Hire in South Korea

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Last updated at October 20, 2022
beautiful scenery in the country of korea

Currency

South Korean Won (KRW)

Capital

Seoul

Time Zone

GMT+9

Key Country Facts

Introduction

Following decades of rapid economic growth, South Korea has become a high-technology, industrialized $2 trillion economy powered by such sectors as electronics, telecommunications, automobile production, chemicals, shipbuilding and steel. Seoul, South Korea’s capital, is home to more than 25 million people (about 50% of the country’s population). The country’s legal system is a civil law system based on the Constitution of the Republic of Korea.

Area

South Korea comprises the southern half of the Korean Peninsula. Covering about 99,720 square kilometers, the country is surrounded by the East Sea and the Yellow Sea.

Climate

South Korea hosts a temperate climate, offering four distinct seasons. Winters are cold, dry and long while a typical summer is short, hot and humid with a good amount of rainfall.

Culture

South Korea is situated in the heart of Northeast Asia. Its culture reflects the very essence of Asia with an exotic blend of a multicultural society, where people live together in peace and harmony. Koreans are warm and friendly people who, in general, easily accept foreigners into their circle of friends.

Religion

About 46% of the population has no religious affiliation, 23% is Buddhist and 29% is Christian.

Official Language

The official language of South Korea is Korean. Hangul serves as the official alphabet.

South Korea HR at a Glance

Employment Law

The Labor Standards Act (LSA) is the main legislation on regulating the employment relationship and providing minimum employment standards. The Korean labor environment is employee-friendly with stringent employment protection laws.

Employment Contract

Employers must provide employees with certain terms in writing related to wages, working hours, annual paid leave and weekly holiday. The employer must provide these written terms to the employee once the employee enters the employment contract. A copy must be retained by the employer for at least three years after the employment contract ends. A verbal or implied agreement is enforceable, if the employee-employer relationship is proven to exist. Contracts do not have to be in Korean.

Contract Terms

  • Certain statutes, mainly the LSA, restrict the terms of employment contracts. Other conditions under the rules of employment (ROE) or a collective bargaining agreement (CBA) can supersede the terms of the contract.
  • Employees can be employed on a permanent basis or on a fixed-term basis, which is generally limited to two years.
  • Minimum retirement age is 60 years old.

Work Rules

Companies with 10 or more employees must prepare the ROE document, which governs the calculation of wages, payment schedule, method of payment, hours of work, paid leave, training, maternity care, workplace health, workplace safety, disciplinary procedure and other work conditions. Employers need to file the ROE with the Ministry of Employment and Labor (section 93, LSA) and keep workers informed of the rules. The ROE must be made freely accessible.

Probation Period / Trial Period

The probation period is discretionary and there is no fixed minimum in South Korea. A three-month period is common and it can be extended.

Overtime

Any work performed beyond 40 hours per week or eight hours a day is considered overtime. Employees cannot work for more than 52 hours per week, including overtime hours. This means the maximum overtime hours allowed by the law is 12 hours per week. 

The reduction of overtime to 52 hours has been applied gradually to businesses of different sizes. The schedule is as follows:

  • Workplaces with 300 or more employees: the 52 hours overtime cap was effective from July 1st, 2018.
  • Workplaces with 50 to 299 employees: the cap was effective from January 1st, 2020.
  • Workplaces with 5 to 49 employees: the cap was effective from July 1st, 2021.
  • Workplaces with less than 30 employees can have additional eight hours of overtime based on labor-management agreement. This means they can engage employees for 60 hours of work per week instead of 52 hours. This exception is temporarily allowed to small companies only from July 1st, 2021 through December 31st, 2022.

In addition, employers should pay 50% or more of the ordinary wages for overtime work, night work (from 10 p.m. to 6 a.m.) or holiday work.

Bonus

There are no restrictions or guidelines on bonuses. In South Korea, bonus pay (additional pay for things like overtime and professional achievements) is not added to regular monthly pay. Instead, it is included in the severance pay an employee receives at the end of the contract. Bonus pay is calculated by dividing the total bonus pay amount due for one year by 12, which represents the months in a year. That amount, which is one month of bonus pay),is then added to the amount of severance pay owed for one year. The total, which accounts for severance pay and bonus pay, is then multiplied by the number of years the employee has worked at the company.

Termination

Termination is reasonably difficult in South Korea and must be executed with just cause. Employer should give the worker a written notice of dismissal.

A terminated employee is generally entitled to severance benefits described in the law for all kinds of termination.

