Work insurance premiums jump 44% from 2011

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Work insurance premiums jump 44% from 2011

Thanks to a Labor Ministry ruling, employers and employees alike will get hit with giant increases in their work-related insurance premiums next year.

The premium for Occupational Health and Safety Insurance, which all employers pay, will increase by 40 percent, and that for the National Employment Insurance, which both employers and employees contribute to, will increase by 44 percent.

The steep hike is being forced by Labor Ministry guideline that goes into effect Jan. 1, which redefines employee’s incomes. Previously, income was defined as salaries, regular bonuses and expenses for meals during working hours. Under the new definition, income also includes performance-based-bonuses, subsidies for tuitions and medical expenses, and all other perquisites employees receive from their employers.

In the case of one company, Hyundai Heavy Industries, the new definition will add 19.6 billion won (US$16 million) to its Occupational Health and Safety Insurance premiums, bringing them to 69.2 billion won. For National Employment Insurance, the company’s contribution will increase from 18.5 billion won to 25.8 billion won. An employee making the company’s average salary will pay an annual premium of 330,000 won in 2010, compared to 230,000 won this year, a 43 percent rise.

That’s bad news for corporations and their workers.

“Employees are demanding only a minimum pay raise or even allowing their salaries to stay flat for a while due to the financial difficulties of the company,” said Kim Sung-ho, a 52-year-old employee at Hyundai Heavy Industries. “But the government increased the insurance premiums so much that we are all losing now.”

The government says it made the changes to increase efficiency and convenience. As premiums for the National Employment Insurance and Occupational Health and Safety Insurance will be based on the same definition of income as the National Pension and the National Health Insurance, there will be less confusion for both corporations and employees.

“It is definitely a problem if the burden upon employees and corporations increases because of institutional changes,” said Ryu Gi-jung, Social Policy Bureau Chief at Korea Employers’ Federation.” According to the KEF, six conglomerates are facing an increase in insurance premium larger than 10 billion won next year.

Because the jump in insurance premiums is so huge, the Ministry of Labor is considering postponing the deadline for paying premiums for companies that face excessively burdensome increases. The Regulatory Reform Committee convened yesterday afternoon to discuss how to lessen the burden on households as well as corporations.

By Kim Ki-chan []
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