SMEs show concern over snowballing labor cost
By Yoon Ja-young
The bill to slash working hours was approved by the National Assembly Environment and Labor Committee, Tuesday, which while allowing workers to enjoy a better quality of life, could raise the costs for small- and medium-sized businesses.
The bill cuts the maximum statutory working hours to 52 hours a week from the current 68 hours. It is expected to get approval at a plenary session as early as Wednesday since it passed the committee with the consensus of both the governing and opposition parties.
Slashing working hours was among the main election pledges of President Moon Jae-in, which he said will improve quality of life as well as help create jobs.
However, fewer working hours means higher labor costs for businesses. According to an estimate by the Korea Economic Research Institute, businesses will pay an additional 12.1 trillion won annually to maintain current production while cutting the working hours. This includes wages paid to additional workers hired to cover the hours lost, as well as their training costs.
It is especially likely to hit the manufacturing and transportation industries as working overtime has been the norm there. Labor ministry data from 2012 showed that employees in manufacturing work on average 28.1 extra hours a month. SMEs will be damaged more than conglomerates. The institute explained that small businesses hiring fewer than 300 will pay 8.6 trillion won of the extra costs, or 70 percent of the total.
To minimize the impact on industry, the committee agreed to apply different schedules for adoption of the new law depending on the size of the business. Large businesses hiring more than 300 workers will be subject to it beginning July, while implementation will be delayed to July 2021 for businesses with less than 50 workers.
The labor ministry said the government will prepare support plans for small businesses.
"Most large businesses have been preparing for shorter working hours since last year when discussions gained momentum. The government will prepare supportive measures for small businesses that might face difficulties due to the revision," a ministry official said.
By Yoon Ja-young
The bill to slash working hours was approved by the National Assembly Environment and Labor Committee, Tuesday, which while allowing workers to enjoy a better quality of life, could raise the costs for small- and medium-sized businesses.
The bill cuts the maximum statutory working hours to 52 hours a week from the current 68 hours. It is expected to get approval at a plenary session as early as Wednesday since it passed the committee with the consensus of both the governing and opposition parties.
Slashing working hours was among the main election pledges of President Moon Jae-in, which he said will improve quality of life as well as help create jobs.
However, fewer working hours means higher labor costs for businesses. According to an estimate by the Korea Economic Research Institute, businesses will pay an additional 12.1 trillion won annually to maintain current production while cutting the working hours. This includes wages paid to additional workers hired to cover the hours lost, as well as their training costs.
It is especially likely to hit the manufacturing and transportation industries as working overtime has been the norm there. Labor ministry data from 2012 showed that employees in manufacturing work on average 28.1 extra hours a month. SMEs will be damaged more than conglomerates. The institute explained that small businesses hiring fewer than 300 will pay 8.6 trillion won of the extra costs, or 70 percent of the total.
To minimize the impact on industry, the committee agreed to apply different schedules for adoption of the new law depending on the size of the business. Large businesses hiring more than 300 workers will be subject to it beginning July, while implementation will be delayed to July 2021 for businesses with less than 50 workers.
The labor ministry said the government will prepare support plans for small businesses.
"Most large businesses have been preparing for shorter working hours since last year when discussions gained momentum. The government will prepare supportive measures for small businesses that might face difficulties due to the revision," a ministry official said.
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