Korean companies cutting staff as they anticipate economic slowdown

[Photo by Kim Ho-young]

South Korean companies in major industries from banks to retail are cutting jobs in efforts to save costs in an uncertain environment brought on by high inflation and concerns of a global economic recession.

Korean banks that are projected to report record net profit this year, are offering voluntary early retirement programs. The move comes as they want to prepare for sluggish economy next year through preemptive restructuring.

Local lender NH Nonghyup Bank is expected to give a notice for those that applied for voluntary early retirement this week, according to multiple industry sources on Sunday. There will be about 500 employees that will on the list, up from 427 last year, as the financial institution offered more retirement grants of up to 39 months-worth of average wage. Last year, employees that went on voluntary retirement received up to 28 months-worth of average wage as severance pay.

With the latest move by NH Nonghyup Bank, a total of about 2,400 employees in the banking sector would have voluntarily retired from the country’s top five banks this year.

Woori Bank also plans to receive voluntary early retirement applications from employees from Dec. 18 to 27. Staff that will be eligible to apply will be managers aged over 48, directors over 45 and bank clerks over 42.

Brokerage houses are also making similar moves. They are receiving voluntary early retirement applications from employees and some staff are told to leave as investment banking- and property-related departments close down.

KB Securities until last Thursday received voluntary early retirements from regular staffs aged over 40 to improve corporate workforce structure.

Small- and mid-size securities firms have also been engaged in downsizing after liquidity woes led by Legoland Korea crisis in October. Daol Investment & Securities offered regular employees except for newcomers to voluntarily retire last month and HI Investment & Securities received applications from those aged over 56 and those in senior posts. CAPE Investment & Securities last month decided to shut down its corporate and research business units.

Korea’s retail industry is also engaged in downsizing to cut costs amid growing uncertainty in the economy next year.

[Photo by MK DB]

Korean duty-free shop operator Lotte Duty Free for the first time since its inception started receiving voluntary early retirements from last Wednesday. It’s targeting 160 employees, or 15 percent of its entire workforce, that are higher than assistant manager level and worked for more than 15 years.

The restructuring at Lotte Duty Free comes as a shock given that the retailer in the third quarter managed to swing to profit.

Lotte Himart had also earlier received voluntary early retirement applications from 1,300 employees, two years after it received applications from 80 employees in 2020.

Lotte Himart posted 7.2 billion won ($5.5 million) in operating losses in the first nine months of this year amid intensifying competition with e-commerce platforms.

Last month, Korean dairy food manufacturer Purmil also decided to cut 30 percent of its entire staff while top liquor maker HiteJinro is receiving voluntary retirements from employees that have worked for more than 15 years.

Display industry is also engaged in downsizing.

LG Display recently received applications from employees wishing to join its affiliates as part of workforce relocation program. About 200~300 employees are expected to change work locations by early next year. They will join affiliates like LG Energy Solution and LG Innotek.

LG Display posted 488.3 posted billion won in operating losses in the second quarter ended June and 759.3 billion won in the third quarter due to sluggish demand from slow global economy.

Startups, which are struggling to raise funds, are also cutting staff.

About 100 employees, or 40 percent of entire staff at Mesh Korea that operates delivery service platform VROONG offered to retire voluntarily but in the end filed for court receivership.

Local streaming platforms Watcha and talent sharing platform Taling have already engaged in staff restructuring, as well as top multi-channel network Sandbox Network.

Tech platform giants Naver and Kakao and major game publishers are upping efforts to make management more efficient by adjusting wage and incentive rates, relocating staff, reducing new recruits.

Active restructuring in various industry sectors is leading to a sharp decline in the number of employed.

According to Statistics Korea, the seasonally-adjusted number of employed came to 28.139 million in November, down 28,000 from October. The number of employed had also fallen 22,000 and 5,000 in September and October, respectively, marking the first three straight months of decline since February-April 2020.