Severance Payments

Under the Employee Retirement Benefit Security Act (Retirement Benefit Act), employers must do one of the following:

  • Pay severance at the end of the employment relationship
  • Set up a retirement pension system with the employees’ consent.

The severance amount due for an employee who has worked for at least one year is the equivalent of 30 days’ average wages for each year of continuous employment. Average wages are calculated by using wages for the three months preceding termination. Severance payments apply to voluntary retirement as well as termination for cause.

If an employer makes no decision about a mandatory retirement package after establishing a company, the retirement pay system is automatically adopted. Some Koreans use the word “severance pay,” which means the same thing as retirement pay.

Under the Employee Retirement Benefit Security Act, labor and management can choose the retirement pension system instead of retirement pay. 

Employers should obtain an agreement of a majority union or, if there is no majority union, the majority of workers to decide on a retirement benefit system. They may select retirement pay or retirement pension.

Retirement pension has two types: defined contribution (DC) and defined benefit (DB).

Notice Period

Employers must give a 30-day advance notice of termination or 30 days’ pay in lieu of notice. However, notice may not be required if the employee is serving a probationary period of three months or less.

Tax and Social Security

Personal Income Tax (PIT)

Every individual who is taxed in South Korea is required to declare his or her income to the National Tax Service (NTS). 

Resident

Residents of South Korea are subject to income tax on all incomes derived from sources both within and outside South Korea. Foreign residents who have stayed in Korea for longer than five years during the last 10-year period are taxed on their worldwide income. However, foreign residents who have stayed in South Korea for five years or less during the last 10-year period are taxed on South Korea-source income. Foreign-source income is reportable only in the case where foreign-source income is paid by a South Korean entity or transferred to South Korea.

Non-resident:

Non-residents are subject to income tax only on income derived from sources within South Korea. When a non-resident without a domestic place of business has Korea-source income to report through an annual tax return, they will be subject to most provisions concerning the tax rates and the filing procedures of residents. However, in calculating taxable income and tax amount, a non-resident is not entitled to claim any personal exemptions for their dependents (except for themselves), income deductions and tax credits.

These are the basic Personal Income Tax (PIT) rates:

 

Income Above (Column A) Income Not Above Tax on (Column A) in KRW Tax on Excess (%)
0 12,000 0 6.0
12,000 46,000 720 15.0
46,000 88,000 5,820 24.0
88,000 150,000 15,900 35.0
150,000 300,000 37,600 38.0
300,000 500,000 94,600 40.0
500,000 1,000,000 174,600 42.0
1,000,000   384,600  45.0

Resident Surtax:

  • Besides the above PIT, there is also a local income tax that is assessed at a rate of 10% of the PIT rates.
  • PIT is paid to the NTS.
  • Local income tax is paid to the city or the province that is the domicile of the taxpayer.

Non-Taxable Items & Deductions

The following items are considered to be either non-taxable reimbursements or tax-exempt earned income:

  • Meal allowance up to KRW 100,000 per month
  • Reimbursement of vehicle operating expenses up to KRW 200,000 per month when an employee uses his or her own vehicle for business purposes
  • Allowance up to KRW 100,000 per month in connection with childbirth or care of a child of six years old and under
  • Cost of uniforms provided to those required by law to wear uniforms
  • Cost of work clothes worn exclusively at the workplace by employees in specified industries
  • Reimbursements for social membership and entertainment expenses incurred for business purposes
  • Qualified employee’s education fees paid by the employer
  • Cost of housing for the expatriate employee, paid by the employer directly on behalf of the employee where the rental contract was entered into between the employer and the landlord

Deductions for all taxpayers can include the following with conditions applying for each:

  • Automobile allowance
  • Meal allowance
  • Insurance premium paid by employer on behalf of employee
  • Medical expenses (employees need to submit receipts)
  • Payments made via credit card or designated cash receipts (a rebate is provided)
  • Deductions on charitable donations (applies to South Korean charities and some foreign organizations)
  • Expenses for education (kindergarten through university and college for dependents; graduate studies for self)
  • A deduction if allowed for each: taxpayer, spouse and dependents (the latter is age-related)

PIT: Employer Requirements

Employers must submit tax settlement documents on behalf of their employees by March 10. The employer will generally ask for documents and materials from employees in January. This is the time a foreign employee should indicate if they want to pay the flat 19% rate or use the progressive rate based on their income. Often, if taxes were underpaid, employers may take extra out of the February pay. The employer typically files the relevant tax forms. If not, it is up to the employee to do so. This includes foreign employees.

Employers must submit a Wage & Salary Income Taxes Withholding receipt form every February. . 

