Union Criticizes "Hope Retirement Followed by Medical Expense Support Reduction"
Emart Rebuts "Welfare Beneficiaries Significantly Expanded"
Emart, which recorded its first loss since its establishment last year, is facing labor-management conflicts as it undertakes structural improvements through cost reduction. Recently, at the Emart Sangbong and Pentaport stores that are closing, the acceptance of voluntary retirement has sparked opposition from the labor union, and the reduction of medical expense support for employees has escalated into a 'worker-to-worker conflict' situation. Recently promoted Jung Yong-jin, chairman of the Shinsegae Group, has ordered profitability enhancement, raising concerns that high-intensity restructuring to rebound performance could lead to an expansion of labor-management conflicts.
According to the industry on the 13th, the Emart branch of the Mart Industry Union under the Korean Confederation of Trade Unions Service Federation will hold a rally in front of Emart Andong store on the 15th demanding the resignation of the company-wide employee representative. The Emart branch is the second union in Emart, which has multiple unions. They recently conducted picketing in front of Emart headquarters demanding the cancellation of the company's reduction in medical expense support.
Emart is conducting wage and collective bargaining negotiations with the first union while holding quarterly labor-management councils. The labor-management council is an organization established at workplaces with 30 or more employees according to the 'Act on the Promotion of Workers' Participation and Cooperation,' where overall discussions related to workers' working conditions are held, including productivity improvement and performance distribution, hiring, placement and training of workers, and handling of workers' grievances.
Emart recently held the 12th company-wide labor-management council. At the council, there was a request to review the medical expense support system to ensure it is applied fairly to all employees, and in response, the company announced a welfare amendment proposal through the internal intranet earlier this month. The revised welfare regulations expanded the scope of comprehensive health checkups but excluded treatments such as manual therapy, extracorporeal shock wave therapy, and proliferation therapy, which had previously been supported by the company.
In response, the union is opposing the recent voluntary retirement and welfare regulation amendments, arguing that these measures shift the burden of cost reduction due to poor performance onto the workers. An Emart branch official said, "The revised welfare regulations changed only through consultation with the company-wide employee representative without following the disadvantageous change procedures under the Labor Standards Act are invalid," adding, "This clearly constitutes a disadvantageous change to the employment rules." The union is also considering legal action.
Emart stated that this measure is not being implemented as a cost-cutting effort. An Emart official explained, "Since the scope of comprehensive health checkups has been significantly expanded to all employees with more than three years of service through this welfare regulation amendment, it cannot be seen as cost reduction," and added, "The retirement support is a decision to provide additional options beyond assignment to adjacent stores for employees working at closing stores."
Emart has been undergoing high-intensity structural improvements this year. Emart recorded sales of KRW 29.4722 trillion last year, but posted an operating loss of KRW 46.9 billion, marking its first loss since establishment. This was due to a large deficit reflected in its subsidiary Shinsegae Construction amid a downturn in the real estate market, but its core retail business also underperformed. In fact, the operating profit of Emart's main discount store (mart) business was KRW 92.9 billion, down KRW 85.8 billion from the previous year. Compared to Coupang, which achieved its first annual profit and KRW 30 trillion in sales last year, emerging as a strong player in the retail industry, Emart's performance looks even more disappointing.
Some in the industry expect that following the recent promotion of Jung Yong-jin to chairman of Shinsegae Group, restructuring and management efficiency efforts within the group will accelerate. In fact, Chairman Jung stated in his New Year's address earlier this year, "In response to the market and customers questioning whether Shinsegae is truly the number one company, 2024 must provide a clear answer," and emphasized, "Organizations exist to produce results, and companies must generate profits to be sustainable," setting profitability as the top management goal. It is reported that at his first meeting with subsidiary presidents, Chairman Jung discussed issues including Shinsegae Construction's problems, Emart's profit improvement, and online business performance enhancement.
Previously, Shinsegae Group undertook a major overhaul in its regular executive appointments in September last year, replacing 40% of its CEOs. At that time, Han Chae-yang, CEO of Chosun Hotel & Resort, was appointed as the 'savior' of Emart. Han Chae-yang, who was CEO of Chosun Hotel & Resort, turned the hotel from an operating loss of KRW 70.9 billion in 2020 to an annual profit of KRW 22.2 billion in 2022.
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