor costs and social insurance premiums will be integrated into various similar support systems and provided on the same basis as general small and medium enterprises. Director Kim stated, "Most of next year's labor cost budget for social enterprises will be cut," adding, "We are removing the previous special privileges and will support them on the same standards as general small and medium enterprises."

Support will be differentiated based on performance evaluation. Instead of uniform support, government support such as public procurement and tax benefits will be provided differently by evaluating social value and economic performance. The evaluation results will be published and used as procurement guidelines for both public and private sectors.

To promote the scaling up of excellent social enterprises, investment briefing sessions linked to private companies' Environmental, Social, and Governance (ESG) management will be held to create a funding system where various investors can invest based on social performance from an ESG management perspective as well as profitability.

The role of social enterprises as service delivery systems in social service fields such as care, nursing, and housekeeping will be expanded in response to the low birthrate and aging society. To this end, management capabilities of social enterprises will be strengthened through specialized consulting and mother funds support in the care, nursing, and housekeeping sectors.

Director Kim said, "Through this basic plan, the government has presented an innovative plan to restore the original identity of social enterprises while securing self-sustainability from government finances," adding, "We plan to restore the identity of social enterprises as 'voluntary participation of members and local communities to solve social problems' and shift the support paradigm from uniform fostering to enhancing self-sustainability to strengthen competitiveness as enterprises."

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