Half of Companies Expect Economic Conditions to Worsen After Chuseok... Reduction in Chuseok Bonus Payments

KCCI '2020 Chuseok Holiday Closure Survey' Results

(Data from Korea Employers Federation)

[Asia Economy Reporter Kim Ji-hee] While companies faced difficulties in management this year due to the novel coronavirus disease (COVID-19) crisis, more than half expected the economy to worsen in the remaining fourth quarter. The number of companies planning to pay Chuseok bonuses this year also decreased compared to last year due to the economic downturn.

The Korea Employers Federation (KEF) announced on the 20th that, according to the results of the "2020 Chuseok Holiday Survey" conducted on 673 companies nationwide with five or more employees (based on respondents), the percentage of companies that said they would pay Chuseok bonuses was 59.1%, down 5.4 percentage points from last year. KEF explained, "There are more companies with reduced capacity to pay."

Among large companies with 300 or more employees, 72.3% responded that they planned to pay Chuseok bonuses, while companies with fewer than 300 employees showed 56.5%. Regardless of company size, the proportion of companies that said they would give bonuses during the Chuseok holiday decreased.

Regarding the level of Chuseok bonus payments, 86.5% responded that it would be "the same level as last year." Companies planning to pay less than last year accounted for 8.7%.

The increase in companies not paying bonuses is analyzed to be due to the economic downturn. More than half of the companies viewed the economic situation negatively for the period from October to December after this year's Chuseok. Among all respondents, 50.7% expected the economy in the remaining three months of this year to "deteriorate significantly (6.4%)" or "deteriorate (44.3%)" compared to January to September. Only 10.1% expected the economy to improve compared to before Chuseok.

Accordingly, most forecasts for this year's overall performance were bleak. Nearly 70% of all respondents said that sales and operating profits would decrease compared to last year. As many companies were hit by the COVID-19 crisis, 68.1% responded that operating profits would "decrease compared to the previous year." When asked about the expected rate of decrease in operating profits compared to last year, the largest proportion (38.2%) answered "10% or more but less than 30%."

Concerns about performance deterioration were felt more strongly by small and medium-sized enterprises (SMEs). The response that operating profits would decrease compared to the previous year was 70.1% among companies with fewer than 300 employees, while it was 57.1% among companies with 300 or more employees. Among companies with fewer than 300 employees, 22.5% expected operating profits to fall by more than 30% this year.

This Chuseok holiday, 85.1% of companies were recorded to take a "5-day" break. Adding the three days of the Chuseok public holiday, followed by National Foundation Day (October 3) and Sunday (October 4), results in a five-day holiday. In addition, 9% of companies took "4 days or less" off, with 64.4% of them citing "workload is not heavy, but work is unavoidable due to meeting deadlines, etc." Conversely, among companies taking "6 days or more" off (5.9%), nearly half cited "mandatory holidays according to collective agreements or employment rules rather than workload or costs" as the reason.