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SMEs Hiring Foreign Workers Bear Extra Burden Under Revised Minimum Wage Law
In-kind Support Not Included in Minimum Wage Calculation
SMEs Hiring Foreign Workers Bear Extra Burden Under Revised Minimum Wage Law
  • By Jung Suk-yee
  • March 28, 2019, 09:20
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SMEs that provide board and lodging to their foreign workers bear an extra burden as the cost for such in-kind support is not included in minimum wage calculation.

More than nine out of 10 small and medium-sized enterprises (SMEs) in South Korea provide foreign workers with accommodation as well as an additional pay of over 400,000 won (US$352) a month on average, according to a recent survey. Companies are now facing a heavier burden as the cost of board and lodging, which is a wage in kind, has not been included in minimum wage calculation last year.

Among SMEs which employ foreign workers, 94.6 percent served meals and 92.3 percent offered accommodation, according to a report released by the Korea Federation of SMEs (Kbiz) on March 27.

“Support in kind” accounted for the most part of their board and lodging. The study said 77.8 percent of respondents provided foreign employees with board and lodging in the form of support in kind. It means that nearly eight out of 10 SMEs offer accommodation, including dormitory, to their foreign workers instead of providing accommodation fees. Moreover, 12.9 percent of the companies provided lodging with a mixture of cash and support in kind, while 3.9 percent of them offered only cash, which was higher than the proportion (5.4 percent) of those who did not support accommodation at all. Likewise, 62 percent of the respondents said they provided meals in the form of support in kind, while 16.4 percent of them offered with the mixture of cash and support in kind, 14 percent with cash and 7.7 percent with no support.

The problem is that such support is not included in calculating the minimum wage. The National Assembly passed an amendment of the Minimum Wages Act in May last year. Under the new law, regular bonuses exceeding 25 percent of the minimum wage and welfare benefits, such as lodging and transportation, surpassing 7 percent of it will be included in the calculation of basic wages. However, the unit of welfare benefits is limited to cash so companies have to shoulder the burden of accommodation support in kind. In addition, the latest report said each company paid 399,000 won (US$351) to each foreign employee a month on average for lodging. Companies which offered only in-kind support paid 388,000 won (US$341) a month, while those which provided a mixture of in-kind support and cash paid 429,000 won (US$377) a month.

Meanwhile, 61.3 percent of respondents did not deduct accommodation costs, while only 32.9 percent of them deducted partial costs.

The latest study was conducted on 15,464 companies which asked for foreign employees on the E-9 visa last year and 1,422 of them responded to the survey. The Kbiz said it carried out the survey on March 8 to understand the current status of accommodation provision and deduction of small and medium-sized manufacturers having foreign workforce.