Employee Benefits in South Korea
Happy and satisfied employees make your businessthrive and lead to even better profits. However, the specific benefits for employees in South Korea might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labor contracts for employees in South Korea including local benefits.
When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few.
What are the Employee Benefits in South Korea?
Benefits and entitlements in South Korea are covered in general by the Labor Standards Act, supported by a raft of supplementary laws adding detail to certain aspects of employment law.
Foreign companies hiring employees in South Korea must operate within this complex framework of legislation, which provides safeguards and guarantees for the workforce. Minimum guarantees include:
- Minimum wages
- Paid vacations
- Working hours
- Termination, severance, and notice periods
- Maternity allowances and benefits
The responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations. Failure to comply with specific regulations applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship
What Compensation Laws exist in South Korea?
The obligations of employers and the rights of employees are covered in general by the Labor Standards Act. Additionally, other Acts and Statutes focus on specific areas of employment law. These include Minimum Wage Act, Employees’ Retirement Benefits Act, Protection of Fixed-Term and Part-Time Employees Act, Trade Union Act, Gender Equality Act, Prohibition of Age Discrimination Act, Foreign Workers’ Employment Act and Personal Information Protection Act.
Social Insurance responsibilities are also strictly governed in South Korea, by the National Pension Act, National Health Insurance Act, Employment Insurance Act, Industrial Accident Insurance Act and the Wage Claim Guarantee Act.
This legislation protects employees regarding minimum wages; paid vacations; working hours; termination, severance, and notice periods; maternity and paternity allowances and benefits.
In South Korea it is vital for employers to be up to speed with responsibilities to their staff over benefits, compensation, and minimum requirements. Do not take the risk of paying penalties for ignoring these responsibilities!
Compensation, entitlements, and benefits include the following:
- National Minimum Wage: The minimum hourly rate was raised in January 2022 to KRW 9,160 (€6.85, US$7.60), the increase of 5.1% being the largest since 2019. Based on a working week of 40 hours, the new rate equates approximately to KRW 1,465,600 (€1,096, US$1,218) each month. Working 208 hours per month, including the maximum 12 hours weekly overtime is not uncommon, in which case the increase equals a monthly wage of approximately KRW 1,905,280 million (€1,432, US$1,588)
- Sick Leave and Benefits: Employment law requires neither sick leave or paid entitlement in South Korea, where a tendency to work though illness indicates a strong work ethic, unless the illness or injury is directly work-related. Where allowed in CBAs, ROEs or the employment contract, employees may use paid vacation as sick leave
- Working Hours and Breaks: In July 2021 legislation restricted the maximum working week to 40 hours, based on eight hours per day and a maximum of 12 hours overtime. Previously, employers could insist on 12 hours overtime each week and another 16 hours at weekends. Companies employing five or fewer are exempt from the new regulations, while those with between six and 30 staff can require employees to work 60 hours a week until December 2022. Employers who ignore the rules face up to three years imprisonment and KRW 20 million (€14,965, US$16,623)
- Overtime: Extra hours are those exceeding eight in a day or 40 a week, up to a weekly maximum of 52, and the employer pays the extra hours at 1.5 times the usual hourly rate. If there is a written agreement, the employee can take time off in lieu. Employees who work eight hours on a holiday or rest day are also entitled to 150% of their normal hourly wage, and 200% for exceeding eight hours on a rest day
- Vacations: A full year’s employment entitles workers to 15 days’ paid vacation. Employees who have not completed a full year or have less than 80% attendance, receive one day’s paid leave for each month of completed employment with perfect attendance. Employees who have worked continuously for three years receive an extra day of paid leave for each further two years up to a maximum of 25 days. As of January 2022, employers with more than 30 employees must pay staff for public holidays
- Maternity Leave and Benefit: The Ministry of Employment and Labor stipulates 90 calendar days, with a minimum of 45 taken after the birth. The mother receives 100% of earnings (excluding bonuses and overtime) from her employer for the first 60 days, then 100% for the remainder from the Employment Insurance Fund (EIF), capped at KRW 2,000,000 (€1,495, US$1,655). To aid Small and Medium-Sized Enterprises (SMEs), the EIF pays for the first 60 days up to the same limit, with employers adding the balance if the employees’ ordinary earnings exceed the cap
- Termination and Severance: Statutory severance pay applies equally to staff of foreign-owned subsidiaries or branches as well as local employees. The Retirement Benefit Act requires employers to establish a corporate pension scheme and pay ‘retirement benefit’ at termination whether it is voluntary or with ‘just cause’. Benefit applies to employees who have completed one year’s service and equates to 30 days of average earnings for each year worked. Average earnings, including bonuses, are based on the previous three months
- Notice Periods: Employers must give 30 days’ notice of termination or payment in lieu, except in exceptional circumstances or if employment has been less than three months. ‘Gardening leave’ is allowed under the Labor Standards Act if included in a contract or is company policy