More than 2 million in S. Korea living as subcontractor workers

Posted on : 2014-09-29 16:48 KST Modified on : 2019-10-19 20:29 KST
Forms of indirect employment spread broadly from manufacturing to many areas of the economy
 a dispatch TV and internet installation technician for LG Plus
a dispatch TV and internet installation technician for LG Plus

By Jeon Jong-hwi, staff reporter

The issue of indirect employment is drawing renewed attention in the wake of recent court rulings recognizing 1,647 in-house subcontractor employees at Hyundai and Kia Motors as indirectly employed by the automakers.

Indirect employment in South Korea is not a 21st century invention. Industries like construction, shipbuilding, and steelmaking have made use of in-house subcontractors since the 1960s and 1970s, bringing employees of those businesses to perform jobs at the contracting workplace. Outsourcing of cleaning and security jobs has also been a common practice. It was in the early 1990s that in-house subcontractors first began appearing directly on automobile production lines.

The Asian Financial Crisis of 1997 was the event that truly ushered in the country’s irregular employment boom. At the International Monetary Fund’s request, systems for introducing layoffs were introduced into the Labor Standards Act, and the newly enacted the Act on the Protection, Etc., of Dispatched Workers allowed employers to send their workers to other workplaces to serve under other hirers. Job security for workers has been desperately fragile ever since.


First bit of momentum: Asian Financial Crisis

Faced with heavy worker resistance to large-scale “voluntary resignations” at the time, companies turned away from regular employment and began hiring on one- to two-year contracts - or simply outsourcing the duties to partner businesses. The practice soon spread like a contagion: duties like parking lot attending, security, promotions, facilities management, and cash register operation were swiftly outsourced at financial firms, hospitals, hotels, and retailers.

“In-house subcontracting is a premodern practice, but it was already in wide use in the past,” said Lee Byung-hee, a senior fellow at the Korea Labor Institute. “After the Asian Financial Crisis, it became the standard model for big companies.”

Lee also suggested the scope of the phenomenon may be unique to South Korea.

“You don‘t find any examples overseas of in-house contractors not just being used for simple duties like cleaning and security, but being widely put to work on permanent duties in areas like manufacturing and the public sector, sometimes doing the same things the regular workers do,” he explained.

As was confirmed in the court’s decision about the employment status of workers at Hyundai Motora and Kia Motor, in-house subcontract work in the manufacturing industry is at the heart of the problem of indirect employment. This kind of work has fueled the controversy about illegal dispatching for more than 10 years.

Beginning at air conditioning manufacturer Carrier in 2001 and continuing at Hyundai Motor, Kumho Tires, Hyundai Heavy Industries, Kiryung Electronics, and other manufacturers, in-house subcontract workers have been carrying on their struggle for the prime contractor to take responsibility for their employment. Since they work not at the company that employed them but rather at the prime contractor, by necessity they are overseen and managed by the prime contractor.

The Labor Standards Act states that “no one shall intervene in the employment of other person for the purpose making a profit or gain benefit, as an intermediary, unless otherwise prescribed by any Act,” and the only act that legalizes this is the Act on the Protection Etc. of Temporary Agency Workers.

In-house subcontracting does not even have the legal grounds demanded by the Labor Standards Act, and it is stoking the flames of social conflict between employers and employees. Despite this, the government and the National Assembly are not working actively to resolve this contradiction.

South Korean society completely recovered from the Asian financial crisis in 2003 and 2004, at the beginning of the administration of Roh Moo-hyun, but it failed to resolve labor problems created by the IMF such as the Act on the Protection, Etc., of Temporary Agency Workers.

“It was a time when we were breaking free from the economic crisis and capital was being accumulated. The debt ratio at the chaebol had dropped to 100%, and their cash reserves had reached an all-time high. That was the time we should have addressed the issue of irregular workers, but we missed our chance,” said Cho Don-mun, professor at the Catholic University of Korea.


Act to decrease number of irregular workers has adverse effect

A more direct cause of the expansion of indirect employment was the enactment of the so-called irregular worker laws in July 2007. The Act on the Protection Etc. of Fixed-Term and Part-Time Employees was passed and the Act on the Protection Etc. of Temporary Agency Workers was revised, placing a two-year limit on the employment of fixed-term and dispatch workers. The object of these laws was to put the brakes on companies that were in the habit of using irregular workers without any restrictions.

It is difficult to calculate how many people are indirectly employed, since the government does not keep any official statistics. Nevertheless, Kim Yoo-seon, senior researcher at the Korea Labor and Society Institute, estimates that the number of dispatch and temp workers jumped from 449,000 in 2001 to 767,000 in 2007. These figures do not even include a considerable number of in-house subcontractor workers.

The object of the law was to increase the number of regular workers, but companies dodged the regulations of the labor law by taking refuge in the even worse practice of in-house subcontract work.

“As companies attempted to avoid the regulations of the irregular worker laws, they found that temporary agencies and subcontracting companies were too bothersome, so they started hiring workers as independent contractors. In the past, the technicians who install water heaters had been directly hired by companies on a temporary or daily basis, but the companies converted this to a sneaky form of special employment in which independent contractors signed a personal contract with the prime contractor,” said Kim Jong-jin, head of research at the Korea Labor and Society Institute.

Without anything to stop them, South Korean companies have continued to increase their use of indirect employment, and today there are more than 2 million such workers in Korea, most labor activists believe. Indirect employment was once centered in the manufacturing industry, but it has now spread into the service industry. In 2013, employees of electronics and cable subcontractors for chaebol such as Samsung Electronics Service, C&M, and T-Broad organized unions and carried out multiple strikes and sit-ins calling for job security, higher wages, and acknowledgment that they are employed by the prime contractor.

The Ministry of Employment and Labor has been inspecting the subcontract companies for LG Uplus and SK Broadband since April to determine the employment status of the workers. The ministry will announce its findings on Sept. 29.

“We ought to have placed limits on the reasons for hiring irregular workers when we revised the law in 2006. When we limited the period of employment, companies didn’t regularize these workers, they converted them to indirect employees. What we should do now is make the regulations even tougher. We should make it a rule that anyone who works more than one year should be viewed as a permanent, regular worker. We should also make the reasons for hiring irregular workers indirectly even stricter than those for hiring irregular workers directly,” said Cho Don-mun.


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