Strategic Human Resource Management in Response to Employment Protection

• In Event: Artificial Intelligence and Smart Policymaking in South Korea

Abstract

This study examines the strategic human resource management changes in South Korean manufacturing companies following the 2010 Supreme Court ruling on illegal indirect employment, using a  Difference-in-Differences analysis of Workplace Panel Survey (WPS) data from 2007-2013. Our findings show that after the Supreme Court ruling, companies that previously used indirect employment underwent significant changes in their HR practices, transitioning to an internal development and stable workforce maintenance model, particularly shifting toward a High-Commitment Human Resource Management (HCHRM) paradigm. Through this transition, firms strengthened workforce planning, implemented training based on job analysis, increased multi-skill training, standardized performance management (expanded performance evaluation systems for production workers), utilized performance assessments for employee development, opened communication channels, and rigorously documented fair treatment and compliance. Results showed decreased involuntary turnover and expanded labor-management agreements to prevent disputes. These adjustments represent a coherent shift toward HCHRM, characterized by employment security, extensive training and information sharing, decentralized decision-making, careful selection, performance management, and stable employment relations. The mechanisms driving this strategic shift can be explained through several theoretical frameworks: (1) the restriction of external flexibility prompted pursuit of internal flexibility, (2) long-term employment assumptions increased incentives for human capital investment, (3) heightened legal risks necessitated fair HR practices, and (4) institutional legitimacy pressures encouraged HCHRM adoption. These firms demonstrated that adapting to stringent employment protection laws is achievable through thoughtful HR reforms that integrate employees as valued, long-term contributors. Our research contributes to understanding how external regulatory changes can influence organizational paradigm shifts in human resource management. Rather than merely implementing superficial changes, firms responded to legal pressures by developing comprehensive HCHRM systems that balanced compliance requirements with performance objectives. These findings highlight the role of employment protection legislation as a driver of strategic human resource management practices.

Author

• Yeonwoo Sim, Korean Association of Public Administration
  Presenting Author