South Korea Country Facts

We provide comprehensive information regarding, Culture, Work life, Taxation, Visa’s & immigration, Labour Law, recruiting in your country of choice and employment contracts.

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Expanding into South Korea generally comes with challenges, however, partnering with us and using Employer of Record (EOR) eliminates the frustrations you could encounter.

South Korea Visas, Work Permits and Migration

Foreigners traveling to South Korea (officially the Republic of Korea, ROK) to live and work can find experiencing a new culture both exciting, daunting, and challenging. Among the challenges is organizing the correct documentation to permit foreigners to live and work there!

For short term visits for tourism and business but not for paid employment, many countries are visa exempt. Canada for 180 days; the EU and the UK plus 44 other countries – 90 days; Lesotho and Russia – 60 days and a further 36 countries for periods of 30 days. However, visa-exempt countries’ nationals must apply for a K-ETA before travel. This is South Korea’s Electronic Travel Authorization and can be applied for 24 hours before travelling.

All other foreigners should apply for the national visa C-2 for business and C-3 for tourism.

Employment in South Korea is complicated, mainly due to the diverse types of work visa and the categories within the types of visas as well as the work permit. Deciding which is appropriate for the employee is important and depends on nationality, qualifications, area of expertise and whether there is a labor shortage. There are certain requirements for each visa type. Working in ROK without the correct paperwork can lead to fines and deportation.

What Types of Work Visas, and Permits for South Korea are there?

Although many nationalities can enter South Korea (officially the Republic of Korea, ROK) for cultural and some business purposes, for short periods without a visa, they require a passport with six months validity, a return ticket, and a Korea Electronic Travel Authorization (K-ETA). However, everyone requires some documentation if they want paid employment including work visas and permits.

Visas are divided into various types and categories, and these are classified as either:

  1. Single Entry Visa for 90 days and renewable yearly, but if employees wish to visit the home country, they require a re-entry permit
  2. *Multi Entry Visa is for one year and allows exit and entries and is renewable (when available)

*Multi Entry Visa holders should check to see if they need to apply for a re-entry permit.

Visas to enter South Korea are numerous which is good, if the applicant applies for the correct one. There are various types (prefixed) A to H, M and T giving 40 categories and 77 sub-categories.

Work Visas are covered by types C, D, E, and H. The main work visas are:

  • Short Term Employment Visa (C-4). Temporary work lasting for less than three months
  • Corporate Resident / On assignment (Intra-company Transfer (D-7)
  • Self-Employment Visa (D-8-4). For those interested in a Business Start-Up (points system)
  • Technology Transfer (E-4). To supply technical expertise in the high-tech industry unavailable in South Korea
  • Professional Job Visa (E-5). For people who have internationally accredited qualifications
  • Special Ability Visa or Specific Job (E-7) for specific or specialist occupations

Non-professional Visas are:

  • Manufacturing (E-9-1)
  • Construction (E-9-2)
  • Agriculture (E-9-3)
  • Fishery (E-9-4)
  • Service sector (E-9-5)
  • Working Holiday (H-1)

Work Visas should be applied for in the home country at local embassy or consulate. Work visas validity is generally 12 months and may take up to one month to process. Applicants should know the type of visa they require before applying as they cannot change a tourist visa, for example, to a work visa once inside South Korea. This needs to be done in the home country. Check for availability of the more versatile multi entry visas. Also, re-entry permits may be required before leaving ROK, if not, on returning to ROK – from immigration at the port of entry – and there will be a charge.

Like most countries, South Korea protects its borders and workforce and although it is possible to find employment, the roads are many and the paperwork prolific. Traditionally there is no ‘Labor Market Test’ (i.e., the position should be offered to all nationals first) although some of the work visas – E-5 and E-7 may require a letter of recommendation for the employee and a letter giving the reason company needs to employ a foreigner. How well and fully these are written can determine approval or not. Even if the occupation of employee doesn’t require one from the Immigration Office, providing one improves their chances.

South Korea Tax Laws

Bradford Jacobs has more than 20 years’ experience in the front line of international payroll providers, and we ensure our clients comply with every aspect of taxation legislation across the globe. Our ‘knowledge’ is vital for international companies expanding into South Korea and then widening their horizons into Asia and the Pacific Rim.

