Companies` Social Security Costs Surge

Social security costs, which companies shoulder through four major systems including the National Pension Fund, medical insurance, employment insurance and industrial disaster insurance, doubled compared to before the 1997-1998 financial crisis.

According to a report by the Korea Employers Federation on July 30, companies` social security costs set by the court doubled to 13.6 trillion won last year from 6.7 trillion won in 1997.

The amount that companies pay out of the total legal social security costs increased to 57.8 percent last year from 49.0 percent in 1997 while workers` burden reduced relatively. As a result, companies paid a total of 6.89 trillion won or 70 percent out of the increased amount of 8.84 trillion won for the five years whereas workers paid additional 2.95 trillion won or 30 percent for the same period.

“The rise in social security costs for companies can lead to a weaker competitiveness and have a negative impact on employment opportunities by contracting investment,” said the federation. “The government should review the entire social security system,” it argued.

The federation demanded that the government introduce a social security system that will raise the level of welfare within the range of economic growth rates, maintain the current premium of the National Pension Fund and lower the level of payments, make insurance premiums reasonable through connecting the Corporate Pension Fund and the National Pension Fund, try to keep balance among members, and pay for the overpayment and the entire management costs of the system.

Joong-Hyun Park sanjuck@donga.com