Hire in South Korea

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Last updated at June 16, 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 led by such sectors as electronics, telecommunications, automobile production, chemicals, shipbuilding, and steel. The capital of South Korea, Seoul, is home to more than 25 million people, or about 50% of the country’s population. Their legal system is a civil law system based on the Constitution of the Republic of Korea.

Area

South Korea makes up the southern half of the Korean Peninsula. It is surrounded by the East Sea and the Yellow Sea, and covers about 99,720 square kilometres.

Climate

South Korea has a temperate climate with four distinct seasons. Winters are cold, dry and long while a typical summer is short, hot and humid. The summers here have a good deal of rainfall, while the winters are long, cold and dry. January is the coldest month of the year.

Culture

South Korea is situated in the heart of Northeast Asia. It reflects the very essence of Asia with an exotic blend of a multi-cultural society that lives together in peace and harmony. Koreans are warm and friendly people who easily accept foreigners into their circle of friends.

Religion

About 46% of the population have no religious affiliation, 23% are Buddhist and 29% are Christians.

Official Language

Official language is Korean. Hangul is Korea’s official alphabet.

South Korea HR at a Glance

Employment Law

The Labor Standards Act 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 relating to wages, working hours, annual paid leave and weekly holiday in writing. The employer must provide these written terms to the employee at the time the employee enters the employment contract. The employer must retain a copy for at least three years after the employment contract ends. A verbal or implied agreement is enforceable if proven. Contracts do not have to be in Korean.

Contract Terms

  • Certain statutes, mainly the Labor Standards Act (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 Rules of Employment (ROE). The ROE governs the calculation of wages, the timing and method of payment, hours of work, paid leave, training, maternity care, workplace health and 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 and make them freely accessible.

Probation Period / Trial Period

Discretionary and no fixed minimum. A three-month period is common and can be extended.

Overtime

Required. Anything over 40 hours per week or 8 hours a day is considered overtime. Employees cannot work for more than fifty two (52) hours per week, including overtime hours, i.e. maximum overtime hours allowed by the law is 12 hours per week.

The reduction of overtime to 52 hours will apply gradually to businesses with different sizes. Schedule 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 will be effective from July 1st, 2021.

  • Workplaces with less than 30 employees can have additional 8 hours’ overtime based on labor-management agreement, which means they can have 60 hours of work per week instead of 52 hours. This exception is temporarily allowed to small companies only from July 1st, 2021 to 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 is no restriction or guidelines on awards of bonuses. In Korea, bonus pay (additional pay for things like overtime, and professional achievements) is not added to regular monthly pay, but rather, 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 (for months in a year). That amount (one month of bonus pay) is then added to the amount of severance pay owed for one year. The total (severance pay and bonus pay) is then multiplied by the number of years the employee has worked at the company.

Termination

  • Reasonably difficult and must be with just cause. Employer should give the worker a written notice of dismissal.

  • Generally, an employee is 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 either:

  • Pay severance at the end of the employment relationship, or

  • Set up a retirement pension system with the employees’ consent.

The severance amount for each 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 mandatory retirement package after establishing a company, 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 retirement pension system instead of retirement pay.

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

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

Notice Period

Employer 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 is required to declare his/her income to the National Tax Service (NTS).

Resident:

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

Non-resident:

Subject to income tax only on income derived from sources within Korea. When a non-resident who does not have a domestic place of business has Korea-source income to report through an annual tax return, most provisions concerning the tax rates and the filing procedures of residents shall apply to them. 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.

 

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

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

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/her own vehicle for business purposes,

  • Allowance up to KRW 100,000 per month in connection with childbirth or childcare 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 only at the workplace by employees in certain industries,

  • Reimbursements for social membership and entertainment expenses incurred for business purposes,

  • Qualified employee’s education fees paid by the employer, and

  • Cost of housing of the expatriate employee, paid by the employer directly on behalf of the employee where the rental contract was entered into between employer and landlord.

Deductions for all taxpayers can include (conditions apply for each of the following):

  • Automobile allowance,

  • Meal allowance,

  • Insurance premium paid by employer on behalf of employee,

  • Medical expenses (employees need to submit receipts),

  • Taxpayers receive a rebate of payments made via credit card/designated cash receipts,

  • Deductions on charitable donations (applies to Korean charities and a few foreign ones),

  • Education expenses (kindergarten to university/college for dependents/graduate studies for self), and

  • Deduction for each: taxpayer, spouse and dependents (latter age-related).

PIT: EMPLOYER REQUIREMENTS

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

Employer has to submit a Receipt for Wage & Salary Income Taxes Withholding form every February.

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

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

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 X 50), resident tax becomes payable, irrelevant of number of employees. This additional employment cost is calculated at 0.5% of (total salary – non-taxable income).

