South Korea

South Korea PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in South Korea to companies willing to enter the South Korea market or recruit local/expat employees in this country.

Traditional approach requires establishing a subsidiary in South Korea.  However our solution allows you to start the operations in South Korea within a few days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

South Korea fast facts

Population, million: 51,269,185
Land area: 100,210 km²
Capital: Seoul
Local currency: South Korean won (KRW)

GDP per capita:$ 30,644
GDP in currency:$ 1.6 trillion

Article 32 of the Constitution, The Labour Standards Act (LSA), Other statutes and related regulations govern various aspects of employment

Legislative acts and other regulations that govern the relations between employer and employee:
The Constitution, which sets out the basic rights relating to employment; and Labor Standard Act of Korea (LSA).

Hiring, Negotiating and Doing Business in South Korea

Necessity of written employment contract

The Labour Standards Act (LSA) does not require an employment contract to be in writing. However, certain terms relating to wages, working hours, annual paid leave and weekly holiday, Other terms and conditions-Workplace, Job description, beginning and ending date of work, recess hours, determination, calculation and payment method of wages must be 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. Even without a written agreement, either side may claim the existence of a verbal or implied agreement. A verbal or implied agreement is enforceable if proven. The employment contract does not have to be in South Korean.

For a part-time employee – yes, it is mandatory to have the document in a written form.

Different forms of engagement: employment, contracting, work with private entrepreneur

Employees are free to form a labour union that may negotiate a CBA with the employer. Generally, the CBA applies only to union members. Employment conditions may therefore vary between union members and non-union members.

However, the CBA will also apply to the non-union employees engaged in the same work at the same workplace or in the same business, if both (section 35, Labour Union and Labour Relations Adjustment Act):

A majority of the employees ordinarily engaged in a given type of work at a given workplace or in a given business are union members and the CBA applies to the union members.

The general employment rules contain conditions less favourable than those under the CBA.

The CBA prevails for any employees covered by the CBA.

South Korea Employment Contract

Types of employment agreements

  1. Temporary workers

The Fixed-term Employees Act prohibits employers from using fixed-term employees for more than two years. Where an employer uses a fixed-term employee for more than two years, the employee is deemed employed for an indefinite term. There are certain exceptions.

  1. Agency workers

While there is no concept of agency workers, the Dispatched Workers Act regulates the use of employees of another company by way of “worker dispatch” from a temporary work agency.

Under the Dispatched Workers Act, a company is prohibited from engaging dispatched workers in direct production processes and can only engage dispatched workers in 32 specified business roles. These include computer expert services, travel guide services, and security services. Any employer who dispatches or uses a dispatched worker contrary to the Dispatched Workers Act may be subject to criminal sanctions.

Further, if a dispatched employee has worked for two years for the company, the dispatched employee may be deemed to be a company employee. There are certain exceptions.

The employment conditions for dispatched workers should conform to the employment rules that apply to the company’s regular employees in the same or similar jobs. If the company does not have any regular employees with the same job, the company must provide the new employee at least the same working conditions as when he was a dispatched employee. Failure to comply may be punishable by criminal sanctions.

  1. Part-time workers

The terms and conditions for part-time workers should be based on the proportion of their working hours compared with those of full-time workers engaged in the same kind of job (section 8, Fixed-term Employees Act).

Agreement should include the following:

  • Name and address of both the company and the employee
  • Salary
  • Working hours
  • Details of holiday entitlement and paid annual leave
  • General working conditions
  • Location of work
  • Job description
  • The amount of time an employee can take off for sick leave

South Korea working hours

The Labour Standards Act (LSA) imposes a maximum 40 hours week working week and 8 hour day. There is a required rest break of one hour for each eight hours of work or 30 minutes for each four hours of work. There is no exception for shift worker.

Overtime

Generally, an employee may agree to an additional 12 hours a week in overtime. The employer must pay an additional 50% of ordinary wages for overtime.

Night work is work performed between 22:00 and 06:00. The employer must pay an additional 50% of ordinary wages for night work.

Employees must receive 50% additional pay for eight hours’ work on a holiday and 100% additional pay for exceeding eight hours’ work on a holiday.

Vacation leave in South Korea

An employee who works a full year is entitled to 15 days of annual paid leave. An employee who has not completed a full year of work or has a less than 80% attendance rate in a year is entitled to one day of annual paid leave per month of full employment with perfect attendance. An employee with over three years of service is entitled to an additional one day of paid leave for every two years following the first year, to a maximum of 25 days (section 60, LSA).

South Korea Maternity Leave

• 90 days Maternity Leave
• 45 days must be taken after childbirth 

An employer must allow 90 days of maternity leave or 120 days for twins. At least 60 days or 75 days in case of twins of the leave must be paid. The government pays for the remaining 30 days or 45 days. 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:

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

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

Parental leaves

An employer, on 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 normal wage. The monthly payment amount should be between KRW700,000 and KRW1,700,000.

Employees eligible for parental leave may generally choose to work reduced hours instead of taking parental leave. Reduced working hours should be between 15 hours and 35 hours each week.

South Korea Severance Laws

An employer must give 30 days advance notice of termination, or 30 days’ pay in lieu of notice. However, notice may not be required if:

  • It is impossible to maintain the business due to a natural disaster or other unavoidable reason.
  • The employee commits any intentional wrongful act or omission that has a serious adverse effect on the company’s business or operations.
  • The employee is serving a probationary period of three months or less.
  • The employee is paid monthly and has worked for less than six consecutive months.
  • Other similar situations apply.

Severance payments

Under the Employee Retirement Benefit Security Act (Retirement Benefit Act), employers must either:

  • Pay severance at the end of the employment relationship.
  • With the employees’ consent, set up a retirement pension system.