Dealing with tax, payroll, and employment regulations for your staff from overseas is always a potentially troublesome process with complications that demand expert guidance. South Korea is no exception and employers cannot risk mistakes with layers of regulations applying at state and local level both for personal and corporate taxes.

International companies wanting to run payroll to handle their employees’ tax and social insurance payments must open a subsidiary in South Korea. The typical choice is to open a limited liability company, known as a Yuhan Hoesa, under the Foreign Investment Promotion Act (FIPA) and the Foreign Exchange Transaction Act.

Once incorporated, requirements include registering employees with the National Tax Service (NTS) within 15 days of starting work and with the National Health Insurance Service (NHIS) in order to withhold and remit tax and social insurance payments to the authorities.

Overview of Taxes in South Korea

* South Korea uses the ‘won’ (KRW) with an exchange rate of roughly 100 KRW to €.075 or US$.080).

Personal Income Tax (PIT): There are eight progressive tax bands starting at 6% for income up to 12 million KRW (€8,962, US$9,940); including, for example, a fifth band of 150 million KRW (€112,046, US$124,220) at 38% on the excess; a top rate of 45% on excess above one billion KRW (€746,726, US$828,030). PIT is paid to the National Tax Service (NTS).

Local Income Tax: Local taxes are paid to the city or province where the taxpayer lives and are based on 10% of the PIT bands.

Social Insurance Taxes: Employers and employees jointly contribute 9% to the National Pension and approximately 7.8% to National Health. Employers contribute between 1.4% and 2.6% to Employment insurance funds, with employees contributing 0.8%. Employers alone contribute between 0.7% and 18.6% to Workers’ Compensation Insurance, depending on the type of industry.

Corporate Income Tax (CIT): Rates on tax base are 10%, 20%, 22% and 25% ranging from KRW 200 million (€149,590 US$165,654) up to KRW 300 billion (€224,338,934, US$248,800,850). Additional premiums are paid at the 20%, 22% and 25% bands. An Alternative Minimum Tax applies to smaller companies with rates of 10%, 12% and 17%, with SMEs taxed at 7%. Local corporate tax applies at 1%, 2%, 2.2% and 2.5%.

Withholding Tax (WHT): Tax on income sourced in Korea by foreign corporations with Permanent Establishments is 22% for loans’ interest and 15.4% for interest on bonds.

Value Added Tax (VAT): Goods and services are taxed at 10%, with categories such as unprocessed foodstuffs, agricultural products, medical and health, financial and insurance services zero rated. Invoicing must be done electronically.

Companies registered for VAT have two return periods, January 1 – June 30 and July 1 – December 31. In addition, preliminary returns are submitted the National Tax Service at the end of the first and third calendar quarters. The deadline for returns and any due payment is 25 days from the end of the six-month period.

South Korea Individual Tax – Single, Married

The tax year is the calendar year. Returns must be filed between May 1 and May 31 of the following year along with taxes due. Liability depends on residency. Tax residents are those residing in South Korea for more than 183 days in a tax year or spending 183 days or more in-country due to their occupation. Individuals residing with families or having assets in South Korea for more than 183 days or those whose family are in the country for more than 183 days a year even if their job is overseas, are also tax residents. Tax residents are liable for their worldwide income, as are foreign residents who have lived in the country for five years in the most recent 10-year period. Non-residents are taxed on South Korea-sourced income.

* South Korea uses the ‘won’ (KRW) with an exchange rate of roughly 100 KRW to €.075 or US$.080).

Figures in KRW, euros and US dollars

Personal Income Tax (PIT):

From | To | Percentage
0 – KRW 12 million (€8,962, US$9,940): 6%
KRW 12 million – KRW 46 million (€34,454, US$38,103): 15%
KRW 46 million – KRW 88 million (€65,913, US$72,877): 24%
KRW 88 million – KRW 150 million (€112,339, US$124,205): 35%
KRW 150 million – KRW 300 million (€224,703, US$248,433): 38%
KRW 300 million – KRW 500 million (€374,371, US$414,070): 40%
KRW 500 million – KRW 1,000 million (€748,743, US$828,020): 42%
Above 1,000 million: 45%

Local Income Tax: The same tax bands apply as for PIT, but the tax bands are 10% of the above, from 0.6% to 4.5%. Tax is paid to the province or city where the taxpayer resides.

