South Korea Payroll Services

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South Korea Payroll

It is vital for international companies planning expansion into the powerful and highly-competitive South Korean economy to have a clear plan – they must make the right moves from day one. This is essential for foreign businesses establishing a presence and intending to run payroll in this high-tech economy with globally aware consumers.

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 as domestic demand and tourism rebound. 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.

International companies planning to run their own payroll in South Korea must establish a subsidiary – preferably in one of the economic free zones. 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).

So, the potential is there to reward expansion, but there are effective alternatives to the complexities of setting up a subsidiary. If you are ready to move into South Korea, Bradford Jacobs can step in from the first day with our Professional Employer Organization (PEO) and Employer of Record (EOR) platforms and networks … and you can be operational in days.

What South Korean Payroll Options are available for Companies?

Remote payroll: This option allows businesses to operate under a single payroll system, by adding employees in South Korea to the parent company’s payroll. However, these employees must operate under different regulations, which is likely to cause problems.

Internal payroll: You may operate payroll for your subsidiary, especially if you are committed to growing your company’s presence in South Korea. However, this does require hiring dedicated HR staff who understand South Korea’s employment and compliance laws.

South Korea payroll processing company: If you are considering outsourcing, then working with a South Korea payroll company will help in processing your payroll – but not when it comes to compliance.

South Korea payroll outsourcing: However, there is another option available that solves both concerns – by working with Bradford Jacobs. We can handle payroll and compliance for all your employees in South Korea. We lift the administrative stress from your shoulders so you can focus on what you do best.

South Korean Payroll Services

International companies moving into South Korea (officially the Republic of Korea, ROK) as a base for further expansion open a wealth of possibilities throughout Asia, the Pacific Rim and with the Association of Southeast Asian Nations (ASEAN) organization.

Challenges come alongside the potential benefits, however. Payroll management is among those challenges, whether your company is considering moving employees abroad or hiring new staff in South Korea. Employment laws, payroll and income tax regulations are areas where you cannot afford mistakes either at state level or with regional authorities.

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.

Taking this step before running payroll in South Korea requires an in-depth knowledge of company, tax, and employment law, and staying up to date with changing taxation rates.

However, there is an alternative and simpler route. Bradford Jacobs’ will navigate around these potential pitfalls effectively and efficiently. We recruit the staff in-country and then put into action our comprehensive knowledge of tax and payroll regulations. As part of our service, Bradford Jacobs files returns, and remits associated payments for tax and social security contributions directly from our payroll system to the relevant authorities.

Outsourcing your payroll in South Korea will streamline your operations by dealing with the following for your staff:

  • 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
  • Collate necessary documents as may be required, such as government ID, passport, or Residence Card (formerly Alien Registration Card, pre-2022)
  • Prepare NTS Certificate of Income depending on Class A or Class B income, or whether employees will qualify for special expat tax rate as of December 2023
  • 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
  • Withhold payroll taxes and remit to the NTS
  • Finalize annual tax liability and supply payroll tax settlement certificate to the NTS

What is required to set up South Korean Payroll?

Non-resident foreign companies wishing to operate payroll for staff in South Korea must establish a subsidiary. The most popular route 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. Setting up a subsidiary is required before attempting to operate payroll. Procedures and requirements include:

  • Confirm choice of unique company name on the Supreme Court website
  • Create a company seal as required by the Korean Commercial Registration Act, to receive 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 represent the company
  • The Commercial Act requires that the foreign investment in the company is reported to a required bank or the Korean Business Center of the Korea Trade-Investment Promotion Agency (KOTRA)
  • Provide passport verification of foreign investors’ nationalities
  • 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)
  • 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; 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

Once incorporated, other steps must be followed to employ staff and operate payroll. The main requirements 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 and remitting contributions
  • Collating necessary documents as may be required, such as government ID, passport, or Residence Card (formerly Alien Registration Card pre-2022)
  • Prepare NTS Certificate of Income depending on Class A or Class B income, or whether employees qualify for special expat tax rate
  • Registering employees with the National Health Insurance Service (NHIS) for contributions to National Pension (NP), National Health Insurance (NHI), Employment Insurance (EI) and Workers’ Compensation Insurance (WCI)
  • Withhold 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