SMEs on Thin Ice Amid Tough Response to Industrial Accidents: "Government Support Is Urgently Needed"

Reviewing Higher Fines and Penalties
Potentially Devastating for SMEs
"Government Support for Safety Investments Is Essential"

As President Lee Jaemyung has announced plans for stringent economic sanctions on workplaces where industrial accidents occur, anxiety is mounting among small and medium-sized businesses, who fear that their overall management could be destabilized. There are concerns that if such intense pressure continues without sufficient safety personnel and budgets, the entire industry could contract.

Workers are working at a construction site in Goyang, Gyeonggi.

According to industry sources on August 13, the government and ruling party are considering strengthening economic sanctions such as fines and penalties for workplaces where serious accidents occur. This measure follows President Lee's order for a stern response after a series of fatal accidents at industrial sites, including at POSCO E&C. In addition, strong sanctions such as disqualification from public bidding, reduction of loan limits, and stricter business suspension criteria are reportedly under discussion. An official from the Ministry of Employment and Labor stated, "It is true that we are reviewing various options, including raising penalties, but specific measures have not yet been decided."

With the announcement of tough economic sanctions, the small and medium-sized business sector is on edge. This is because small businesses, which often lack the budget to hire more safety personnel or establish safety systems, are most likely to become the first targets of such sanctions. The impact of these economic sanctions would also be far more devastating for them compared to large corporations, raising concerns that the entire industry could shrink if the system is implemented. Since the Serious Accidents Punishment Act came into effect in January 2022, small and medium-sized businesses have accounted for 87.1% of cases prosecuted for violations of the Act.

An official from the Korea Employers Federation explained, "Compared to large corporations, small and medium-sized businesses lack both safety personnel and budgets, making it difficult to prepare the numerous safety management documents required by the Serious Accidents Punishment Act and to establish systems for management to check compliance. Due to these practical limitations, the risk of industrial accidents tends to be concentrated among small and medium-sized businesses."

The small business sector unanimously argues that government support for safety investments is essential for companies that cannot afford it. The industry believes that a punishment-only approach is not a fundamental solution. According to a report published by the Korea Employers Federation in February this year, after the implementation of the Serious Accidents Punishment Act, the average increase in safety budgets was 62.76 billion KRW for workplaces with over 1,000 employees, compared to just 50 million KRW for those with fewer than 50 employees-a difference of more than 1,255 times. The gap in the increase of safety personnel was also more than 50 times, highlighting a serious polarization in overall response levels.

An official from the Korea Federation of SMEs said, "While we agree on the need to strive for safer workplaces, in reality, many frontline businesses lack the budget and personnel to fully comply with safety regulations, or management lacks the expertise to know what to fix first. Therefore, the government should strengthen consulting support for small businesses to establish safety measures, and increase support for hiring safety personnel and introducing smart safety equipment." The official added, "If economic sanctions and punishments are strengthened in a situation where overall conditions are lacking, companies that feel their survival is threatened may instead try to hide. Strengthening incentives for companies that focus on safety management, rather than just punishment, could also be an alternative."

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