Social Insurance Taxes: Employers and employees contribute into various funds: the National Pension (where the employee is registered as ‘workplace-insured’); National Health Insurance (assuming employee is registered as ‘workplace-insured’); Employment Insurance; Workers’ Compensation Insurance. Employers contribute an equivalent percentage of their employees’ salaries, while employees contribute from their salary. Amounts are withheld and remitted to the relevant authorities.

  • National Pension – capped for employer at monthly salary of KRW 5,240,000 (€3,913, US$4,310); capped for employee at KRW 235,800 (€176, US$194)
  • National Health Insurance – capped at monthly salary of KRW 8,203,680 (€6,127, US$6,748)
  • Employment Insurance – rates vary for foreigners depending on type of visa. Contributions shown from July 2022
  • Workers’ Compensation Insurance – compulsory for employers

Fund | Employer | Employee | Totals
National Pension | 4.50% | 4.50% | 9.0%
National Health Insurance | 3.92% | 3.92% | 7.85% *
Employment Insurance | 1.15%-1.75% | 0.90% | vary
Workers’ Compensation Ins. | 0.70%-18.6% | | vary

Additional: Occupational Development Ins. 0.25%-0.85%

* Approximate figure

South Korea Entity Set Up

Launching a subsidiary overseas comes with risks. The venture can be costly, time-consuming and with no guarantee of success.

Non-resident companies must open a subsidiary to run payroll, and generally establish a Foreign Invested Enterprise (FIE) limited liability company, known as a Yuhan Hoesa, under the Foreign Investment Promotion Act (FIPA) and the Foreign Exchange Transaction Act.

As South Korea grew into one of the world’s most powerful economies it became an increasingly attractive destination for companies expanding their operations overseas.

Officially the Republic of Korea (ROK), the country ranked 10th globally for nominal Gross Domestic Product at 1,823 billion US dollars in 2021, which was a 1.92% share of the world economy. Further growth of 3% is predicted for 2022 and South Korea has the fourth largest economy in Asia, behind China, Japan, and India.

South Korea also has nearly 20 free trade agreements, including with the European Union (EU), the European Free Trade Association (EFTA), the Association of Southeast Asian Nations (ASEAN), Australia, Canada, China, and the United Kingdom.

The appeal is obvious. Even so, expanding overseas is a major step, especially for companies opening a legal entity in their new territory. If the move fails, companies face the extra expenditure and stress of closing the business, selling property, and paying off employees. It is easy to stumble while chasing two objectives – advancing your company at home while crossing the world into a new territory, maybe thousands of miles overseas.

How to set up a South Korean Subsidiary

Setting up a subsidiary in South Korea? International companies planning to hire staff and run payroll must open a legal entity. The typical choice for a subsidiary is a Foreign Invested Enterprise (FIE) limited liability company, known as a Yuhan Hoesa, under the Foreign Investment Promotion Act (FIPA). Foreign entities established in this way qualify for tax incentives under the Special Tax Treatment Control Act.

General requirements and procedures for incorporating a subsidiary include:

  • Confirm choice of unique company name on the Supreme Court website www.iro.go.kr
  • The Korean Commercial Registration Act requires creating a company seal, and obtaining a ‘seal certificate’ from the relevant local authority
  • Obtain six-digit Personal Identification Number (PIN), given on the company seal card, and create personal seals for each director who will officially represent the company
  • Foreign investment in the company must be reported to a required bank or the Korean Business Center of the Korea Trade-Investment Promotion Agency (KOTRA), under the requirements of the Commercial Act
  • Provide passports of foreign investors at the registry office of the relevant local court
  • Supply notarized copy of commercial register from foreign company’s home nation
  • Minimum share capital of KRW 100 (less than one euro or one US dollar), although typically foreign companies invest 100 million (€74,700, US$82,914) at incorporation
  • Register Articles of Incorporation at the registry office of relevant local court
  • Initially transfer investment amount through foreign exchange bank, then subsequently transfer into the company’s account after incorporation
  • Requires at least one member (shareholder) with no upper limit on numbers; the members purchase ‘units’ (shares)
  • Registration with local office of National Tax Service within 20 days of starting business
  • Notify local tax office or KOTRA of completed incorporation and business registration
  • Check you can legally import your type of products into South Korea and for required licenses

Once incorporated, other steps must be followed to employ staff and operate payroll. The main requirements include:

