HR, Recruiting Trends in South Korea

By Ames Gross and Andrew Connor, Pacific Bridge, Inc. Jul 21, 2008
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South Korea, Asia’s third-largest economy, is becoming more information-intensive, requiring increased employment of technicians and information-technology specialists. The demand for such highly skilled workers, combined with a decline in Korea’s population growth, has caused employers to recruit Korea’s seniors to fill gaps. In order to persuade seniors to keep working past the accepted retirement age, employers are providing the necessary education and training. While there is a focus on seniors, overall, Korean workers are willing to upgrade their skills and increase their professional development with many Koreans interested in lifelong learning.

Wages and Compensation

Although salaries for Korean professionals are generally lower than those for their American counterparts, they have been increasing over the past few years. Top employees and expatriates remain expensive, particularly with the appreciation of the Korean won when compared to the U.S. dollar. While many large Korean companies pay a bonus equivalent to one month’s salary four times a year, the practice is less commonly observed by foreign firms. In addition, some foreign companies prefer to provide incentive-based bonuses.

Other Benefits

Korea’s Medical Insurance Act requires all companies to offer health insurance coverage for their employees. Coverage packages generally include inpatient, outpatient, nursing and funeral expenses, with employees generally making a co-payment of about 20 percent of the total amount. However, the Korean government does not mandate companies to implement a sick leave policy, so firms are left to determine their own sick leave policies.

Under Korea’s employment insurance system, full-time and part-time employees who work more than 15 hours a week receive unemployment and disability benefits, which are funded—at least in part—by employers and workers’ contributions totaling about 0.5 percent of the workforce’s monthly salary.

In addition, under Korea’s “national pension law,” employers and employees each contribute 4.5 percent of monthly salary to a retirement fund. Payout at retirement usually depends on years of service, monthly income and number of dependents.

HR Regulations Update

Work Visas for Ethnic Koreans, Immigration: In June 2006, Korea’s new H-2 visa was introduced for Koreans who were of foreign nationality. The H-2 visa was enacted to make it easier for companies to hire ethnic Koreans in construction and service jobs, and allows those Koreans to freely enter and leave the country for three years, and switch jobs without changing visas. In addition, Korea’s immigration policy allows foreigners to work in the country on a case-by-case basis. Foreigners generally occupy senior level positions and are relatively more expensive to hire.

Pension System Reforms: Because of Korea’s rapidly growing population of seniors, reform of the pension system is likely to be implemented between 2010 and 2020, which will likely lead to increased contributions by both employers and employees from the current combined 9 percent of monthly wages to12 or 13 percent. It will also lead to a reduction of post-retirement pension payments from 60 percent of the beneficiary’s former salary, to 50 percent of the beneficiary’s former salary, and the benefits cut is expected to continue with payments eventually dropping to 40 percent of the beneficiary’s former salary.

Increased Health Care Premiums: Pensions are not the only benefit affected by the increase of the senior population; in 2007 the national health insurance premiums increased by about 6.5 percent over the 2.2 percent contribution previously made by employers and employees.

WorkWeek, Overtime Policy: In July 2007, all employers in Korea with at least 30 employees transitioned from a work week of 44 hours per week to 40 hours per week, requiring blue-collar workers to be paid for all hours worked beyond the regular workweek. However, full implementation of the reduction in weekly working hours has been difficult because of the country’s hierarchical mindsets and traditional work ethic. Generally, if bosses or older colleagues have not left the office for the day, subordinates and younger colleagues will not leave the office either. Even though there are arguments that longer hours do not necessarily mean higher productivity, the situation is still well entrenched at many workplaces.

Labor Relations

Korea’s labor unions have a reputation for militancy with the Institute of Management Development ranking Korea last among 61 countries in terms of competitiveness of labor relations. In addition, more workdays per year have been lost to labor disputes in Korea than in any other developed country. Both General Motors and Carrefour have experienced costly strikes in recent years and the unstable labor environment has caused companies such as FedEx and DHL to choose China over Korea for their regional hubs. Such actions have increased Koreans’ awareness that continued activity by the labor unions might erode Korea’s competitiveness. However, despite vocal calls to curb the militant nature of the unions, little headway has been made. Some who are sympathetic to Korea’s labor situation say industrial relations are not the sole factor in making foreign investment decisions; a country’s political and institutional stability, quality of human resources systems, market size and the possibility of exporting to neighboring countries are all influencing factors in locating an operation.

Recruiting Strategies

Relationships and Networking: One common method of recruitment in Korea is based on relationships and networking. Family members, relatives, friends and alumni are often good sources for referrals and recruitment. Koreans are generally interested in opportunities for career advancement and development, therefore, foreign firms recruiting Koreans should make growth potential and other career opportunities clear to prospective employees. In addition, although lifetime employment is not as common in Korea as it is in Japan, the concept is still very attractive to many Koreans.

Campus Recruiting: Another common method of recruitment is for companies to participate at top Korean universities’ student recruitment, which generally occurs twice per year. The top three universities are collectively known as “SKY” for Seoul National University, Korea University and Yonsei University.

Internet Recruiting: Another method used is online recruiting, with the most popular recruiting web sites being http://www.jobkorea.co.kr, http://kr.dir.yahoo.comand http://www.koreajoblink.com. Internet recruiting is generally more successful in hiring entry-level candidates, because young Koreans are among the most wired and Internet-savvy in Asia. However, when hiring for senior positions, companies should use more conventional approaches such as “headhunting” and advertising in specialized trade and professional publications.

Recruiting Trends

Korea’s workforce is hi​ghly educated, and the pursuit of post-graduate degrees by Koreans is one of the highest in the region. Many graduates and post-graduates are ambitious and driven and have high career expectations.

Focus on Fresh Graduates: A recruiting trend among Korean companies is to hire employees based primarily on their age and inexperience in the working world. Companies have indicated that they would hire only new graduates and would not even consider those who had graduated two to three years earlier, based on the belief that fresh graduates are easier to train, are more creative, can learn and grow more quickly and are capable of offering many years of service to the company.

Women in the Workforce: Despite being perceived as one of the most male-oriented societies in Asia, Korea has witnessed an increase in the participation of women in the workforce. Women now constitute a record 42 percent of the workforce and fill 60 percent of new jobs in the financial sector, and 30 percent of positions in the field of information technology. In addition, more women are holding senior managerial and executive positions in Korean companies. Although there is still some discrimination against women in the workplace, employers have generally realized the benefits of hiring women, and many firms are actively recruiting and working to retain highly qualified females.

Ames Gross is the president of Pacific Bridge Inc., a recruiting and HR consulting firm specializing in Asia, and Andrew Conner is a senior associate at Pacific Bridge. For more information about Pacific Bridge Inc., visit the company's web site at www.pacificbridge.com or e-mail to info@pacificbridge.com.

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