By Lee Kyung-min
Fear is growing that small- and medium-sized enterprises (SMEs) may fail to pay workers on time due to the “sharp increase” of the newly set hourly minimum wage of 7,530 won ($6.64).
Such enterprises have claimed job cuts are inevitable to reduce uncontrollable labor costs following what they deem a “too excessive” 16.4 percent increase from this year’ s 6,470 won.
According to data by the Ministry of Employment and Labor, as of last year, out of about 19.6 million salaried workers, 2.66 million, or 13.6 percent, were paid less than the minimum wage.
The portion has been on a steady rise, corresponding with the government’s yearly wage hike. According to data from the Bank of Korea, in 2010 the number stood at 2.06 million (12.4 percent), but it increased to 2.8 million in 2015. The ministry estimates the number will exceed 3.13 million (16.3 percent) this year, adding it will be much higher next year.
Failure to pay workers the state-set minimum wage is punishable by three years in prison or a 20 million won fine. A 1 million won fine is imposed on those who fail to notify workers about the minimum wage. However, the law is not strictly enforced, with employers mostly receiving only verbal warnings.
According to ministry data last year, of the 1,278 violations, only 17, or 1.3 percent, were punished. As not all violations were uncovered, the ministry suspects the actual number was far greater.
The ministry said punishing violators is not easy, as most of them struggle with making ends meet amid a protracted economic slump.
“Many SMEs fail to pay workers minimum wage not because they have malicious intent to exploit workers but because they are unable to do so due to low profits,” an official at the Korea Economic Research Institute said.
The ministry earlier estimated, starting next year, those working minimum wage jobs will be able to earn 1.57 million won per month if they work 209 hours a month, meaning about 9.5 hours a day, five days a week.