  • Employees must be registered with the National Tax Service (NTS) by obtaining their tax certificate from the relevant local tax office. This must be done within 15 days of employees starting work to enable withholding and remitting contributions to the NTS
  • Documents may be required, including such as government ID, passport, or Residence Card (formerly Alien Registration Card pre-2022)
  • Prepare NTS Certificate of Income depending on whether they are assessed on Class A or Class B income
  • Registering employees with the National Health Insurance Service (NHIS) for contributions to National Pension (NP), National Health Insurance (NHI) and Employment Insurance (EI). Only employers pay towards Workers’ Compensation Insurance (WCI)
  • Withholding payroll taxes and remit to the NTS
  • Filing returns and paying any tax due to the NTS between May 1 and May 31 of the year following the calendar tax year
  • Finalize annual tax liability and supply payroll tax settlement certificate to the NTS

Benefits of setting up a Subsidiary in South Korea

Specific advantages for a foreign company opening a private limited liability company in South Korea include that the entity has a separate legal identity from the parent company. The subsidiary operates as a Foreign Invested Enterprise (FIE) limited liability entity known as a Yuhan Hoesa, under the Foreign Investment Promotion Act (FIPA) and the Foreign Exchange Transaction Act.

Through its subsidiary, the parent company has the advantage of maximizing business opportunities throughout South Korea and further afield. South Korea also has nearly 20 free trade agreements, including with the European Union (EU), the European Free Trade Association (EFTA), the Association of Southeast Asian Nations (ASEAN), Australia, Canada, China, and the United Kingdom.

Other benefits for a subsidiary:

  • Easier to obtain potential benefits. Foreign entities established in this way qualify for tax incentives under the Special Tax Treatment Control Act
  • More impact with clients and suppliers, as subsidiaries imply more permanency than branches
  • Employees feel there is more stability and job security than from being with a branch

In the wider commercial sense, opening a subsidiary makes a statement of a company’s commitment to expanding into foreign markets, in this case the opportunities offered by Asian and Pacific Rim economies.

South Korean Market

A growing number of international companies believe it is worth taking on the challenges of the highly-competitive South Korean marketplace – now one of the most powerful and vibrant economies in the world. South Korea has transformed from an agrarian society to become a major economic force with mega-brands such as Samsung, LG and Hyundai setting global benchmarks.

South Korea, officially the Republic of Korea (ROK), ranked 10th globally for nominal Gross Domestic Product at 1,823 billion US dollars in 2021, a 1.92% share of the world economy. Exports and construction helped an 11-year high level of growth in 2021, with further growth of 3% predicted for 2022.

South Korea is the fourth largest economy in Asia, behind China, Japan and India and has nearly 20 free trade agreements, including with the European Union (EU), the European Free Trade Association (EFTA), the Association of Southeast Asian Nations (ASEAN), plus Australia, Canada, China, and the United Kingdom.

However, companies moving in – or planning to recruit staff in South Korea – will encounter a strictly-regulated employment market and complex rules regarding both personal and corporate taxation. Operating through their own subsidiary is another option – but again stringent registration procedures must be followed. None of these issues can be ignored or side-stepped

Starting a Business into South Korea

International companies planning to hire staff and run payroll must open a legal entity. The typical choice for a subsidiary is a Foreign Invested Enterprise (FIE) limited liability company, known as a Yuhan Hoesa, under the Foreign Investment Promotion Act (FIPA) and the Commercial Registration Act. Foreign entities established in this way qualify for tax incentives under the Special Tax Treatment Control Act.

General requirements and procedures for incorporating a subsidiary include:

  • After confirming the choice of unique company name on the Supreme Court website the Korean Commercial Registration Act requires creating a company seal and obtaining a ‘seal certificate’ from the relevant local authority. Personal seals must also be created for directors who will officially represent the company
  • Obtain six-digit Personal Identification Number (PIN) from the registry court
  • Foreign investment in the company must be reported to a designated bank or the Korean Business Center of the Korea Trade-Investment Promotion Agency (KOTRA), under the requirements of the Commercial Registration Act
  • Provide passports of foreign investors at the registry office of the local court and supply a notarized copy of commercial register from foreign company’s home nation
  • Minimum share capital of KRW 100 (less than one euro or one US dollar), although typically foreign companies invest KRW 100 million (€74,700, US$82,914) at incorporation to cover set-up and initial operating costs
  • Initially transfer investment amount through a foreign exchange bank, then subsequently transfer into the company’s account after incorporation
  • Register Articles of Incorporation at the registry office of local court
  • Requires at least one member (shareholder) with no upper limit on numbers; the members purchase ‘units’ (shares)
  • Registration with local office of National Tax Service within 20 days of starting business

Notify local tax office or KOTRA of completed incorporation and business registration

Expanding Business into South Korea

Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance? Drawing up an international expansion blueprint is not enough. Your business plan will have to answer all these questions.

