Bills targeting small business safety net pile up in National Assembly

The National Assembly is moving to shore up small businesses and the self-employed through a wave of new legislation, covering everything from parental leave gaps and supply chain disruptions to energy price spikes and loan guarantee funding. With sluggish domestic demand and prolonged high interest rates pushing self-employed loan balances and overdue debt to record highs, lawmakers are working to build a stronger social safety net around the country's most vulnerable businesses.

People Power Party lawmaker Lee Jong-bae introduced a bill Wednesday to amend the Act on the Protection of and Support for Small Enterprises and Micro Businesses. The bill would allow the government to provide replacement workers, reduce public utility fees, ease loan repayment burdens, support business reopening and subsidize child care services for small business owners who suspend operations due to pregnancy, childbirth or child-rearing. Lee said the existing law already contains provisions for work-life balance support, but that specific programs need to be written into statute.

Unlike salaried workers, small business owners cannot easily take parental leave or reduce their working hours for child care. For sole proprietors and family-run shops, an owner's absence often translates directly into lost sales. The bill creates a legal basis for replacement worker and child care support, recognizing that the burden of childbirth and child-rearing is not merely a personal matter but one structurally linked to the country's low birth rate and the risk of business suspension or closure.

Lee also introduced a separate bill to amend the Act on Equal Employment and Support for Work-Family Balance. Under current law, employees must apply for reduced working hours for child care in minimum one-month increments; the bill would allow daily applications. The change would help workers respond to sudden child care needs while reducing prolonged staffing gaps for small businesses, making it a complementary measure to the small business support bill.

A bill targeting emergency support for small and medium-sized enterprises also emerged this week. Democratic Party of Korea lawmaker Heo Seong-mu introduced an amendment to the Act on the Promotion of Small and Medium Enterprises on Tuesday. Current law allows the minister of SMEs and Startups to draw up an emergency business stabilization plan when a surge in business suspensions or closures is anticipated due to disasters or sudden changes in economic conditions. The bill would explicitly add supply chain disruptions and sharp energy price increases to the list of qualifying triggers, and require the plan to include preferential and expedited support for SMEs.

A bill to strengthen the collective bargaining power of small business owners is also before the Assembly. Democratic Party lawmaker Oh Se-hee introduced an amendment to the Framework Act on Small Enterprises and Micro Businesses on June 19, which would grant qualified small business associations the right to negotiate trading terms with large corporate counterparts.

Expanding the funding base for credit guarantee programs has also emerged as a legislative priority. Democratic Party lawmaker Kim Won-i introduced a bill in April to amend the Regional Credit Guarantee Foundation Act, setting a statutory minimum contribution rate of 0.2 percent for financial institutions. Under current law, the ceiling is 0.3 percent, with the specific rate delegated to presidential decree. Critics have noted that the rate stood at 0.07 percent as of April — well below the 0.225 percent for the Korea Credit Guarantee Fund and 0.135 percent for the Korea Technology Finance Corporation — and was set to fall further to 0.05 percent from June.

Legislation to identify and assist struggling small businesses before they close is also under discussion. A bill introduced in February by Democratic Party lawmaker Song Jae-bong would require the minister of SMEs and Startups to work with policy finance institutions and commercial banks to identify at-risk small businesses early and connect them with available support programs. The bill was effectively shelved in May after the National Assembly's trade and industry committee adopted an alternative measure, but the underlying concern — that support for small businesses is too heavily weighted toward post-closure assistance — has continued to shape policy discussions.

The legislative push reflects the severity of the crisis facing small businesses and the self-employed. According to the Bank of Korea, total outstanding loans held by self-employed individuals reached 1,095.5 trillion won ($705 billion) at the end of the first quarter of this year, the highest level since the central bank began tracking the data in 2012. Overdue debt — principal and interest payments at least one month past due — also hit a record 22.3 trillion won, with the delinquency rate climbing to 2.04 percent, the highest in 10 years and nine months since the second quarter of 2015.

Business closures remain near the 1 million mark. According to a Ministry of SMEs and Startups analysis of National Tax Service closure data and a survey of 1,500 shuttered small businesses, 976,000 businesses closed in 2025. The closure rate across sectors dominated by small operators — manufacturing, wholesale, retail, food service, lodging and other services — stood at 11.08 percent, above the national average. Retail posted the highest rate at 15.4 percent, followed closely by food service at 15.1 percent.