Guide to Hiring in South Korea

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Guide to Hiring in South Korea

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Ranking 5th globally when it comes to ease of doing business according to the World Bank, South Korea boasts a robust and vibrant economy, recognised globally for its technological advancements and innovation. For those wanting to start a manufacturing/ industrial, tech, or food and beverage business – to name a few – Korea just might be where you want to head to!

With a highly educated and skilled workforce, businesses can tap into a talent pool that is adept at adapting to new technologies and driving growth. Additionally, South Korea has a strategic geographical location, serving as a gateway to the vast Asian market.

As the country’s well-developed infrastructure and efficient logistics network further facilitate seamless business operations, South Korea remains a favourite spot for businesses to expand into.

*Please note that all the information listed below are to be used as a general guideline. For more detailed accounts of South Korea’s employment laws and regulations, please visit the official governmental websites.

Labour Law – Basics

What are the basic requirements for employers in South Korea?

  • Labour Legislations

South Korea has approximately 40-50 legislative tools that make up labour/employment law in the country, such as:

    • The Labour Standards Act (LSA)
    • The Framework Act on Employment Policy
    • The Employment Security Act (ESA)
    • Act on Equal Employment
    • Industrial Accident Compensation Insurance Act
    • Labour Adjustment Act (LAA)

For the full list of labour law related legislation, please refer to the Relevant Links section below.

The primary piece of labour legislation is the Labour Standards Act which stipulates mandatory employee benefits, working hours, wages, and other key employer obligations.

It is important to note that the Labour Standards Act covers employees who are deemed workers per their written employment contracts. These employees must be working on a permanent/temporary and full-time/part-time basis. The Labour Standards Act also extends to dispatch workers, however, independent contractors are not covered.

In the event an employee’s employment contract contains terms that are less favourable than the minimum standards prescribed in the Labour Standards Act, the Act will prevail over the contract.

  • Employer Contributions

In South Korea, the total amount of mandatory statutory contributions by the employer can range from 10.3491% or 28.8491% of the employee’s salary. A breakdown of employer contributions is as follows:

    • National Pension: 4.5%
    • National Health Insurance: 3.545% (Long-Term Care Insurance: NHI*0.9082%/7.09%=0.4541%)
    • Employment Insurance: 1.15% to 1.75%
    • Industrial Accident Compensation Insurance: 0.7% to 18.6%

 

What are the different work permits and visas in South Korea?

South Korea has an extensive list of work permits and visas catered to various groups of people. Some of them include:

  • Short-term work visa (Type C) – People who want to engage in short-term employment in a specific field for less than 90 days.
  • Long-term work visa (Type E) – Visa with a long stay of between 3 and 5 years.
  • Top-Tier work visa (D-7) – Visa applied for when a foreign-based corporation dispatches employees to a Korean corporation with a period of stay of 3 years.
  • Dependent Visa (Type F) – As a dependant visa, the upper limit is different for each type of visa (three months to five years).

Visa applications can be made by the applicant themselves, or a sponsor – depending on the type of visa.

For the complete list of work permits and visas available as well as the required documents and fees for each, refer to the Relevant Links section below.

What to note for existing employees?

  • Income Tax Filing – Income tax returns must be filed with the National Tax Service by the 10th of the following month.
  • Year-End Income Tax Filing – The tax settlement fiscal year is from January 1st to December 31st, and the settlement results are reflected in the February Payroll Report by conducting the previous year’s tax settlement process from mid-January to mid-February every year.
  • Individual Income Tax – The income tax that South Korean employees pay ranges from 6% – 45%, depending on their income bracket. The percentage of tax contributions as of 28 February 2023 are as follows:
Income bracketTax rate
Below 14 million KRW6%
14 million – 50 million KRW15%
50 million – 88 million KRW24%
88 million – 150 million KRW35%
150 million – 300 million KRW38%
300 million – 500 million KRW40%
500 million – 1 billion KRW42%
Over 1 billion  KRW45%

Source: Ministry of Economy of Finance

It is important to note that these tax rates apply to both resident and non-residents in South Korea. However, non-residents can now opt to be taxed at a flat rate of 19% instead of following the progressive rates, provided they are employed in South Korea no later than 31 December 2023. Non-residents will only be taxed on Korean-sourced income.

