SME minister nominee signals flexibility on 52-hour workweek, all-inclusive pay rules

Lee So-young, nominee for minister of SMEs and Startups, said Tuesday she would explore ways to ease the financing barriers that prevent employees from acquiring small businesses, expressing support for diversifying succession options beyond family transfers to include employee buyouts and third-party mergers and acquisitions. She also signaled that the 52-hour workweek rule and all-inclusive pay arrangements should be applied more flexibly depending on industry and job type.

Speaking at her confirmation hearing before the National Assembly's Trade, Industry, Energy, SMEs and Startups Committee, Lee responded to questions from Democratic Party of Korea lawmaker Jeon Eun-su on business succession, saying that while a family business succession regime already exists, many people in the current generation prioritize their own lives and preferences and do not wish to take over a company.

Lee said she was aware that a bill to promote third-party M&A had already been introduced in the National Assembly, and that some countries have systems allowing employees and executives to raise funds and acquire their companies.

Jeon said that as small and medium-sized enterprises age, family-only succession can no longer guarantee business continuity. She noted that one in three SMEs is led by a CEO aged 60 or older, and that many companies approaching the retirement of their founders cannot find anyone to take over.

Jeon said there is a need to promote third-party succession — including employee buyouts — beyond family transfers, and announced she is preparing a special bill on employee business acquisitions. She said financing during the acquisition process remains a major obstacle and that institutional support is needed to help businesses continue to grow after a succession.

Jeon cited Korea Engineering Consultants Corp. as a domestic example of a successful employee buyout, and said policy financing and other institutional support mechanisms are needed to make such transactions possible.

In response, Lee said she would look into what options might be available to resolve the financing problem.

The issue of business succession also came up in questions from People Power Party lawmaker Kim Do-eup, who identified inheritance tax burdens as one reason South Korea has far fewer century-old companies than Germany or Japan.

Kim said that when business owners try to pass a company on to a successor, they often have to sell the factory just to pay the inheritance tax, making succession effectively impossible. He said companies that meet certain criteria should receive tax relief during the succession process, warning that jobs and technology can disappear along with businesses that are sold off or liquidated.

Lee's stance on labor regulations also drew scrutiny at the hearing. When Kim asked about all-inclusive pay arrangements and the 52-hour workweek, Lee said businesses should be given a degree of autonomy and flexibility over working-hour and wage regulations.

On a blanket restriction of all-inclusive pay arrangements, she said there could be some concerns. She added that some industries and companies are not well suited to tracking hours and paying overtime accordingly.

Lee said that in such cases, uniformly banning the practice or legally restricting the wage structure altogether would add to the burden on businesses.

She also said the 52-hour workweek rule needs improvement. While acknowledging the need to reduce working hours given concerns about overwork and long hours, she said the nature of work has changed significantly from the past.

Lee said that unlike the traditional model of clocking in and out of a factory, many forms of knowledge work are evaluated by output rather than hours spent.

She said enforcing the 52-hour limit as a rigid, blanket regulation — with criminal penalties of up to two years in prison for employers who violate it — does not fit the increasingly diverse ways people work today, and said reform is needed.