FTC chief warns about abusing subcontractors by conglomerates
By Yoon Ja-young
Conglomerates will have to share the burden of subcontractors hit by the steep minimum wage hike. They should not force subcontractors to supply exclusively for them or restrict their exports of technology. These are part of the subcontractor law revision by the Fair Trade Commission (FTC) that will go into effect from Tuesday.
"Raising the minimum wage is essential for the current administration's income-led growth strategy. However, we are aware that it could weigh on the small businesses and merchants who hire workers and pay salaries," Fair Trade Commission (FTC) Chairman Kim Sang-jo said Monday.
"The commission has been making diverse efforts and will continue to do so to lessen their burden," he added.
According to the revision, subcontractors will be able to demand contractors raise their supply prices if the minimum wage is raised by over 7 percent, or raw material prices rise by over 10 percent. The measure comes amid growing concerns that the steeply rising minimum wage, which marked double digit growth for two consecutive years following President Moon Jae-in's election pledge, is troubling small and medium-sized enterprises (SMEs) more than conglomerates. According to a survey on SMEs, around half of them said that their contractors raise the supply cost as much as the rising raw material price or labor cost. The country's minimum wage for next year was raised by 10.9 percent to 8,350 won ($7.4) Saturday, despite fierce opposition by employers.
When subcontractors make such a request, the contractors are obliged to start a negotiation.
"The subcontractor's demand for a raise is accepted in seven or eight out of 10 such cases according to past experiences," Kim said.
The revision also bans contractors from forcing subcontractors to supply exclusively for them. They also should not restrict subcontractors from exporting technology to overseas.
They should not demand subcontractors to submit managerial information such as costs either. It has been the norm among large businesses to get managerial information from suppliers such as costs, supply prices to their competitors, sales and the list of clients, using such information to slash supply prices.
The FTC also plans to introduce a "one strike out" policy. If a contractor unreasonably slashes its pay to subcontractors or appropriates their technology, it will be banned from bidding for government orders.
"Establishing fair trade in contract work and providing SMEs with their due compensation will be the starting point to tackle the economic polarization and deep-rooted problem involving SMEs," the chairman said.
He also vowed to tackle unfair practices by franchise headquarters. The franchisees will be given stronger rights to act collectively while bargaining with headquarters. They also should obtain consent from franchisees in advance for promotional events that incur costs.
By Yoon Ja-young
Conglomerates will have to share the burden of subcontractors hit by the steep minimum wage hike. They should not force subcontractors to supply exclusively for them or restrict their exports of technology. These are part of the subcontractor law revision by the Fair Trade Commission (FTC) that will go into effect from Tuesday.
"Raising the minimum wage is essential for the current administration's income-led growth strategy. However, we are aware that it could weigh on the small businesses and merchants who hire workers and pay salaries," Fair Trade Commission (FTC) Chairman Kim Sang-jo said Monday.
"The commission has been making diverse efforts and will continue to do so to lessen their burden," he added.
According to the revision, subcontractors will be able to demand contractors raise their supply prices if the minimum wage is raised by over 7 percent, or raw material prices rise by over 10 percent. The measure comes amid growing concerns that the steeply rising minimum wage, which marked double digit growth for two consecutive years following President Moon Jae-in's election pledge, is troubling small and medium-sized enterprises (SMEs) more than conglomerates. According to a survey on SMEs, around half of them said that their contractors raise the supply cost as much as the rising raw material price or labor cost. The country's minimum wage for next year was raised by 10.9 percent to 8,350 won ($7.4) Saturday, despite fierce opposition by employers.
When subcontractors make such a request, the contractors are obliged to start a negotiation.
"The subcontractor's demand for a raise is accepted in seven or eight out of 10 such cases according to past experiences," Kim said.
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| FTC Chairman Kim Sang-jo |
They should not demand subcontractors to submit managerial information such as costs either. It has been the norm among large businesses to get managerial information from suppliers such as costs, supply prices to their competitors, sales and the list of clients, using such information to slash supply prices.
The FTC also plans to introduce a "one strike out" policy. If a contractor unreasonably slashes its pay to subcontractors or appropriates their technology, it will be banned from bidding for government orders.
"Establishing fair trade in contract work and providing SMEs with their due compensation will be the starting point to tackle the economic polarization and deep-rooted problem involving SMEs," the chairman said.
He also vowed to tackle unfair practices by franchise headquarters. The franchisees will be given stronger rights to act collectively while bargaining with headquarters. They also should obtain consent from franchisees in advance for promotional events that incur costs.