Monthly Report: Employers are required to report on the 10th day of each month regarding each employee’s income and withholdings of the previous month. For example, the employer will report on February 10 for January’s income and withholdings.

Annual reconciliation is done for the previous tax year during the month of January. These reports must be submitted by February 10. 

Resident tax: If the monthly average amount of the total salary of employees at the workplace for the past year is over 150 million won (3 million won multiplied by 50), the resident tax becomes payable. This will apply regardless of the number of employees. This additional employment cost is calculated at 0.5% of the total salary minus non-taxable income.

Social Security

There are four compulsory social insurance schemes set out in the law:

  • National Pension Insurance: 

Employers must enroll their employees, including a company’s representative director, in the National Pension Scheme. Foreign employees may submit an application to get a refund for the contributions paid to the national pension authority when he or she leaves Korea. The prescribed requirements must be met. Employers and employees equally share the cost burden of pension contributions, totaling 9% of monthly employment income. Employers and employees are each required to contribute 4.5% of monthly employment income up to KRW 5.24 million.

  • National Health Insurance:

Employers must register with the National Health Insurance for all employees, including a company’s representative director. There is an exception for casual workers or temporary employees as defined under the relevant laws. However, if foreign employees receive medical insurance benefits under global medical insurance coverage sponsored by their employers or national health insurance schemes provided by their resident countries, they may file an application to gain exemption from the mandatory enrollment. Contributions are computed as 6.99% of monthly employment income plus 12.27% for those contributions for long-term care insurance. The employer and the employee equally share the owed contribution.

  • Employment Insurance: 

Employers must enroll all employees, except for representative directors, in the Employment Insurance scheme. Both employers and employees are equally responsible for paying the insurance contributions, set at 0.8% of monthly employment income for unemployment benefit contribution. Employers are required to pay additional contributions at 0.25% to 0.85% of monthly employment income for employment stability plus vocational competency development (totally 1.05-1.65%). There is no income ceiling for this insurance. 

  • Industrial Accident Compensation Insurance:

Employers are exclusively responsible for paying the insurance contributions on behalf of the employee. The contribution rates are determined by the employer’s industry. For instance, the contribution rates for companies in manufacturing are 0.73 to 2.53% while the rate for businesses in the wholesale or retail industry is 0.9%. The premium rate for enterprises in financial services and insurance is 0.73%. There is no income ceiling for this insurance.

Social Security System Monthly Salary Cap (KRW) Employer Contribution (%) Employee Contribution (%)
National Health Insurance 104,536,481 3.495 3.495
Long Term Care 104,536,481 0.43 0.43
National Pension Insurance 5,530,000 4.50 4.50
Employment Insurance 1.15  0.90
Worker’s Compensation Insurance* 0.76 0.00
TOTAL   10.235 9.225
The above rates serve as a broad guideline. Actual rates charged by GoGlobal will differ.

South Korean Social Security System – Meaning & Benefits

 

Health Insurance

  • Improve public health and promote social security by paying insurance benefits to prevent, diagnose, treat and rehabilitate from disease or injury. It aims to promote health and prevent death.
  • Service benefits: healthcare benefits and health checkups.
  • Cash benefits: care expenses, co-payment ceiling system, compensation for excessive co-payment, assistive device expenses for the disabled and expenses for pregnancy and childbirth examinations.

National Pension

  • Contribute to people’s life stabilization and welfare promotion by implementing the public pension benefit for geriatric disease or death.
  • Pension benefits: old-age pension, disability pension and survivor’s pension.
  • Lump-sum allowance: pension refund and death benefit.

Industrial Accident Compensation Insurance

  • Compensate for a worker’s industrial accident rapidly and fairly.
  • Install and operate the insurance facilities required for promoting the worker’s rehabilitation and return to society.
  • Help protect workers by operating businesses for disaster prevention and promote worker safety.
  • Care benefit, temporary incapacity benefit, disability benefit, nursing benefit, survivor benefit, funeral expenses, injury and disease compensation pension.

Employment Insurance

  • Prevent unemployment and promote employment.
  • Increase the worker’s vocational competency development.
  • Strengthen occupational guidance and introduction.
  • Promote the life stabilization of the worker and his or her activity of searching for a job, implementing the benefits required for unemployed workers’ livelihood.
  • Stable employment business.
  • Vocational competency development business.
  • Unemployment benefit.

Retirement Pension Plans

All employers (except for those employing relatives living together) are required to establish a defined benefit (DB) plan, defined contribution (DC) plan or Severance Pay System. However, the employer’s obligation does not apply to employees with less than one year service or temporary workers who perform less than 15 hours of work per week on average for the most recent four weeks.