South Korea generally welcomes foreign investment, with incentives available through such as the Special Tax Treatment Control Act and economic free zones. However, it is vital to understand the market and investment restrictions. The Korean Standard Industrial Classification lists over 60 sectors where foreign investment is prohibited and close to 30 where it is restricted.

There are other issues, too. Where will you find manufacturers, offices, and distributors?

South Korea Business Facts

  • Capital – Seoul
  • Population – 51.82 million
  • Provinces – South Korea has nine provinces: Gyeongsangnam-do, Gyeongsangbuk-do, Jeollanam-do, Jeollabuk-do, Jeju Special Self-Governing Province, Gangwon-do, Chungcheongnam-do, Chungcheongbuk-do, and Gyeonggi-do. Additionally, there are six metropolitan cities – Busan, Daegu, Daejon, Geangju, Ulsan and the self-governing city of Sejong
  • Official language – Korean
  • Economy – GDP 1,823 billion US dollars in 2021
  • Leading Sectors by GDP – Manufacturing, wholesale and retail trade, business, real estate, finance and insurance, administration and defense
  • Main exports include – Integrated circuits, cars and vehicle parts, refined petroleum, passenger and cargo vessels
  • Main imports include – Crude petroleum, integrated circuits, coal
  • Main trading partners – United States, China, Japan, Saudi Arabia, Vietnam
  • Government – Unitary state, presidential system, constitutional republic
  • Currency – South Korean ‘won’

Advantages and Challenges of the South Korea Market

Advantages of expanding into the South Korea market include:

  • Location: Southern end of the Korean Peninsula, land border with North Korea, Sea of Japan and Japan to the south and east, Yellow Sea and China to the west and north
  • Trade:  South Korea also has nearly 20 free trade agreements, including with the European Union (EU), the European Free Trade Association (EFTA), the Association of Southeast Asian Nations (ASEAN), plus Australia, Canada, China and the United Kingdom.
  • Prospects:  Innovation, design and advanced technology are key factors in advancing the South Korean economy
  • Infrastructure:  Extensive and well-maintained road system, with a rail system connecting all major cities, except Jeju-on-Jeju Island.
  • Logistics: There are 15 international airports, with over 20 major seaports and container terminals
  • Incentives:  Foreign entities can qualify for tax incentives under the Special Tax Treatment Control Act, plus there are economic free zones
  • Consumers: Affluent and internationally minded consumers are keen to spend on the latest products
  • Business rating: South Korea’s business environment is ranked 24th out of 82 nations by The Economist Intelligence Unit

Challenges of expanding into the South Korea market include:

  • Trade: Competition from China in shipbuilding, automotive industry, electronics and ‘white goods’
  • Finance: Growing risk of inflation through demand for consumer goods
  • Workforce: Ageing population and growing unemployment among the young
  • Politics:  Relationship with North Korea

Limited Company / Subsidiary or Branch in South Korea?

Non-resident companies must open a subsidiary to run payroll, and generally establish a Foreign Invested Enterprise (FIE) limited liability company. Another option is to open a branch office.

Limited companies and branches have differences in how they are registered and how they operate.

South Korea Contracts

Internationally minded companies hiring employees in South Korea must operate within a strict framework of legislation.

Most aspects of employment law are covered by the South Korea Constitution and the Labor Standards Act (LSA), supplemented by Collective Bargaining Agreements (CBAs) and Rules of Employment (ROEs).

These considerations come into play during the first stages of hiring, onboarding, and drawing up contracts with your new employees. Once Bradford Jacobs’ Professional Employer Organisation (PEO) recruitment networks have located the best talent for your company, we step in to steer you through this crucial element of recruitment.

