KT targets older workers to shrink staff by 20%
It is the first major layoff since KT Chairman Hwang Chang-gyu took office in late January.
KT emphasized it was instituting a voluntary retirement plan rather than a layoff. Around 70 percent of the company’s 32,451 employees will be eligible to apply for early retirement. About 6,000 people, or 20 percent, are expected to leave.
Analysts said Hwang is trying to pull KT out of the red by cutting back on labor costs.
The carrier spent 2.77 trillion won ($2.6 billion) on salaries last year, and it is expected to save around 400 billion won in labor costs when 20 percent of its work force departs.
“Although it might take a trillion won for one-time expense for severance pay, KT can minimize the impact by reducing benefits for current employees and introducing a peak-salary work-share program,” said an analyst at a local securities company.
Along with the early retirements, KT said it will reduce the benefits of employees, including cutting educational support for workers and help toward paying tuition fees for their children in middle school, high school and university.
Analysts said that the downsizing of the work force will most likely be concentrated in its dwindling fixed-line divisions.
According to KT, the fixed-line business continues to shrink every year, with its sales plunging from 4.35 trillion won in 2010 to 3.82 trillion won in 2011 and 3.38 trillion won in 2012. Last year, sales declined to 2.98 trillion won.
As sales of the fixed-line business shrink, the company posted an operating loss of 149.4 billion won for the first quarter.
The size of KT’s work force is significantly larger than competitors SK Telecom and LG U+. The number of KT employees fell from 36,000 to 31,000 in 2009, when Lee Suk-chae became head of the group, but increased by 1,000 when the company went through restructuring and began new businesses.
“Chairman Hwang seems to have prioritized labor cost reduction in solving the worsening profitability of wired services to revive KT,” said a spokesman for KT.
After KT announced it would slash its work force, its share price hit 31,250 won, exceeding the 30,000 won for the first time in 26 trading days and surpassing the 31,000 won mark for the first time since Dec. 2.
BY kim jung-yoon [firstname.lastname@example.org]