Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Kakao Enterprise to initiate voluntary redundancy program
Kakao Enterprise CEO Lee Kyung-jin speaks during a press conference at Grand InterContinental Seoul Parnas in this May 16 file photo. Courtesy of Kakao Enterprise
By Park Jae-hyuk
By Park Jae-hyuk
Kakao Enterprise told its employees that it will carry out a voluntary redundancy program by the end of this month, according to industry officials, Friday.
The announcement, which was made during Thursday's in-house conference, came two months after the money-losing business-to-business (B2B) units of Kakao decided in May, to reorganize the company so as to focus more on cloud-based businesses and improve profitability.
Baek Sang-yeop, who led the company since its launch in 2020, later resigned, handing over his position to Lee Kyung-jin, head of the firm's cloud business division.
“The applicants for the voluntary redundancy program will be able to get severance pay, compensation for changing jobs and additional bonuses that can be as high as their six-month base salaries, depending on length of service,” Kakao Enterprise said.
The company will allow some 1,000 employees, who are not linked to the cloud business, to apply for the voluntary redundancy program.
However, it did not disclose the number of employees it seeks to dismiss.
Its parent company also agreed to lend 100 billion won ($80 million) to the subsidiary later this month at an annual interest rate of 7.36 percent, with a plan to retrieve the money a year later.
Although Kakao only said in its regulatory filing that the money will be used for its subsidiary's operation, the loan is presumed to be intended to compensate those who will leave Kakao Enterprise voluntarily.
Kakao Enterprise has never posted an operating profit after 2021. It suffered a 140.5 billion won operating loss last year, and its net loss also came to 161.2 billion won in 2022, steeper than the 96.3 billion won registered a year earlier.
“Thanks to the voluntary redundancy and redeployment of the workforce, the growth in the number of employees at Kakao and its subsidiaries is expected to slow during the second half of this year,” Samsung Securities analyst Oh Dong-hwan said.
“Due to the distribution of severance pay, however, the decreased payrolls will have a limited impact on the company's earnings until the fourth quarter,” he added.
In addition to the voluntary redundancies, Kakao Enterprise has redeployed its employees to other Kakao affiliates. It has also provided its employees with financial and non-financial support to help them move to other major tech firms.