Under the Severance Pay System, in contrast to the retirement pension plans, employers are not required to make contributions in cash externally. For this reason, the authority strongly encourages employers to adopt one of the retirement pension plans. In this regard, accrued severance pay expense in profit and loss account is not tax deductible from 2016 onwards.

The government intends to phase out the severance pay system and promote retirement pension plans for all employers.

Types of retirement pension plans:

  • Defined Benefit (DB) Plan: ERBSA prescribes that employee’s retirement entitlements on termination of employment should be equal to or more than 30 days’ worth of average salary per service year. Furthermore, employers are required to make contributions to a DB Plan, which should be equal to or more than a prescribed percentage (e.g., 80% from 2016 to 2017) of an employee’s statutory retirement benefit entitlement.
  • Defined Contribution (DC) Plan: An employer adopting a DC Plan is required to make periodic contributions to the DC Plan which should be equivalent to one-twelfth of annual salary of an employee. It’s worth noting that 100% of the contributions to the DC Plan is tax-deductible for the employer. Unlike a DB Plan, an employee under a DC Plan can opt to make additional contributions to his or her pension plan. 
  • Individual Retirement Pension (IRP) Plan: Employees can set up IRPs to manage the retirement benefits paid by their employers. As such, an employer cannot establish IRPs for their employees. However, it is required to transfer existing employee’s retirement benefits to the employee’s IRP within the prescribed due date after the termination of employment. For reference, an employee can contribute a maximum amount of KRW 18 million per year to his or her personal type IRP apart from the retirement benefits paid by the employers.

Employees

Salary Payment

Salaries are generally paid monthly in South Korea, via bank transfer to an employee’s bank account.

Payslip

Employers are required to issue payslips when paying wages to workers. Workers should have access to the payslip via website, PDF or hard copy. The payslip should include employee name, employee number, payday, number of working days, total wage, total number of working hours, number of overtime, amount of each wage item, calculation method for each wage item, deduction item and the final effective amount.

Annual Leave

  • Companies must provide paid leaves of at least 15 days per year. 
  • Employees who have worked for 80% of total working days of the first year are entitled to use 11 days’ annual leave within the first year. 
  • For employees with less than 80% attendance, next year’s leave days are based on one leave day for a full working month in the previous year.
  • The days of leave increase every two other years from the fourth year up to the ceiling of 25 days. 
  • If an employee does not use up his or her annual leave for one year, the remaining days of unused annual leave cannot roll over to the next year. They will expire. However, the employer should pay wages to the employee for the unused leave. If the employer offers a written notice to the employee requesting him or her to use up all the remaining days of leave until the end of the year, the employer will be exempt from the obligation to compensate for the unused annual leave if the employee does not use the leave.
  • Some foreign companies in South Korea allow for the rolling over of annual leave. This is allowed, because the LSA, as the minimum standards, does not prohibit employers from applying working conditions that are better than those of the law.

Sick Leave

  • Employees are not legally entitled to sick leave in relation to non-work related illnesses or injuries.
  • However, quite a few companies grant sick leave to their employees as a special benefit. This allowance is generally up to several months of unpaid leave or up to several weeks of paid leave if illness or injury requires it.
  • Regarding work related illnesses or injuries, worker’s compensation insurance covers partially paid leave and pays for treatment and additional compensation for any lasting disability.

Pregnancy

Pregnant female employees who are at medical risk of miscarriage or stillbirth will be allowed to use childcare leave while still pregnant. They are entitled to change their working start and end times while keeping the prescribed number of working hours. The employer can refuse the request only for reasons prescribed by regulations (e.g. the hours would disrupt the normal operations of the business).

Maternity & Parental Leave

Employers must allow 90 days of maternity leave (or 120 days in the case of twins). For the first 60 days (or 75 days in the case of twins), maternity leave is paid by Employer and the Government provides a subsidy of up to KRW 2,000,000 per month.

The Government pays for the remaining 30 days (or 45 days in the case of twins), capped at KRW 2,000,000 per month.

At least 45 days of leave (or 60 days in the case of twins) must be taken after the birth.

Maternity paid leave is also payable for miscarriage and premature birth:

  • 5 days for pregnancies lasting up to the 11th week,
  • 10 days for those entering the 12th week to the 15th week of pregnancy,
  • 30 days for those entering the 16th week to the 21st week of pregnancy,
  • 60 days for those entering the 22nd week to the 27th week of pregnancy, and
  • The full 90 days of leave for those pregnancies lasted at least 28 weeks.