General requirements applying to all contracts include:

  • The LSA stipulates employers should have a written agreement with employees detailing such as working conditions and hours, wages and payment schedule, paid days off and paid vacations, benefits including sick leave entitlement, location of job and working conditions. Any agreements that do not comply with LSA minimums are invalid
  • The usual contract is indefinite or open-ended, known as ‘regular’ contracts
  • Fixed-term contracts cannot exceed two years, or they become indefinite
  • Part-time and fixed-term employees are entitled to the same rights as full-time employees
  • The contract does not have to be in Korean, although this is recommended for local employees
  • There are no statutory requirements regarding probation periods, which generally are for three to six months

In addition to individual contracts, employees must also apply workplace polices in the form of Rules of Employment.

  • ROEs are mandatory in companies employing more than 10, and publish details of working conditions, health and safety, disciplinary procedures, processes for dealing with harassment or discrimination and retirement arrangements
  • Most workplaces must comply with requirements of the Occupational Health and Safety Act (OHSA)
  • ROEs must be filed with the Ministry of Employment and Labor

Employment Contracts in South Korea

The Labour Standards Act stipulates employers should provide written agreements for workers detailing the essential elements of employment, such as working conditions and hours, wages and payment schedule, paid days off and paid vacations, benefits including sick leave entitlement, location of job and working conditions. Any agreements that do not comply with LSA regulations are invalid.

Main contract types include:

Open-ended, Indefinite, ‘Regular’ Employment Contracts:  The most common type of contract or agreement, which generally end by termination according to employment law or by retirement.

Fixed-term Employment Contracts: Allowed for a maximum of two years, including renewals. If employment continues after this, they become open-ended. Exceptions include where a specific task is the reason for the fixed-term contract, or where a full-time member of staff is substituted for a specific time by the fixed-term employee. Employers cannot discriminate against fixed-term employees in terms of pay or working conditions in comparison with those on regular, open-ended contracts.

Part-time and Temporary Employment Contracts: Under the Labour Standards Act, employers cannot discriminate against part-time employees in terms of pay or working conditions in comparison with those on regular, open-ended contracts.

Collective Bargaining Agreements (CBAs): These generally cover only union members in a company, which means employment conditions can vary between union and non-union members. However, under the Trade Union and Labor Relations Adjustment Act, all workers in each company come under the CBA if the majority of workers are union members. All workers will also be covered by the CBA if general working conditions are worse than those covered by the CBA.

Companies with 10 or more employees must display Rules of Employment (ROEs), detailing such as scales of pay and payment schedule, health and safety and measures against harassment and discrimination in the workplace. ROEs must be filed with the Ministry of Employment and Labour.

Employee Benefits

Happy and satisfied employees make your business thrive 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

South Korea Top Talent

Finding and recruiting top talent in any overseas territory puts many potential obstacles in the way of companies making the move to build their international profile.

This definitely applies to South Korea, officially the Republic of Korea, as it becomes an increasingly attractive target for global expansion and for jobseekers from other nations.

Geographically, the country is at the southern end of the Korean Peninsula and has only one land border, with North Korea from which it is separated by the demilitarized zone. The Sea of Japan lies to the east, the Yellow Sea to the west, with the Korea Strait in the south separating South Korea from Japan.

South Korea has transformed from an agricultural society to become a major economic force with mega-brands such as Samsung and Hyundai becoming global benchmarks. The nation ranked 10th globally for nominal Gross Domestic Product at 1,823 billion US dollars in 2021, a 1.92% share of the world economy. Exports and construction helped an 11-year high for growth in 2021, with further growth of 3% predicted for 2022. Per capita GDP of US$35,196 ranks 29th in the world. South Korea has the fourth largest economy in Asia, behind China, Japan and India.

Unlike the Japanese and Chinese, however, Koreans are a homogenous ethnic group with their own language and culture, based on Confucian and Buddhist philosophies.

This outlook places great emphasis on respect, which permeates every aspect of life including the business world. In business relationships Koreans are reluctant to confront issues and give a straightforward ‘No’, which can become confusing for more direct Western businesspeople

The Recruitment Process in South Korea

South Korea has become an increasingly attractive location for international investment. However, it is essential for foreign companies taking their first steps into South Korea’s economy to have a clear plan when it comes to recruitment.

This particularly applies to Western companies, who are entering a highly competitive marketplace. The work culture demands adjustment and compromise in an environment where hierarchy, respect and dignity play important roles … alongside a business ethic that presupposes long hours at work.

