Road to Job Seeker After Three Months... Restructuring Storm Hits Distribution and Fashion Industries

Workforce Restructuring Accelerates Amid COVID-19 Crisis

Continuous Tension Including Layoff Notices During Business Trips

Export Plans Canceled One After Another, Departments Downsized

Duty-Free Shops and Marts Reduce Non-Regular Staff

Hotels Cut Rooms, Implement Two-Shift Work and Paid Leave

[Asia Economy Reporters Lim Hye-seon, Cha Min-young, Lee Seung-jin] As the novel coronavirus disease (COVID-19) continues to impact the real economy, workforce restructuring is intensifying among distribution, fashion, and hotel companies.

According to the distribution industry on the 8th, Shinsung Tongsang notified about 50 employees in the export division of their dismissal over two days, from the 6th to the 7th. This restructuring was due to the global economic downturn caused by COVID-19, which brought overseas export operations to a complete halt. Kim Young-ho (pseudonym), who recently received a layoff notice, said, "I heard the company was struggling as the COVID-19 situation continued, but I never thought I would have to leave the company," adding, "The domestic economy is also bad, so there might not be any jobs available immediately. I think I will have to look for daily wage work to support my family right away," he sighed. An employee at Shinsung Tongsang who avoided layoff said, "There are colleagues who received layoff notices while on overseas business trips," and added, "We are living in tension, not knowing if we will be the next to be laid off."

Fashion company Shinwon also dissolved its Overseas Business Team 1 and laid off seven employees. They also closed the offline business of the young casual brand VIKI, letting go of about 20 employees in charge. Student uniform maker Hyungji Elite reduced five of its 40 regular employees at headquarters at the end of last month. Uniqlo Korea's FRL Korea caused controversy when CEO Bae Woo-jin announced workforce reduction plans to all employees.

Fashion companies say these are unavoidable choices to survive. Companies with a high proportion of export business are practically on the brink of collapse. A fashion industry insider said, "Due to the impact of COVID-19, American and European companies are unilaterally canceling orders," adding, "Many overseas companies cancel orders with just one email, so export work has virtually disappeared." He emphasized, "This is a case where 'Made in Korea' is collapsing as the global economy comes to a halt."

In the distribution sector, non-regular workers face canceled hires, unpaid leave, and layoffs. Lotte Group's health and beauty (H&B) store, LOHB's, terminated contracts with 87 part-time workers (mates) on the 31st of last month. This was a measure to reduce labor costs amid prolonged sales slumps due to COVID-19 and other factors. Large marts are also experiencing workforce restructuring. Lotte Mart ended its Silver Employee program, which had been ongoing since 2005 as part of social contribution activities, temporarily after 15 years this year. Thirty-eight employees who renewed their contracts for one year on March 31 last year will see their contracts expire on March 31 this year.

The duty-free industry, severely hit by the sharp decline in tourists, is also facing strong aftershocks. Ha Ji-min (pseudonym), a newcomer who became a cooperative employee of a cosmetics brand at a domestic duty-free shop in January this year, was notified of contract termination before even completing the three-month probation period at her first job. With regular employees being laid off due to COVID-19, it was difficult for contract workers to hold on. At a major corporate duty-free shop, there are 7,000 cooperative employees in total, 580 regular employees overall, and 50 regular employees in Incheon alone. Recently, 3-5% of cooperative employees were reduced, which corresponds to about 210 to 350 people.

Hotels operated by large corporations are also struggling. Hanwha Hotels & Resorts implemented paid leave by paying 70% of salaries. SK Group affiliate Grand Walkerhill Seoul decided to suspend room operations for a month until the 22nd of next month and is operating on a two-shift system.

In particular, many workers in the distribution industry are contract or cooperative employees, making it difficult to seek relief from the impact of restructuring. This is because government-supported employment retention subsidies are limited to those enrolled in employment insurance. As of February, only 13.8 million out of 20.56 million wage workers, or 67.1%, were enrolled in employment insurance. About 6.8 million are uninsured. Adding 1.7 million special employment workers classified as self-employed increases the number of workers excluded from employment retention support to 8.5 million.