  • Social Insurance

Korean employees pay national health insurance, national pension insurance, and employment insurance, excluding industrial accident insurance, among the 4 major social insurance policies.

    • National Pension: 4.5%
    • National Health Insurance: 3.545% (Long-Term Care Insurance: NHI*0.9082%/7.09%)
    • Employment Insurance: 0.9%
  • Non-compete Agreements

Employers who want employees to enter non-compete agreements must ensure the agreements are reasonable and limited in scope. Typically, these agreements should not exceed 12 months and should contain a clause for compensation in lieu of the execution of the agreement.

 

What to remember when hiring new employees?

There is no requirement for the employment contract to be written per the Labour Standards Act unless the contract is for a part-time employee. If a contract is written, there is no requirement for it to be in Korean. However, this is highly recommended – especially if the contract involves local employees.

There is also no rule on paying bonuses of 13th month salaries, however, it is common practice for these to be paid to employees across South Korea. Due to there being no regulations on the 13th month salary, employers can make this payment at various periods throughout the year. However, most employers chose to pay it at the end of the year, typically December, aligning with the holiday season.

For information on other employer/employer obligations, refer to the ‘What are the basic requirements for employers in South Korea?’ and ‘What to note for existing employees?’ sections above.

What are the different discrimination laws in South Korea?

South Korea has several laws to protect against discrimination in the workplace, namely:

  • The Constitution of South Korea
  • The Labour Standards Act
  • The Equal Employment Opportunity and Work-Family Balance Assistance Act (Equal Employment Act)

These laws may be read together to issues in the workplace such as racial/gender/religious discrimination, sexual harassment and profiling.

What are the working hours in South Korea?

At present, South Korean employees can work a maximum of 40 hours a week with 12 hours of overtime – a total of 52 hours.

Typically, overtime is paid at 150% of the standard salary rate or 200% for night work (after 10 pm).

DayTimeWage
Weekday18:00 – 22:00Hourly Wage x 150%
Weekday22:00 – 06:00Hourly Wage x 200%
Holiday09:00 – 18:00Hourly Wage x 150%
Holiday18:00 – 22:00Hourly Wage x 200%
Holiday22:00 – 06:00Hourly Wage x 250%
  • <Weekday Overtime Pay – Sample cases> Sample Hourly Wage: 10,000KRW
    • 18:00 – 19:00 = 10,000 X 1 hour X 150% = 15,000KRW
  • <Holiday Overtime Pay – Sample cases>
    • 09:00 – 10:00 = 10,000 X 1 hour X 150% = 15,000KRW

 

READ MORE: Labour Law Insider- APAC 2024 Q1 Legislation Update

What is the legal probation period in South Korea?

There is no specific legislation on probation periods in South Korea – however the standard amount is usually 3 months. Since there is no legislation for it, employers are not prevented from extending an employee’s probation period – with prior consent of the employee.

In terms of termination during probation, the Labor Standards Act 1997 states that employers are not obliged to give employees notice before termination. However, if an employee wants to terminate the employment contract during probation, they will have to give the employer notice if the contract requires them to do so.

Additionally, if the Labor Standards Act is properly specified, there is no problem with writing the Employment Contract in English.

 

What are the minimum wage requirements in South Korea?

South Korea’s minimum wage stands as per the following (January 2024):

  • 2,060,740 KRW per month
  • 9,860 KRW per hour

The nation also has legislation – The Minimum Wage Act – to regulate wage increments.

Termination of Employment – Retirement Pension, Severance Payment, Termination

  • Retirement Pension – There are 2 types of retirement pensions:
    • Defined Benefit (DB) Plan: Retirement pension system in which the severance pay is set in advance based on the salary of 3 months immediately before retirement.
    • Defined Contribution (DC) Plan: If the company accumulates 1/2 or more of the total salary of workers every year, it is a system in which workers can directly manage this amount and make a profit.
    • Termination Process –
      • The company shall pay employee all amounts, including last salary and severance pay, within 14 days after the last working day.
      • The deadline for reporting the termination of the four major insurance is as follows.
        • Health Insurance – Within 14 days after the final working day.
        • National Pension, Employment Insurance, Worker’s Compensation Insurance – Within 15th of next month after final working day.