Employers must grant at least ten days of paid paternity leave at the employee’s request. Paternity leave requests must be made within 90 days of childbirth.

Women with infants under the age of one are entitled to at least 30 minutes of nursing time, twice a day.

Child Care Leave

Employers, upon the employee’s request, must grant up to one year of childcare leave to an employee who has a child, including an adopted child, who is either:

  • Eight years old or younger
  • Not past second grade in elementary school

Since childcare leave is unpaid, the government compensates the employee through the Employment Insurance Funds at 80% of ordinary wage for the first three months and 50% of the wage for the rest of the period. The maximum period is nine months. The monthly payment amount should be between KRW 700,000 and KRW 1.5 million.

Employees eligible for parental leave may choose to work reduced hours instead of taking parental leave. Reduced working hours should be between 15 hours and 30 hours a week.

Family Care Leave

Employers should provide family care leave from 30 to 90 days each year to employees who want to take care of family members including parents, spouse, children and a spouse’s parent if they are sick, injured or old.

Family care leave is unpaid but included in the period of continuous service.

Other Leave

Female employees are also entitled to one day of unpaid leave each month as menstruation leave.

It is common for employers to give leaves for marriage, death of a relative, etc.

Public Holidays

Mandatory paid holidays are:

  • Weekly holidays (typically Sunday)
  • Labor Day (May 1)
  • Public holidays 

Employers were previously not required to provide paid leave on public holidays. However, by amendments to the LSA effective from January 1, 2020, it is mandatory to provide leave on public holidays. The new law will initially apply to corporations with five to 300 workers starting in 2022. 

Employees must receive 50% additional pay for working on a holiday.

Medical Checks

In Article 25 of the Enforcement Decree of the National Health Insurance Act, Article 52 Health Check-up, health checkups must be conducted at least once every two years. For employers who are not engaged in office work, health checkups must be conducted annually. The health checkups must be conducted at an institution designated in accordance with Article 14.

Benefits to the Employee in South Korea

Statutory Benefits

Pension

In South Korea, employer-sponsored retirement plans supplement the pay-as-you-go National Pension Scheme. This comprises the basic social security (old-age, survivors, and disability) safety net. When first introduced in 1961, employer plans covered companies with 30 or more employees and provided mandatory severance payments, which consisted of lump-sum benefits of at least one-month average pay per year of service. Coverage was gradually extended to include employers with five or more employees. Additionally, under the 2005 Employee Benefit Retirement Security Act, employers are encouraged to adopt a tax-advantaged defined benefit plan, also called a defined contribution plan, or convert the existing mandatory severance plan (following the consent of employees) to one of these pension plan designs. Alternatively, employers with fewer than ten employees may choose to make tax-free contributions on behalf of their employees to an individual retirement account.

Visas and Foreign Workers

General Information

The following special income tax rules are available to expatriates.

Foreigners can select either of the following methods for the calculation of their employment income tax:

  • Apply a 19% flat tax rate to total Korea-sourced employment income (no deductions or credits are allowed for this purpose)
  • Use the existing regular method of tax calculation under which graduated rates (ranging from 6% to 42%) are applied to adjusted taxable income that has been derived by subtracting applicable deductions and exemptions from gross income. The tax amount calculated is further reduced by applicable tax credits to arrive at the final tax due amount under the regular method. 

In order to make the selection for the 19% flat rate, taxpayers should file an application when the monthly payroll withholding tax return or year-end payroll tax reconciliation is performed or when the annual composite income tax return is filed. 

The monthly payroll withholding tax return is due on the 10th day of the following month. Year-end tax reconciliation and the annual composite income tax return are due on March 10 and May 31 of the year following the tax year, respectively.

Public Holidays in 2022

S.No Occasion Date
1 New Year’s Day January 1st
2 Lunar New Year January 31st – February 2nd (3-day consecutive holiday)
3 Anniversary of the Independence March 1st Movement March 1st
4 Presidential Election Day March 9th
5 Labour Day May 1st
6 Children’s Day May 5th
7 Buddha’s Birthday May 8th
8 National Local Elections June 1st
9 Memorial Day June 6th
10 Liberation Day August 15th
11 Chuseok (Harvest Moon Festival) September 9th – 11th (3-day consecutive holiday, substitution holiday September 12th)
12 National Foundation Day October 3rd
13 Hangeul (Korean Characters) Day October 9th (Substitution holiday October 10th)
14 Christmas Day December 25th

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