More than half of South Korea's small and medium-sized enterprises either will not pay a Chuseok bonus this year or have yet to decide whether to do so. Weak domestic demand and high borrowing costs have left smaller firms short of cash heading into the autumn holiday.
45.1% Plan Bonuses, More Than Half Undecided or Paying None
Only 45.1% of small and medium-sized enterprises said they plan to pay a Chuseok bonus this year, according to a survey of 1,000 companies conducted by the Korea Federation of SMEs over one week starting Sept. 1 and released on the 17th.
Of those, 40.5% said they would pay about the same amount as last year, the largest single response. Another 1.2% said they would increase payments, while 3.4% said they would reduce them.
By contrast, 54.9% said they would pay no bonus or had not yet decided. Some 30.8% said they have never paid a separate Chuseok bonus, and 7.7% said they would skip it this year because of business difficulties. A further 16.4% said they had not yet made a decision.
Among firms planning to pay, those using a percentage-based formula said they would pay an average of 37.7% of base salary. Companies paying a flat amount said they would give an average of 665,000 won per worker.
Firms outside the greater Seoul area planned larger bonuses than those within it. Companies outside the capital region said they would pay an average of 43.9% of base salary, or 769,000 won per worker, compared with 30.4% of base salary and an average of 555,400 won per worker in the capital region.
Cash conditions were also tight ahead of the holiday. Some 40% of respondents said their finances were worse than at last year's Chuseok, with 31.3% describing conditions as difficult and 8.7% as very difficult. Another 47.1% said conditions were similar to a year earlier, while just 12.9% said their finances were comfortable.
Manufacturers reported greater strain. Some 47.8% of manufacturing firms said their cash position was difficult, 15.6 percentage points higher than the 32.2% among non-manufacturers.
Firms Need 256.45 Million Won Each, Fall Short by 58.48 Million
Companies pointed to weak sales as the main cause of their cash squeeze. In a multiple-response question, 71.5% cited sluggish sales and revenue, followed by higher raw material and component prices at 59.5%, rising labor costs at 21.8% and delays in collecting payments at 12.8%.
Small and medium-sized enterprises said they needed an average of 256.45 million won each to get through this year's Chuseok. But the amount they could actually secure averaged 197.97 million won, or 78.44% of what was required.
That leaves an average shortfall of 58.48 million won per company.
The burden was heavier for manufacturers, which said they needed an average of 306.4 million won and were short by 84.11 million won. Non-manufacturers put their average requirement at 198.33 million won, with a shortfall of 28.67 million won.
Asked about access to funding from banks and state-backed lenders, 60.4% said conditions were no different from last year's Chuseok. Some 27.0% said borrowing was difficult, while 12.6% described it as smooth.
One in Three SMEs Struggles to Borrow, 56.5% Cite Rates
One in three companies, or 33.3%, said they were having trouble borrowing from banks.
High lending rates were the most cited obstacle at 56.5%, followed by insufficient credit limits at 41.1% and tougher collateral requirements at 22.5%.
Few firms had room for extra time off. Some 85.1% said they had no plans for additional closures beyond the statutory Chuseok holidays, while 14.9% said they did. Average additional days off came to 0.4 days, less than half a day.
Kim Hee-joong, head of the economic policy division at the Korea Federation of SMEs, said smaller companies and micro-business owners are struggling not only with the burden of holiday bonuses but also with securing short-term working capital amid a prolonged slump in domestic demand and high interest rates.
"Cash pressure on small and medium-sized enterprises is so severe that they are moving to collect payments from customers early and even considering delaying their own payments in order to cover holiday funding gaps," Kim said.
Kim added that close attention and pre-emptive support from the financial sector are urgently needed so that the cash crunch does not spread into a chain of defaults and so that policy relief reaches vulnerable segments such as traditional market merchants quickly.