According to the Labour Standards Act, contract or regular employees may only be terminated due to a “justifiable reason attributable to the employee” or “urgent managerial necessity” after the completion of the employee’s probationary period. The Korean Supreme Court also insists that the reason must be “directly attributable to the employee”. In simpler terms, an employee can only be terminated for a strong reason such an issue that was directly caused by that employee or a managerial-level decision such as a layoff or bankruptcy.

  • Severance Pay / Termination
    • Pay in lieu of notice –
      • In accordance with Article 26 of the Labour Standards Act, the standard for payment of dismissal notice allowance is ordinary wages.
        • Ordinary wages include fixed payments such as meal, vehicle maintenance expenses.
          • If the company is notified before 30 days, there is no need to pay dismissal allowance.
          • If the company is notified less than 30 days, there is a need to pay 30 days of monthly ordinary wage.
      • Standard guidelines that dictate the termination notice should:
        • Be in writing,
        • Include the reasons for termination,
        • Include the date of termination.

For example:

  • Employee Join Date: 1 January 2023
  • Last Working Date: 1 December 2023
  • Basic Salary: 3,000,000 KRW, Annual Bonus: 2,400,000 KRW

It is not compulsory for termination notices to be issued in the following circumstances:

  • It is impossible to provide such notice due to a natural disaster or other unavoidable reasons.
  • The employee commits any intentional wrongful act or omission that has a serious adverse effect on the company’s business or operations. An example of this would be selling company data or breaching a non-compete agreement.
  • The employee has worked for less than three months in the company.

Terminations that are done without following proper procedure may result in them being classified as ‘without just cause’, in which case, the employee may be able to ask for reinstatement to their job and a back pay.

In terms of payment during severance/termination, full-time employees are entitled to receive one month’s salary for each year of employment if they have worked for at least one year for more than 15 hours per week or more than 60 hours per month.

Employers are expected to make this payment within 2 weeks of termination.

What is the retirement age in South Korea?

At present, South Korea’s retirement age by law is 60 years old – for both males and females.

Retirees in Korea are eligible to get a pension based on a progressive formula that totals both individual earnings and the average earnings of the insured as a whole. Pensions rates are typically reviewed every July. For July 2022 to June 2023, the pension contribution is capped at a monthly salary of 5,530,000 KRW, while the maximum monthly pension contribution to be paid by an employee is 248,850 KRW.

 

Employment dispute channels

Employees in South Korea can have their labour disputes heard through two main channels, namely the civil courts and the Regional Labour Relations Commission. Where a case can be heard depends on various factors such as the type of claim or value of the claim.

  • Civil courts
    • Cases can be classified as either individual labour relations disputes or collective labour relations disputes.
    • Examples of individual labour relations disputes include contesting suspensions, transfers and disciplinary actions, payment of wages and retirement benefits or damages for injury caused by an employer’s acts.
    • Collective labour relations disputes would relate to damages caused by unlawful industrial actions of labour unions or the bargaining agreements.
    • For claims that exceed 500 million KRW or ones that cannot be valued, they will first be heard by a panel of judges in the district court. If the decision given by this court is appealed, it will then be heard by higher courts such as the High Court, and then the Supreme Court.
    • If a claim is valued at under 200 million KRW, it will only be heard by a single judge.
    • There may be a time limit for when a case can be brought to court. For instance, a claim related to wages has to be heard within 3 years, however, there is no time limitation for cases involving the invalidity of a dismissal.
  • Regional Labour Relations Commission
    • The Regional Labour Relations Commission typically hears cases of unfair dismissals or unfair labour practices.
    • Claims must be filed within 3 months of the unfair dismissal of labour practice.
    • If a party disagrees with a decision made by the Regional Labour Relations Commission, they have 10 days to apply for a review by the National Labour Relations Commission.

Is employment insurance compulsory in South Korea?

In South Korea, there are four major compulsory insurances for full-time employees which employers must mandatorily contribute to. Below are the types of insurances and contribution rates based on total taxable salary:

Statutory contributionsEmployee contributionEmployer contributionMaximum Salary Cap (KRW)Minimum Salary Cap (KRW)
1. National Pension (NP)4.5%4.5%5.9 Mil370,000
2. National Health Insurance (NHI)3.545%3.545%110.3323 Mil279,266
Long-Term Care Insurance (NHI-LCI)0.4591%0.4591%
3. Employment Insurance (EI)0.9%1.15% to 1.75%
4. Worker’s Compensation Insurance (WCI)0.7% to 18.6%

*(Mil = 1,000,000 KRW)

Market Practice: Part-time employees who have worked more than 60 hours per month will be included.