Other barriers also have to be negotiated, such as the language. English is commonly spoken in many sectors, but not all, and taking a course in Korean will indicate commitment to making a mark. Advancement is an important concept for Koreans, so recruiting companies should emphasize career opportunities.

For jobseekers, there are two ‘recruitment seasons’ in the year, often organized by mega-companies such as Hyundai, Samsung, and LG, targeting graduates. But the process is demanding; after sending in a resumé and introductory letter, candidates may have to sit an exam before being invited for interview.

Recruitment is the first stage of making your company operational and competitive. It is vital to know where to locate the finest talent in South Korea to be the perfect fit for your company’s expansion plans. Don’t wait … contact Bradford Jacobs for the solutions.

Once recruited, companies must then consider the implications of handling payroll for their staff and dealing with the revenue and social insurance authorities. Foreign companies must establish a subsidiary to undertake these responsibilities, then strict registration procedures for employees must be followed, in addition to other responsibilities for the employer. These include:

  • Registering employees with the National Tax Service (NTS) within 15 days of employment by obtaining their tax certificate from the relevant local tax office, to facilitate withholding payroll tax
  • Prepare NTS Certificate of Income depending on Class A or Class B income
  • Registering employees with the National Health Insurance Service (NHIS) for payroll contributions to National Pension (NP), National Health Insurance (NHI) and Employment Insurance (EI). Employers also contribute to Workers’ Compensation Insurance
  • Filing returns and paying any tax due to the NTS between May 1 and May 31 of the year following the calendar tax year
  • Withholding payroll taxes and remitting to the NTS
  • Finalizing annual tax liability and supply payroll tax settlement certificate to the NTS

Legal Checks on Employees in South Korea

Scope: The Personal Information Protection Act (PIPA) rules that the applicant’s permission must be obtained for any checks that exceed those generally required for an employment agreement. In addition to requiring general permission, some areas require specific consent.

Criminal Records: Companies cannot request police records for criminal record checks. Under PIPA regulations, the individual must have permission to obtain and release the information.

Medical History and Records: This is allowed only with the applicant’s specific consent. Refusal to comply does not justify refusal to employ.

Educational and Reference Checks: With the applicant’s consent, the employer can request the minimum amount of information relevant to the position.

Credit Checks: Under the Use and Protection of Credit Information Act, the employer must ask for permission from the applicant and inform them that the check may impact their credit rating.

Required:  That the applicant fulfils all work permit, visa, and immigration requirements.

Basic Facts on Hiring in South Korea

The obligations of employer and rights of employees in South Korea are governed by the Labor Standards Act (LSA) and the Constitution, Collective Bargaining Agreements (CBAs) and Rules of Employment (ROEs).

  • The LSA stipulates employers most have a written agreement with employees detailing such as working conditions and hours, wages and payment schedule, paid days off and paid vacations
  • Agreements that do not comply with LSA regulations are void
  • Contracts are generally either indefinite or fixed term
  • Contracts for part-time workers must be in writing
  • There is no statutory language requirement for contracts, although it is advisable, they should be in a language understood by all parties
  • There are no statutory limits regarding probation periods, and they are generally between three and six months
  • Rules of Employment are mandatory in companies employing more than 10, giving details of working conditions, health and safety, disciplinary procedures, and retirement arrangements
  • Most workplaces must comply with requirements of the Occupational Health and Safety Act (OHSA), appoint a health and safety committee, and make regular reports to the government
  • ROEs must be filed with the Ministry of Employment and Labor. No other third-party approval is required

After hiring and onboarding, employers must be aware of other considerations. Minimum standards apply to such as sick leave, minimum wages, working hours, maternity allowances, paid vacations, termination, and severance, notice periods and social insurance payments. Other rules regulate workplace discrimination.

Employers’ responsibilities include:

  • Registering employees with the National Tax Service (NTS) within 15 days of employment by obtaining their tax certificate from the relevant local tax office, to enable withholding payroll tax
  • Prepare NTS Certificate of Income depending on Class A or Class B income
  • Registering employees with the National Health Insurance Service (NHIS) for payroll contributions to National Pension (NP), National Health Insurance (NHI) and Employment Insurance (EI)
  • Filing returns and paying any tax due to the NTS between May 1 and May 31 of the year following the calendar tax year
  • Withholding payroll taxes and remitting to the NTS
  • Finalizing annual tax liability and supply payroll tax settlement certificate to the NTS

South Korea Work Culture

To succeed in business in South Korea, it is vital for both employers and employees to have a strong understanding of the business culture.

