Exclusive WeWork Korea begins rapid downsizing

WeWork office space in Shinnonhyeon, Seoul / Courtesy of WeWork Korea

By Nam Hyun-woo

WeWork Korea General Manager Chun Chung-joo

WeWork Korea is scaling down its workforce drastically by placing employees on indefinite leave and launching early retirement programs as part of the headquarters' urgent plan to cut fixed costs after a botched initial public offering (IPO).

On Sunday, sources told The Korea Times that the co-working space operator has put its employees on “administrative leave,” which discharges them from their positions and bans access to company facilities, this month, after more than 60 employees left the company as part of two early retirement programs from November 2019 and last month.

According to WeWork Korea's internal document, a copy of which was obtained by the publication, WeWork Korea have placed a number of employees on an indefinite “paid administrative leave,” which prohibits their visiting of company facilities and contact with personnel. During the period, those on the enforced leave are also mandated to return all property relating to WeWork Korea's operation, such as laptops, mobile phones and even access keys.

According to the sources, at least eight employees have been placed on leave as of this month, and they hadn't been told any specifics of the decision, such as whether it is a disciplinary action or not.

“WeWork Korea has launched early retirement programs twice since last year and more than 60 have signed into the program,” one of the sources said. “As the notice came after the retirement programs, employees were viewing and interpreting this as pressure compelling employees to (voluntarily) quit the company.”

According to this source, approximately 50 employees have left the company in the first round of the retirement program in November, and 10 more followed in the second round. This accounts for 40 percent of the company's total number of employees of 150 in 2018 ― the latest figure available.

Another source said this is part of WeWork Korea's plan to reorganize or restructure its workforce, which will be focused on downsizing of teams and number of personnel.

“The company told employees that it has to downsize its workforce in order to improve profitability, but there were no further explanations,” another source said on condition of anonymity.

This second source said the company's human resources (HR) team directly mentioned the word “layoff” multiple times to the employees and urged them to sign the retirement programs and take the available benefits, saying “it will be better than a layoff.”

“Multiple employees said the HR team urged staff to do so off-the-record, such as in face-to-face talks or unrecorded video conferences, thus exercising a stringent pressure for employees to accept those programs,” the second source said.

WeWork Korea is subject to Korea's Labor Standards Act, and those employees are “regular workers,” meaning their retirement age is guaranteed unless there are serious difficulties in running the company or disciplinary purposes for layoff.

Lawyers said, the situation at WeWork Korea will not likely constitute an unfair effort or an abuse of power to fire employees, unless there is real evidence showing the company has compelled employees to sign early retirement programs.

“Even though there is no specific reason, the employer can relieve employees from positions without notifying them about the reason,” a Seoul-based lawyer said asking not to be named. “Though this may be seen as a company's indirect pressure against employees to leave the company, it is difficult to clarify whether the administrative leave could result in an actual layoff at the current stage.”

WeWork Korea spokesperson declined to comment on anything regarding the administrative leave and the retirement program.

SoftBank Group founder and CEO Masayoshi Son, left, and Alibaba founder and former Chairman Jack Ma attend the Tokyo Forum 2019 in Dec. 6, 2019. REUTERS-Yonhap

Faltering profitability

WeWork is in a move to downsize its workforce globally after its botched IPO in September in an effort to address its faltering profitability. In November last year, WeWork laid off 2,400 staff accounting for some 20 percent of its total employees, globally.

The massive layoff was followed by legal tussles between its largest investor, SoftBank. Founder Masayoshi Son rarely admitted he was “foolish” about the investment in WeWork, whose value given by SoftBank plummeted to $2.9 billion from $47 billion before the IPO.

In South Korea, the company was centered on the speculations and possibilities that it may exit the country as it “renegotiates” the contract terms of its office space in Jongno-gu, Seoul. Reportedly, the vacancy rate of WeWork Korea's office spaces stood between 30 and 50 percent, far higher than South Korea's homegrown co-working space companies such as FastFive and Sparkplus, which offer spaces at cheaper rates.

The position of WeWork Korea chief has been vacant since Cha Min-geun left the company in October. Cha was the chief of WeWork Korea since 2010. Later Chun Chung-joo was named as its new general manager.

Industry officials said the company's exit is “unlikely” given it has opened a new office location in Seoul in April, but the company's financial status is far from being profitable.

Since WeWork Korea is a limited liability company, it is not obliged to make public its financial status.

WeWork Korea spokesperson said “WeWork membership,” meaning the number of clients using WeWork Korea's office space, has grown by 7 percent from February to June this year, but sources said the Korean unit has piled up losses for at least three years.

“WeWork is committed to our business in Korea and is dedicated to provide our space and services to our members in Korea,” the spokesperson said in response to questions of the possibility of its departure. “All of our locations in Korea are fully operational.”