[Exclusive] 'Philippine Housekeeper' Company "Lost 20 Million Won in One Month" [The Swamp of Care]

①Pilot Project Participant Interview
"Operating at a Loss Even Before Work Started"
Seoul City Also States "Company Negative Margin"

Editor's NoteLast year, the number of households applying for childcare services reached 120,000, but the number of childcare workers remained in the 20,000 range. To find a solution to the 'care gap' issue, Seoul City launched a pilot project introducing 'foreign domestic workers,' but there is still a long way to go before a smooth landing. This series of three articles diagnoses the fundamental causes and solutions related to the childcare problems facing Korean society.

"A monthly deficit of 10 million won..."

Mr. A, the CEO of company ㄱ participating in the foreign domestic worker pilot project, recently told Asia Economy, "Including the operating expenses for September and the training costs for July and August, the loss amounts to about 20 million won," adding, "We are running a deficit of about 10 million won every month." The pilot project for foreign domestic workers, promoted by Seoul City and the government to reduce the burden on parenting households, has revealed shortcomings not only in unauthorized departures, wages, and working conditions but also in the management system.

On the morning of the 24th of last month, Kim Seon-sun, Director of the Seoul Metropolitan Government's Women and Family Office, spoke at a meeting of stakeholders involved in the pilot project for foreign domestic workers in Seoul, held in the conference room of Home Story Living in Gangnam-gu, Seoul. Photo by Yonhap News.

Previously, Seoul City and the Ministry of Employment and Labor allocated and paid a budget of 150 million won under the categories of system operation costs, establishment costs, and maintenance costs. However, the company explained that the operating expenses for the project have exceeded that amount. Mr. A said, "Only part of the wages and training allowances paid to workers have been settled."

Most companies currently bear the costs that foreigners must pay when joining domestic businesses as workers, as well as additional payments such as night shift allowances and holiday work allowances. In this project, Filipino domestic workers receive the hourly minimum wage (9,860 won). The user households are charged about 1.19 million won per month, calculated at 13,700 won per hour, which reflects the minimum indirect costs including the hourly minimum wage and the four major social insurances. Because the amount is set low, the company explained that it is difficult to notify user households when additional costs arise.

He lamented that he decided to participate in the project without realizing he would suffer losses to this extent. Mr. A said, "It is natural for problems to arise and be supplemented in a pilot project, but it turned out that we had to bear everything," adding, "The reason was that we agreed to cover the operating expenses ourselves."

According to the 39th Foreign Workforce Policy Committee's 'Foreign Domestic Worker Pilot Project Plan' drafted by the Ministry of Employment and Labor in September last year, this project is designed so that government-certified service providers under the 'Domestic Workers Act' employ foreign domestic workers and provide services to households that have signed usage contracts on a commuting basis. Seoul City and the Ministry of Employment and Labor are effectively responsible for 'matching,' while specific matters such as in-house training and service provision are assigned to the companies.

Although companies began preparing for the pilot project with Seoul City and the Ministry of Employment and Labor last year, detailed management methods such as training and housing for foreign domestic workers were discussed only from early this year. Due to the rushed preparation, companies faced difficulties managing domestic workers and covering necessary costs.

Ministry of Employment and Labor 39th Foreign Workforce Policy Committee 'Pilot Project Plan for Foreign Domestic Workers' Pilot Project Procedures. [Source=Office of Assemblyman Kim Han-gyu, Democratic Party of Korea]

Companies decided to participate in this project because they focused on the reality of the shortage of caregivers. Although it was difficult to estimate losses and profits in this new business area, there was hope that it could be an alternative to increase the supply of caregivers.

Mr. A explained, "Under the current laws and systems, the wages of freelance caregivers continue to rise, and user households inevitably have to pay high costs." He added, "Although it started with good intentions, if losses of this magnitude occur, which company would participate?" and emphasized, "System improvements are needed so that companies can participate without losses." He suggested considering improvements where caregivers are directly employed by the state or companies.

Seoul City is aware of the companies' situation but remained cautious about discussing user fees or management costs. A Seoul City official said, "With the minimum wage and coverage of the four major insurances, companies are operating at a negative margin, not zero margin," but added, "We have set the user fees at a minimum to reduce the burden on user households."