Social Security

There are four compulsory social insurances set out in the law:

  • National Pension Insurance:

Employers must enroll their employees including a representative director of a company 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/she leaves Korea, provided that the prescribed requirements are met. Employers and employees equally share the cost burden of pension contributions, totaling 9% of monthly employment income (meaning employers and employees are required to contribute 4.5% of monthly employment income each) up to KRW 5.24 million.

  • National Health Insurance:

Employers must register with the national health insurance for all employees including a representative director of a company, except 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 get 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 share the contribution equally.

  • Employment Insurance:

Employers must enroll all employees, except for a representative director of a company, in the employment insurance. Both Employers and Employees are equally responsible for paying the insurance contributions at 0.8% of monthly employment income for unemployment benefit contribution, whereas 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 celling for this insurance.

  • Industrial Accident Compensation Insurance:

Employers are solely responsible for paying the insurance contributions. The contribution rates are determined by the industry of the employer. For instance, the contribution rates for companies in manufacturing sector are 0.73 to 2.53%, and the rate for businesses in wholesale or retail industry is 0.9%, whereas 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 102,739,067 3.495 3.495
Long Term Care 102,739,067 0.43 0.43
National Pension Insurance 5,240,000 4.50 4.50
Employment Insurance 1.05 (1.15 effective 1st July 2022) 0.80 (0.9 effective 1st July 2022)
Worker’s Compensation Insurance* 0.76 0.00
TOTAL   10.235 9.225

The above rates serve as a broad guideline. Actual rates charged will differ.

KOREAN SOCIAL SECURITY SYSTEM – MEANING & BENEFIT

Health Insurance

  • Improve public health and promote social security by paying insurance benefits to prevent, diagnose, treat, and rehabilitate from disease or injury and to help promote health and prevent death.

  • Service benefits: health care benefit and health check-ups.

  • Cash benefits: care expenses, co-payment ceiling system, compensation for excessive co-payment, assistive device expenses for the disabled, and pregnancy/childbirth examination expenses.

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 workers’ safety promotion.

  • 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/her activity of searching for a job by 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 either a DB Plan, DC Plan or Severance Pay System. However, the employer’s obligation does not apply to those employees with less than one year service or temporary workers who work less than 15 hours per week on average for the recent four weeks.

In contrast to the retirement pension plans, under the Severance Pay System, 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 makes retirement pension plans compulsory for all employers by 2022.

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/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, but it is obliged to transfer exiting 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/her personal type IRP apart from the retirement benefits paid by the employers.

Employees

Salary Payment

Generally paid monthly. By bank transfer to employee’s bank account.

Payslip

It is mandatory to issue payslips when paying wages to workers, and workers should have access to it via website, pdf or be issued a 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 need to provide paid leaves, at least 15 days per year.

  • Employee who has worked for 80% of total working days of the first year is entitled to use 11 days’ annual leave within the first year.

  • For employee 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 4th year up to the ceiling of 25 days.

  • If an employee does not use up his/her annual leave for one year, the remaining days of unused annual leave cannot roll over to the next year and will expire. However, the employer should pay wages to the employee for the unused leave. If the employer gives a written notice to the employee requesting him/her to use up all the remaining days of leave until the end of the year, and the employee does not use the leave in spite of such request, the employer is exempted from the obligation to compensate for the unused annual leave.

  • Some foreign companies in Korea allow such rolling over of annual leave, which is perfectly fine because the Labor Standards Act, as the minimum standards, do not prohibit employers from applying working conditions that better than those of the law to employees.

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 generally up to several months of unpaid leave and/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 to provide partially paid leave and to pay for treatment as well as additional compensation for any lasting disability.

Pregnancy

Pregnant female employees who are at medical risk of miscarriage of stillbirth will be allowed to use childcare leave while still pregnant.

They have a right 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 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, or

  • 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 3 months and 50% of the wage for the rest of period(max. 9 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.

It is unpaid but included in the period of continuous service.

Other Leave

  • Female employees are also entitled to one day of unpaid leave per 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 1st)

  • Public holidays (See list of Public Holidays)

Employers were not obliged to provide paid leave on public holidays. However, by amendments to the LSA effective from 1 January 2020, it is mandatory to provide leave on public holidays. The new law will initially apply to corporations with 5 to 300 workers starting 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 check-ups shall be conducted at least once every two years. For employers who are not engaged in office work, health check-ups must be conducted annually. The health check-ups 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, 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 1-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 their existing mandatory severance plan (with 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), or

  • Use the existing regular method of tax calculation under which graduated rates ranging between 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 of the following month. Year-end tax reconciliation and the annual composite income tax return are due on March 10th and May 31st 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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