More than half of SMEs to skip Chuseok bonuses
With Chuseok a week away, shoppers browse for groceries at Sangmu Geumyo Market in Gwangju, Friday. Yonhap
More than half of small and medium-sized enterprises (SMEs) are expected to forgo Chuseok bonuses for their employees this year, citing financial difficulties.
According to a survey of 1,000 SME member companies conducted by the Korea Federation of SMEs from Sept. 1-7, 45.1 percent said they plan to provide Chuseok bonuses. Of these, 1.2 percent plan to increase bonus payments, 40.5 percent to maintain last year’s level and 3.4 percent to reduce them.
More than half, or 54.9 percent, said they had either decided not to provide bonuses — including 30.8 percent that have never provided separate bonuses and 7.7 percent that will not provide them this year due to financial difficulties — or had yet to make a decision (16.4 percent).
Among companies planning to provide bonuses, those paying a percentage of salary will provide an average of 37.7 percent of employees’ base pay, while those paying a fixed amount will provide an average of 665,000 won ($493) per employee.
By region, companies outside the Seoul metropolitan area reported higher bonus levels than those in the capital region, both as a percentage of base pay and in fixed amounts. Non-metropolitan companies planned to pay an average of 43.9 percent of base pay and 769,000 won ($570) per employee, compared with 30.4 percent and 555,400 won ($412), respectively, among companies in the Seoul metropolitan area.
The main reason companies are unable to provide Chuseok bonuses is financial difficulty. Four in 10 respondents said their financial situation was worse than last Chuseok, with 31.3 percent describing it as difficult and 8.7 percent as very difficult. Meanwhile, 47.1 percent said their situation was unchanged from last year, while 12.9 percent said it was favorable, including 12.5 percent who said it was favorable and 0.4 percent who described it as very favorable.
By industry, manufacturers were more likely than nonmanufacturers to report financial difficulties, at 47.8 percent compared to 32.2 percent, respectively.
The most commonly cited reason for financial difficulties, with multiple responses allowed, was weak sales and revenue, cited by 71.5 percent of companies. This was followed by rising prices of raw materials and components (59.5 percent), higher labor costs (21.8 percent) and delays in collecting payments from customers (12.8 percent).
SMEs said they need an average of 256.45 million won ($190,200) in funds for Chuseok this year, but expect to secure only 197.97 million won ($146,800), or 78.44 percent of the amount needed. This leaves an average shortfall of 58.48 million won ($43,400) per company.
Manufacturers reported greater funding needs and larger shortfalls than nonmanufacturers. Manufacturers said they need an average of 306.4 million won ($227,200) and face a shortfall of 84.11 million won ($62,400), compared with 198.33 million won ($147,100) and 28.67 million won ($21,300), respectively, among nonmanufacturers.
Companies facing funding shortages said they plan to seek alternatives such as collecting payments for delivered goods early (40.6 percent), borrowing from financial institutions (38.3 percent) and postponing payments (29.9 percent).
Regarding access to financing through financial institutions, 60.4 percent said conditions were unchanged from last year's Chuseok. However, one in three companies (33.3 percent) said they faced difficulties obtaining bank financing.
The most commonly cited difficulties, with multiple responses allowed, were high lending rates (56.5 percent), insufficient borrowing limits (41.1 percent) and stricter collateral requirements (22.5 percent).
This article from the Hankook Ilbo, the sister publication of The Korea Times, is translated by a generative AI system and edited by The Korea Times.