[The Editors' Verdict] "A Second Booyoung Is Welcome, But..."

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Mid-sized construction company Booyoung paid 100 million won per employee as childbirth incentives, and it took only a month for the government to come up with a solution. This period marks the time from when employees received the large support funds on the 5th of last month to when the government addressed the issue of employees having to pay tens of millions of won in taxes.

The government has decided to exempt childbirth support payments made to workers from taxation going forward. From a corporate perspective, this means childbirth support payments can be treated as expenses, reducing corporate tax. On the 5th, President Yoon Suk-yeol promised, "Childbirth support payments made by companies to workers will be fully tax-exempt to ease the burden on companies and allow more workers to benefit." For example, a worker earning an annual salary of 50 million won who receives a 100 million won support payment previously had to pay 27.5 million won in earned income tax. However, under the revised law, they would only pay 2.5 million won in earned income tax on their salary. Although this breaks the basic tax principle that 'taxes are levied where income exists,' it reflects the government's firm determination to solve a national issue.

However, it is questionable whether the government will truly benefit from this measure. Despite this institutional reform, it is unlikely that a second or third Booyoung will emerge. Companies capable of paying hundreds of millions in support funds are limited to major domestic corporations. Most of these are publicly listed companies where shareholders' opinions are crucial. Shareholders are unlikely to view spending large sums to encourage childbirth among employees as aligned with corporate objectives. They may prioritize whether dividends will be paid this quarter instead. This contrasts with Booyoung, an unlisted company where Chairman Lee Joong-geun holds most of the shares.

It was not that large corporations were stingy with childbirth support due to insufficient tax-exempt limits. In 2022, only 2.3% of all workers reported tax-exempt childbirth and childcare allowances (according to National Tax Service statistics). The reported amount averaged 679,000 won per person annually, which is below both the 2022 tax-exempt limit (1.2 million won per year) and the current limit (2.4 million won per year).

From a human resources management perspective, large support payments are burdensome. Since only employees who gave birth within the last few years receive the large sums, companies must consider how to address potential discrimination claims from previous childbirth employees. They also need to manage possible tensions with employees who cannot have children.

Nevertheless, companies planning childbirth support payments may still emerge, even if they do not pour in massive funds comparable to Booyoung. After Booyoung announced its childbirth incentive support, Lotte Group decided to cover Carnival van rental fees for two years for employees across all affiliates who have a third child. Ssangbangwool also announced it would pay up to 100 million won as a third-child childbirth incentive.

However, what the government should pay close attention to is that such changes may represent only very minor progress in solving the low birthrate problem. Small and medium-sized enterprises (SMEs), which employ 90% of workers, do not have the financial capacity to provide such support. Especially amid the recent economic downturn, it is unthinkable. Hearing that friends working at large companies received childbirth support payments can even cause relative deprivation, negatively affecting childbirth plans.

Going forward, the government needs to align its expectations with these companies. It is time to show firm determination to solve the low birthrate issue to SME workers and self-employed individuals as well. Only when a bright light shines on places where male employees want but cannot take parental leave and where childbirth support payments are just a dream can the myth of a birthrate rebound be written.

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