  • For example, if an employee’s monthly salary is KRW 7 mil:
Statutory contributionsEmployee contributionEmployer contributionMaximum Salary Cap (KRW)Minimum Salary Cap (KRW)
National Pension (NP)5.9 Mil (Upper limit of NP) x 4.5%5.9 Mil x 4.5%5.9 Mil370,000
National Health Insurance (NHI)7 Mil x 3.545%7 Mil x 3.545%110.3323 Mil279,266
Long-Term Care Insurance (NHI-LCI)7 Mil x 0.4591%7 Mil x 0.4591%
Employment Insurance (EI)7 Mil x 0.9%7 Mil x 1.15% to 1.75%
Worker’s Compensation Insurance (WCI)7 Mil x 0.7% to 18.6%

*(Mil = 1,000,000 KRW)

Register or Deregister Employees:

As of the 15th of each month, the insurance premium of the person entering or leaving the company for the month is included in or excluded from the bill.

  • If register/deregister report is filed before 15th -> It will be reflected in the current month’s bill.
  • If register/deregister report is filed after 15th -> It will be reflected in the next month’s bill.
4 InsurancesReport DeadlineTypeData Required
National Health Insurance (NHI)Within 14 daysNew HireName / Resident registration number / Nationality / Join date / Monthly salary / Working hours per week / Job duty
National Pension (NP)By the 15th of the month following the month of employmentNew HireName / Resident registration number / Nationality / Join date / Monthly salary / Working hours per week / Job duty
Employment Insurance (EI)By the 15th of the month following the month of employmentResigneeName / Resident registration number / Last working date / Total remuneration for the year (number of working months) / Total remuneration for the previous year (number of working months) / Reason for leaving company
Worker’s Compensation Insurance (WCI)By the 15th of the month following the month of employmentResigneeName / Resident registration number / Last working date / Total remuneration for the year (number of working months) / Total remuneration for the previous year (number of working months) / Reason for leaving company

Labour Law - Leave

Unpaid leave due to personal circumstances can be done in accordance with the company regulations. There are no separate labour relations laws related to unpaid leave.

South Korea’s labour laws do not have a provision for sick leave, meaning that it is not mandatory for employers to provide leave for non-work-related illnesses or injuries. In the case of work-related illnesses/injuries, the Labor Standards Act makes it mandatory for employers to provide sick leave.

While there is no law on sick leave, it is common practice for companies to still provide the leave. Employers should note that sick leave payments cannot be claimed from the government.

If a company doesn’t provide sick leave, employees can use their annual leave instead.

Employers must provide monthly menstrual leave when female employees claim it, with an allowance of 1 day per month.

According to Article 73 of the Labour Standards Act, menstrual leave is generally provided as unpaid leave. However, it can be stipulated as paid leave according to the company regulations.

Employers are not obligated to pay wages during unpaid leave. 

Employees are entitled to family care leave for up to 90 days per year – which can be used in instalments, with more than 30 days at a time.

Family care leave cannot be used by probationary employees if their working period is less than 6 months.

The government has announced an extension from 12 months to 18 months as of January 2024. However, both parents must use childcare leave for at least 3 months.

Read also: Labour Law Insider – APAC 2024 Q1 Legislation Update

Childcare leave is considered unpaid leave. Companies are not obligated to pay wages during this period – the employee is to receive a grant from the government.

Pregnant female employees and those with children under 8 years or under the 2nd grade of elementary school are eligible for childcare leave.

It is important to note that employers cannot fire employees due to childcare leave.

If the number of full-time employees is more than 5 and the attendance rate of the employees is more than 80% of the previous year, 15 days of paid leave must be given to the employee – as stated on Article 60 of the Labour Standards Act.

The amount of paid vacation days an employee receives is determined by how long they have been employed. In the first year, they are entitled to 11 days, in the second and third year, they receive 15 days, and from then on, they gain an extra day for every two years of employment (with a maximum limit of 25 days).

