South Korean businesses bear the second highest cost among 36 member countries of the Organization for Economic Cooperation and Development (OECD) for laying off an employee, a report found Tuesday.
Korean employers on average handed over nearly seven months’ pay in compensation to laid-off employees – 27.4 weeks to be precise -, the Korea Economic Research Institute (KERI) said, citing the World Bank’s Doing Business 2019 report.
They paid most generously after Turkish companies whose average came to 29.8 weeks of salary. The German average was 21.9 weeks, 13 weeks for France, 9.3 weeks for the U.K., 4.5 weeks for Italy and 4.3 weeks for Japan, while the U.S. has no rules forcing severance payments in case of redundancy.
The research institute said the high dismissal cost in Korea is due mainly to high compensation expenses. Firing cost is a cost of advance notice requirements and severance payments, according to the World Bank, and Korea came in at 22nd in terms of the advance notice cost but ranked first for severance payments along with Turkey, Chile and Israel.
Even companies in Germany, known for generous redundancy compensation, pay an average of 11.6 weeks of salary to fire an employee, the report said. Korean businesses give 43.4 weeks of wage to dismiss a worker with 10 years of employment, 21.6 weeks more than their German counterparts.
By Lim Hyung-joon and Choi Mira
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]