Government begins to design child care support subsidy system for sole proprietors of small businesses

For Ms. A, a small business owner who runs a flower shop in Yongsan-gu, Seoul, the harrowing memories of being pregnant about three years ago are still vivid. Since she couldn’t hire staff, she had to manage everything herself. Ms A, who continued to keep her shop open while taking morning sickness medication until just two weeks before giving birth, said: “It was not uncommon for me to run to the bathroom while preparing flowers and feel nauseous in the sink,” adding: “I felt like I couldn’t keep the shop closed for long, so I took exactly two weeks off after giving birth and then resumed operations.”

There is potential for some easing of the triple burden faced by small business owners like Ms. A, who have been struggling to run their businesses while also dealing with childbirth and childcare. The government has begun to design a comprehensive support system specifically for self-employed business owners who are trying to juggle business and parenthood but often find themselves on the brink of closure. According to the government on August 18, the Korea Small Business Institute recently started a research project on providing childcare support subsidies to small business owners. This follows the Ministry of SMEs and Startups’ announcement earlier this month of its intention to introduce childcare support grants to prevent income disruption and business closure among small business owners due to childbirth or childcare responsibilities.

Through this research, the Korea Small Business Institute is expected to examine a variety of options, including providing grants to help small business owners who are unable to run their businesses due to childbirth or childcare maintain some income for a certain period. The study will also cover potential recipients, payment methods, financing required, and expected results. Once the investigation is complete, the government plans to finalize the timing and size of the support in consultation with tax authorities.

The government’s plan primarily focuses on “sole sole proprietorship small business owners,” those who operate their stores without employees. These owners are at high risk of having to suspend or close their businesses permanently, since they have no one to cover them in their absence due to childbirth or childcare. According to the “Basic Statistics on Small and Medium Enterprises” published by the Ministry of SMEs and Startups, there were 2.28 million women sole proprietorship owners in 2023, accounting for 82.1% of all women-owned SMEs. However, childbirth and child care support systems remain woefully inadequate.

The key issue is how to design the payment system for childcare support subsidies. Various methods are being considered, ranging from fixed payments to eligible sole proprietorship owners to compensation for loss of income due to childbirth or childcare. If the system is designed to supplement lost income, establishing eligibility criteria will become an important point of discussion. The scope of beneficiaries will determine whether only complete business closure will qualify as a labor gap, or whether reducing business hours or employing substitute staff will also make an individual eligible.

A representative from the Korea Small Business Institute said, “This investigation is not only considering childcare support subsidies, but is also reviewing the introduction of a ‘healthcare subsidy’ to compensate for business gaps and losses resulting from medical checkups for small business owners,” adding, “We are currently considering various possibilities and analyzing the impact and effectiveness of the potential new system.” The investigation is expected to conclude by the end of next month.

© The Asia Business Journal. All rights reserved. Unauthorized training and use of AI is prohibited.