For employees who have worked continuously for less than a year, or less than 80% of a year, employers must give one day of paid leave for each month of work.

Annual leave is also granted to employees during probation period.

Paid leave that is not taken for a whole year will be considered expired, unless the reason the leave was not taken is because the employer required the employee to work on that day, or other reasons along those lines.

Calculating annual leave in South Korea:

Annual Leave entitlement days – Based on the number of years of service:

1st to 2nd year15 days13th to 14th year21 days
3rd to 4th year16 days15th to 16th year22 days
5th to 6th year17 days17th to 18th year23 days
7th to 8th year18 days19th to 20th year24 days
9th to 10th year19 days21st year annual leave25 days (Maximum)
11th to 12th year20 days

Maternity leave is a legal leave guaranteed under the Labour Standards Act and must be granted regardless of the type of labour contract, occupation, length of service, etc. – as stated on Article 74 of the Labour Standards Act.

Working mothers are entitled to 90 days of paid maternity leave for a single birth, or 120 days for multiple births. Mothers must take 45 consecutive days of leave after childbirth.

When it comes to payment during maternity leave, at least 60 out of the 90 days must be paid by the company (75 days for twin births). The remaining amount will be paid by the government.

Female employees who are on maternity leave cannot be terminated during the leave, or for the 30 days following the leave.

Before going on maternity leave, expectant women can ask for a reduction in their working hours. Currently, the law allows only women who are less than 12 weeks and more than 36 weeks pregnant to reduce their working time by 2 hours a day.

Working fathers are entitled to 10 days of paternity leave for each child.

South Korea has 11 statutory public holidays which make up a total of 16 days – see the ‘What are the upcoming public holidays in South Korea’ section below for the full list.

Labour Day (1 May) is not an officially recognised public holiday in South Korea, however, companies may still choose to observe it as a holiday if they wish to do so.

If a company has more than 5 employees, it must give employees paid time off on all public holidays.

South Korea’s labour law states that employees must be given at least one rest day per week, on average. However, employees can work on these rest days, provided they are paid for it.

Employees who work on holidays are entitled to 150% wages, and if they work more than 8 hours on a rest day, they are entitled to 200% of ordinary wages. Please refer to the above section ‘What are the working hours in South Korea?’ for more information.

Instead of wages, employers can also give employees time off in lieu, provided there is a written agreement between the employer and labour representatives.

In a series of reforms made to its labour laws in March 2023, South Korea has also introduced a system that guarantees a rest period of 11 hours between each working day.

What are the upcoming public holidays in South Korea?

2024 Public Holidays

HolidayDate
New Year’s Day1 Jan
Lunar New Year (Seollal)9 Feb – 11 Feb
Lunar New Year (Seollal) – Substitute Holiday12 Feb
Independence Movement Day1 Mar
General Election10 Apr
Labour Day1 May
Children’s Day – Substitute Holiday6 May
Buddha’s Birthday15 May
Memorial Day6 Jun
National Liberation Day15 Aug
Chuseok Holiday16 Sep – 18 Sep
National Foundation Day3 Oct
Hangul Proclamation Day (Korean Alphabet Day)9 Oct
Christmas Day25 Dec

 

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In the meantime, stay updated on Labour Law updates throughout the year through our Labour Law Insider. For more news and insights into the market, make sure to subscribe to our blog so you don’t miss out on the latest HR news, or contact our team to learn more about the latest changes!

*Please note that all the information listed above are to be used as a general guideline. For more detailed accounts of South Korea’s employment laws and regulations, please visit the official governmental websites.

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Relevant Links:

  • Labour Laws in Korea
    • Complete List of Labour/Employment Legislation – https://law.go.kr/LSW/eng/engLsAstSc.do?dataCls=lsAstSc&cptOfiCd=1492000&menuId=1#cptOfi1492000
  • Work Permits and Visas:
    • Korea Visas by Category – https://www.visa.go.kr/openPage.do?MENU_ID=10102
  • Minimum Wage:
    • Minimum Wage Commission of the Republic of Korea – https://www.minimumwage.go.kr/english/main.do
  • Terminations:
    • Procedure for Terminating an Employee in South Korea – https://content.next.westlaw.com/6-508-2342?transitionType=Default&contextData=%28sc.Default%29