As a global PEO (Professional Employment Organization) it is our goal to be familiar and updated with the business culture in the country we work with and in. By sharing our knowledge about South Korean work culture, we want to support your global expansion plans. Therefore, we will address all the aspects of the work culture in South Korea to start your expansion well-informed.

The hierarchical attitudes in South Korean life are reflected in workplace culture, where etiquette and business practices are similar to other Asian countries but can be significantly different from the Western outlook.

A growing number of international companies believe it is worth making the adjustments to enter the highly-competitive South Korean marketplace – now one of the most powerful and vibrant economies in the world.

South Korea, officially the Republic of Korea (ROK), ranked 10th globally for nominal Gross Domestic Product at 1,823 billion US dollars in 2021, a 1.92% share of the world economy, with further growth of 3% predicted for 2022. Per capita GDP of US$35,196 ranks 29th in the world. South Korea has the fourth largest economy in Asia, behind China, Japan and India.

South Korea also has nearly 20 free trade agreements, including with the European Union (EU), European Free Trade Association (EFTA), Association of Southeast Asian Nations (ASEAN), Australia, Canada, China and the United Kingdom.

Unlike the Japanese and Chinese, Koreans are a homogenous ethnic group with their own language and culture, based on Confucian and Buddhist philosophies.

This places great emphasis on respect and ‘kibun’ or ‘face’, which permeates every aspect of life including the business world. Visiting businesspeople must take care to recognize the position of their opposite number in the hierarchy.

In business relationships, Koreans are reluctant to confront issues and give a straightforward ‘No’, which can become confusing for more direct Western businesspeople.

Incomers must be ready for the challenge and now is the time to get down to business. So here are a few tips on taking the best steps and clearing those cultural barriers … and South Korea has some particular etiquette nuances which could catch out western visitors.

  • Language: Although many South Koreans are comfortable using English as their business language, it is not uncommon for high-level businesspeople to stick to their own language. If unsure use an interpreter, but at the very least learn basic words. Do not rely on verbal communication and confirm in writing
  • Punctuality:  Be on time after arranging the meeting well in advance … and allow for the traffic
  • Attitudes: ‘Face’ is important, as in most Asian business environments. Avoid pointing out errors and making criticisms in the presence of others. Raised voices are not appreciated
  • Relationships: Business relationships often begin with introductions by a third party, but beyond that it is vital to build your own relationships with the other team. This is the essential first step in the process
  • Presentations and Negotiations: Use charts and statistics to make your point, restricting English to distinct and clear phrases to express the message. Avoid questions in the negative as these are likely to be misunderstood. Do not expect quick decisions; be patient but firm and do not show frustration
  • Greetings: The most senior team member should enter the meeting first and greet his opposite number in a formal but friendly manner. Ensure you use titles correctly, with a slight bow, breaking eye contact, and then a handshake. Wait for the most senior member to offer their hand. During the meeting, however, maintain eye contact with the person you are talking to
  • Business Cards: Exchanging them is an import element of the business ritual, so take a good supply. Give and receive them with both hands, study the one you receive and maybe leave it face up on the table in front of you
  • Dress Code:  Smart and formal
  • Gift Giving: A regular occurrence and part of the ‘getting to know you’ process
  • Out of Hours: Wining and dining is also part of the process, although heavy alcohol consumption is not such an automatic ingredient as before. These occasions often reveal important aspects to the negotiations, so stay alert, although deals are generally concluded much in the Western style … in writing

South Korea’s Minimum Wage

The minimum hourly rate was raised in January 2022 to KRW 9,160 (€6.85, US$7.60), an increase of 5.1% and the largest since 2019. Based on a working week of 40 hours, the new rate equates roughly 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, when the increase equals a monthly wage of approximately KRW 1,905,280 million (€1,432, US$1,588).

Probation Periods in South Korea

The Labour Standards Act places no statutory requirements on probation periods. They are generally for between three and six months.

Working Hours in South Korea

Since July 2021 legislation has restricted the maximum working week to 40 hours, based on eight hours per day, with a maximum 12-hour 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 fewer than 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 in South Korea

Extra hours are those worked 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 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.

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