Following the increase in corporate tax, the "yellow envelope law" (amendments to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act) has passed the National Assembly, increasing the labor-management burden for small and medium-sized enterprises.
Concerns have emerged that uncertainty in the business environment has deepened due to disputes arising between subcontractors and corporations over the key aspect of the bill, the "expansion of the employer scope." There are also worries that this could lead to a slowdown in investment and a decrease in employment.
According to industry sources on the 25th, small and medium-sized enterprises are conducting assessments across management to address concerns about the potential for labor-management disputes following the passage of the yellow envelope law. Some corporations are seeking advice from law firms and reviewing response scenarios in case of labor-management disputes.
The previous day, the National Assembly voted on the yellow envelope law with 183 in favor and 3 against out of 186 members present. The core of the bill is the "expansion of the employer scope." The definition of "employer" has been changed to include anyone in a position to practically and concretely control and determine working conditions, even if they are not a party to the employment contract.
For example, even if Ms. B from a subcontractor does not have a direct contract with corporation A, if corporation A is in a position to determine Ms. B's working conditions, she will have the opportunity to negotiate with corporation A.
In addition, the bill also includes content that expands the scope of strike actions and restricts corporations' claims for damages against striking workers.
The small business sector has expressed concern. Park Pyeong-jae, head of the Korea Surface Treatment Industry Cooperative, noted, "Many employees of the second- and third-tier suppliers are worried about becoming victims due to the amendment of the labor union law and are concerned that if strikes occur at the primary contractors, it will affect the sales and incomes of the subcontractors."
Some corporations are assessing potential disputes surrounding the 'employer characteristic' and reviewing expected scenarios.
A labor law specialist at a law firm explained, "There will be cases where subcontractor unions demand collective bargaining from primary contractors, and primary contractors may refuse collective bargaining by arguing that they do not have the authority to determine the working conditions of subcontractor workers," adding that "there is also a possibility that strikes may occur more frequently on site."
The government maintains that not every primary contractor will be automatically recognized as an employer for several subcontractors. If primary contractors do not exert substantial control over subcontractors, they are not obligated to negotiate, hence negotiation responsibility is not recognized.
While we need to monitor specific guidelines, assessments indicate that uncertainty in external conditions has deepened. Before the yellow envelope law, the government decided to increase corporate tax rates by 1 percentage point across all four tax bracket standards. The additional tax burden on small and medium-sized enterprises due to tax law changes is estimated to be 6.5 trillion won.
Mr. C, who operates a parts manufacturing company in Gyeonggi Province, mentioned, "I thought the management conditions had become difficult due to the recent increase in corporate tax, and now the labor-management burden has increased". He added, "It is clear that not only has uncertainty expanded in terms of costs but also in corporate operations," pointing out that "if strikes occur frequently, there are concerns that the workload received from primary contractors may decrease, leading to a review of the entire labor-management system."
Concerns have also been raised that the increase in uncertainty could lead to job losses. According to the '2025 First Half Recruitment Trend Report' released by Job Korea, the number of recruitment announcements from small and medium-sized enterprises in the first half of this year decreased by 8% compared to the second half of last year. In the same period, the number of recruitment announcements from large corporations only decreased by 1%.
An official from the Korea Enterprises Federation remarked, "As uncertainty in the external environment increases, recruitment numbers are also declining," adding, "The ambiguity of this amendment could lead to increased litigation burdens for small and medium-sized enterprises, as well as a decrease in corporate competitiveness and jobs. Specific alternatives and guidelines from the government are needed."