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.

Interim payment of the severance accrued to date is allowed only in specific situations prescribed by the Retirement Benefit Act.

As an alternative to the retirement pension system, an employer may adopt either:

  • A fixed contribution system, where the employer contributes fixed amounts for the retirement pension.
  • A fixed payment system, where the amount to be paid at retirement is pre-determined.

To adopt either retirement system, the employer must:

  • Obtain the consent of the labour union, if there is one that represents the majority of the employees and if not, the consent of a majority of the employees.
  • File by-laws detailing the system with the Ministry of Employment and Labour.

South Korea Tax

Income Tax regulations regard any foreign national who stays in Korea for 183 days or more as resident for tax purposes. Foreign nationals who are tax resident are subject to income tax on all worldwide income in the same way as Korean nationals. Non-resident foreign nationals are only taxed on Korean sourced income.

The following rates of taxation for 2020 are charged on employment income:

  • Income of up to KRW12 million: 6%.
  • Income from KRW12 million up to KRW46 million: 15% (plus KRW0.72 million).
  • Income from KRW46 million up to KRW88 million: 24% (plus KRW5.82 million).
  • Income from KRW88 million up to KRW150 million: 35% (plus KRW15.90 million).
  • Income from KRW150 million up to KRW300 million: 38% (plus KRW37.60 million).
  • Income from KRW300 million up to KRW500 million: 40% (plus KRW94.60 million).
  • Income of KRW500 million and above: 42% (plus KRW174,60 million).

Social security contributions for 2020 are:

  • National pension: 9% of monthly salary up to KRW4.86 million. The contribution is shared equally by the employer and the employee.
  • National Health Insurance: 6.67% of monthly salary plus 10.25% of the health insurance premium for long-term care insurance. The employer and the employee share the contribution equally.
  • Industrial Accident Compensation Insurance: the employer contributes between 0.7% to 34.04% of monthly salary, depending on the industry.
  • Unemployment Insurance: 1.6% of monthly salary for unemployment insurance. The employer and the employee share the contribution equally. In addition, the employer contributes between 0.25% to 0.85% (depending on the size of the company) of monthly salary for job security and vocational capability insurance.

Health Insurance Benefits in South Korea

Universal healthcare in South Korea is provided by compulsory National Health Insurance (NHI).

Employees and employers must contribute to National Health Insurance. The contribution rate is dependent on the employee’s salary and the employer and employee each pay 50% of the contribution.

Additional Benefits in South Korea

Employers often provide additional supplementary health and life insurance benefits.  For customers using our employee leasing or PEO service, Globalization Partners advises on typical costs and arranges these benefits as required.

South Korea Holidays

Employers with 300 or more employees must provide their employees with paid holiday on public holidays. This requirement will apply to employers with 30 to 299 employees from 1 January 2021, and to those with five to 30 employees from 1 January 2022)

Public holidays designated by the government for 2020 are:

  • New Year’s Day: 1 January.
  • Lunar New Year’s Day (Seollal): 31 December to 2 January by Lunar calendar.
  • Independence Movement Day (Sam Il Jul): 1 March.
  • Children’s Day (Uhrininal): 5 May.
  • Buddha’s Birthday: 8 April by Lunar calendar.
  • Memorial Day: 6 June.
  • Independence Day (Kwang Bok Jul): 15 August.
  • Harvest Moon Festival (Chuseok): 14 August to 16 August by Lunar calendar.
  • National Foundation Day (Kae Chun Jul): 3 October.
  • Christmas: 25 December.

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.

 

FAQ South Korea

  • Working hours in South Korea

    The Labour Standards Act (LSA) imposes a maximum 40 hours week working week and 8 hour day.

  • What are the main holidays in South Korea?

    Public holidays:

    • New Year’s Day: 1 January.
    • Lunar New Year’s Day (Seollal): 31 December to 2 January by Lunar calendar.
    • Independence Movement Day (Sam Il Jul): 1 March.
    • Children’s Day (Uhrininal): 5 May.
    • Buddha’s Birthday: 8 April by Lunar calendar.
    • Memorial Day: 6 June.
    • Independence Day (Kwang Bok Jul): 15 August.
    • Harvest Moon Festival (Chuseok): 14 August to 16 August by Lunar calendar.
    • National Foundation Day (Kae Chun Jul): 3 October.
    • Christmas: 25 December.
  • What are payroll taxes in South Korea?

    The following rates of taxation for 2020 are charged on employment income:

    • Income of up to KRW12 million: 6%.
    • Income from KRW12 million up to KRW46 million: 15% (plus KRW0.72 million).
    • Income from KRW46 million up to KRW88 million: 24% (plus KRW5.82 million).
    • Income from KRW88 million up to KRW150 million: 35% (plus KRW15.90 million).
    • Income from KRW150 million up to KRW300 million: 38% (plus KRW37.60 million).
    • Income from KRW300 million up to KRW500 million: 40% (plus KRW94.60 million).
    • Income of KRW500 million and above: 42% (plus KRW174,60 million).

    Social security contributions for 2020 are:

    • National pension: 9% of monthly salary up to KRW4.86 million. The contribution is shared equally by the employer and the employee.
    • National Health Insurance: 6.67% of monthly salary plus 10.25% of the health insurance premium for long-term care insurance. The employer and the employee share the contribution equally.
    • Industrial Accident Compensation Insurance: the employer contributes between 0.7% to 34.04% of monthly salary, depending on the industry.
    • Unemployment Insurance: 1.6% of monthly salary for unemployment insurance. The employer and the employee share the contribution equally. In addition, the employer contributes between 0.25% to 0.85% (depending on the size of the company) of monthly salary for job security and vocational capability insurance.
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