Major conglomerates initiate personnel restructuring to cut costs

Samsung Electronics headquarters in Seoul. / Korea Times file

By Kim Hyun-bin

Personnel restructuring is occupying the heads of major conglomerates as they hope to cut costs to better deal with the ongoing COVID-19 pandemic, which has drastically raised uncertainty.

Some companies have already initiated voluntary resignations as a means to cut their staff and costs.

Most conglomerates with affiliates in the electronics, automotive, heavy industry, hotel and distribution sectors have been asking for voluntary resignations ― even Samsung Electronics, LG Electronics, Hyundai Engineering & Construction and Hotel Shilla have been busy reducing personnel.

Usually, voluntary resignations are sought among the higher levels of the corporate structure as they receive the most pay, but some companies are also offering it to lower-level employees, even those in their 20s and 30s. The move is common among struggling companies, but due to the pandemic more firms are taking a precautionary approach in case the pandemic is prolonged even further, leading some well-performing businesses to begin asking for voluntary retirement.

“This year companies are expected to close unprofitable businesses, reduce personnel costs and take a conservative management approach,” an industry official said. “Also the Moon Jae-in administration's anti-corporate policies have taken a toll on top of the pandemic.”

The country's leading conglomerate Samsung Electronics is seeking resignations from some of its employees even as its semiconductor and smartphone businesses are seeing a recovery and the home appliances sector saw explosive sales due to pent-up demand amid the pandemic.

Samsung Electronics Vice Chairman Lee Jae-yong

Last month, Samsung Electronics accepted voluntary resignations from employees who are department heads and higher within the consumer electronics, IT and mobile communications and “device solutions” sectors.

LG Electronics has conducted several such rounds in the past few years in the smartphone department, which has suffered a continuous decline in revenue. It accepted resignations from deputy heads and heads of departments. LG conducted its most recent voluntary resignations in November through December last year.

In November, LG Innotek also asked people to resign in its LED division, and its semiconductor substrate Gumi plant and camera module department, which have been considered cash cows within the firm.

Hyundai Engineering & Construction has taken it a step further, accepting resignations from deputy section chiefs and lower-level employees mostly in their 20s and 30s. Renault Samsung and Samsung Heavy Industries have conducted similar restructuring at the end of the year for the past several consecutive years.

Hotel Shilla, which saw a drastic drop in duty free sales, had to halt its long-planned Hanok Hotel construction and received resignations. Lotte Hi-Mart which conducted the company's first voluntary retirement last March initiated another one last month.

“The company finances have been struggling so there are rumors there could be up to 20 percent reduction in personnel,” an employee at a conglomerate said. “Many employees that received poor evaluations are said to be searching for new jobs.”

Lotte Group Chairman Shin Dong-bin has also been engaged in fierce business restructuring. Last year, Lotte Shopping closed 115 offline stores, disbanding its LOHBs business division as well as slimming down Lotte Asset Development.

Lotte Group Chairman Shin Dong-bin

Last February, Lotte Shopping announced it was closing 30 percent of its 200 offline stores and last year 115 stores were closed including one department store, 14 Lotte Marts and 74 large outlets.

Due to the circumstances, the country is set to hit its worst employment crisis in 22 years.

President Moon Jae-in is set to announce his fourth-year employment status report next week. From March to November there has been a continuous decrease in employment due to COVID-19. The employment rate is expected to have declined by 220,000 last year which is the worst figure since the Asian financial crisis in 1998 which accounted for 1.27 million job losses in total.