外資系本社のリストラ方針と韓国HRの役割

What role should the Korean entity’s HR play in a restructuring plan from headquarters?

Advising foreign-invested companies, we often see the same scene. One day a restructuring plan comes down from headquarters to the Korean entity.

• •“Cut headcount by 20%.”
• •“Complete the workforce reduction within this quarter.”
• •“This position has been eliminated globally, so separate the employee.”

From the global headquarters’ point of view, this may be a business decision that has already been made. For Korean HR, however, that is where the work begins, because in Korea a decision by headquarters does not mean an employee can be dismissed right away.

Korean HR is not simply the one who “executes” headquarters’ restructuring

One of the most important roles of HR at the Korean entity of a foreign-invested company is not to pass on and carry out headquarters’ policy as it is. Quite the opposite. HR should translate headquarters’ business decision into terms that fit Korean labor law and Korean reality, and explain accurately to headquarters the costs and risks that may arise along the way.

Suppose, for example, that headquarters asks, “Please have this employee leave by next month.” It can be quite risky for Korean HR simply to move toward notifying the employee of separation.

Under the Korean Labor Standards Act, dismissal for managerial reasons is not recognized merely because the company wants to reduce headcount. There must be an urgent managerial necessity, and whether the company made every effort to avoid dismissal and whether the selection criteria are reasonable and fair are examined together. In certain cases, the company must also notify the employee representative at least 50 days before the intended dismissal date and consult in good faith on the methods of avoiding dismissal, the selection criteria and related matters.

1. Explain the “risk of dismissal” first, not the “cost of dismissal”

Headquarters often thinks, “Can’t we just dismiss lawfully?” In Korea, however, dismissal is not that simple.

If a dismissal leads to a dispute, many kinds of costs can arise: an application for remedy to the Labor Relations Commission, litigation, the time HR staff spend responding, outside professional fees, internal conflict, and unrest among other employees. If the lawfulness of a dismissal for managerial reasons is in doubt, it may be about far more than a few months of severance pay.

So when reporting a restructuring plan to headquarters, Korean HR should not simply present Option A: dismissal / Option B: voluntary retirement, but should present the following for each option.

• •Legal requirements
• •Expected duration
• •Likelihood of dispute
• •Labor Relations Commission and litigation risk
• •Expected legal costs
• •Impact on the organization
• •Room for negotiation with employees
• •Final expected cost

In other words, restructuring also needs to be reported to headquarters as a risk-adjusted decision.

2. Sometimes a sufficient voluntary retirement package is the most economical choice

One frequent source of conflict between headquarters and the Korean entity in restructuring is the level of the separation package. Headquarters may say, “Why do we have to pay this much?”

That question, however, needs to be reframed as: “What is the total cost the company will bear if it restructures without adequate compensation?”

Additional compensation paid in a voluntary retirement program or termination by mutual agreement is separate from statutory severance pay. The company is not required to pay an additional separation payment in every case. In actual restructuring, however, a certain level of additional compensation can be an important means of preventing disputes and allowing the employee and the company to end the relationship reasonably.

For example, if the company rushes negotiations to save on additional separation pay and a dispute follows, it may end up saving a few months of extra compensation while bearing a far larger cost.

Framed this way, Finance and Regional HR at headquarters can understand it much more easily.

3. Above all, restructuring needs “time”

There is one more part of a headquarters restructuring instruction that Korean HR must revise: the timeline.

Headquarters may think of a schedule such as “decide this month → complete next month” at the global level. In Korea, however, such a schedule can be very risky in practice. Especially when reducing a large number of employees or considering the possibility of dismissal for managerial reasons, enough time must be secured for legal procedures and consultation.

The Labor Standards Act also provides, in relation to dismissal for managerial reasons, that the employer must notify the employee representative at least 50 days before the intended dismissal date and consult in good faith on methods of avoiding dismissal, selection criteria and related matters.

It is not only about legal procedure. In practice, too, restructuring takes time. The company needs to explain its situation to the affected employees, present separation terms, give employees time to review them and, where appropriate, adjust the terms. Not a few employees who initially refuse to leave reach agreement after sufficient explanation and negotiation.

Conversely, if the company sets a deadline and presses with “Submit your resignation by this week,” the situation is likely to turn into mutual conflict. That is the moment a negotiation becomes a labor dispute.

So one of the important resources Korean HR should ask headquarters for is not only money but time.

4. Korean HR should be the “architect of the negotiation” between employees and headquarters

In restructuring, Korean HR is often put in the most difficult position. Headquarters presses for fast headcount reduction, while employees ask, “Why me?” and “Can the company do this unilaterally?”

If HR acts only as a messenger for one side, the problem will not be solved. Rather, HR needs to design the entire restructuring process.

HR must explain Korean law and risk to headquarters, explain the company’s business situation and the background of the restructuring to employees, and build an exit package and timeline that both sides can accept. This is an important area of expertise required of Korean HR at foreign-invested companies.

5. “Headquarters has decided” may be the most dangerous phrase for Korean HR

In meetings with employees affected by restructuring, one phrase often comes up: “This has already been decided by headquarters.” HR uses it to explain that it was not their own decision. But this phrase can actually be risky.

From the employee’s point of view, it raises the question, “So no review at all was done in Korea?” Especially where dismissal for managerial reasons is possible, it can become important that the company has substantively considered efforts to avoid dismissal, selection criteria and the like.

Korean HR should therefore manage how the global decision will be carried out in Korea—through what procedures and on what criteria—rather than merely conveying that a global decision was made.

Summary

The role of Korean HR in restructuring at a foreign-invested company is by no means passive. Restructuring at a foreign-invested company is not simply a dismissal issue. In the end, there are three keys:

• •assess the legal risk accurately,
• •prepare reasonable separation terms, and
• •negotiate with enough time.