Hiring and paying employees in South Korea requires an understanding of the country’s employment laws, payroll systems, and benefit structures. This guide provides a comprehensive overview for international businesses seeking to hire in South Korea, ensuring compliance and smooth operations.
Employment laws in South Korea
South Korea’s employment laws are heavily regulated, with a strong emphasis on protecting employees. Businesses must adhere to the following key legislations:
Labour Standards Act
- Working hours: Standard working hours are 40 hours per week, with a maximum of 52 hours including overtime. Overtime is capped at 12 hours per week.
- Rest and holidays: Employees are entitled to one rest day per week and 11 public holidays. After one year of service, employees earn 15 days of paid annual leave.
Minimum wage
- 2025 rate: ₩9,860 per hour (approximately £6.05 or $7.50).
- Applies to all employees, regardless of employment type.
Employment contracts
- Must be written and specify key terms, including job description, wages, working hours, and termination conditions.
- Fixed-term contracts cannot exceed two years unless there is a justified reason.
Termination and severance
- Employers must provide a 30-day notice or pay in lieu of notice.
- Severance pay is mandatory for employees who have worked for at least one year. It equals one month’s wages for each year of service.
Payroll elements in South Korea
Payroll components
Korean payroll consists of:
- Base salary: The agreed wage in the employment contract.
- Overtime pay: 150% of the regular hourly rate for overtime hours.
- Bonuses: Common practice, especially for Chuseok (harvest festival) and Lunar New Year.
- Deductions:
- Income tax
- Social security contributions
- National Health Insurance premiums
Income tax rates (2025)
Income tax in South Korea is progressive:
| Income Bracket (KRW) | Tax Rate |
|---|---|
| Up to 12,000,000 | 6% |
| 12,000,001–46,000,000 | 15% |
| 46,000,001–88,000,000 | 24% |
| 88,000,001–150,000,000 | 35% |
| 150,000,001–300,000,000 | 38% |
| Over 300,000,000 | 40% |
Employees are also subject to local income taxes at 10% of their national income tax liability.
Social security and benefits
Employers and employees in South Korea are required to contribute to the country’s social security system:
Social security contributions (2025)
| Scheme | Employer Contribution | Employee Contribution | Total Rate |
|---|---|---|---|
| National Pension | 4.5% | 4.5% | 9% |
| National Health Insurance | 3.8% | 3.8% | 7.6% |
| Employment Insurance | 1.55%–1.65% | 0.8% | Up to 2.45% |
| Industrial Accident Insurance | 0.73%–18.63% | N/A | Varies |
Statutory benefits
- Health insurance: Covers medical expenses, including hospitalisation and prescriptions.
- Pension: Provides retirement, disability, and survivor benefits.
- Unemployment insurance: Offers income support for jobseekers.
- Industrial accident insurance: Covers workplace injuries and illnesses.
Payroll process in South Korea
Managing payroll in South Korea requires adherence to local laws and meticulous attention to detail. Below are the key steps involved in processing payroll:
Step 1: Employee onboarding
- Register employees: Enrol new hires in mandatory social security schemes, including the National Pension Service (NPS), National Health Insurance Service (NHIS), Employment Insurance, and Industrial Accident Insurance.
- Tax file registration: Obtain the employee’s tax details and ensure they are registered with the National Tax Service (NTS).
- Document collection: Gather essential documents, such as bank account details, ID copies, and signed employment contracts.
Step 2: Calculate gross pay
- Base salary: Begin with the agreed monthly salary specified in the employment contract.
- Overtime and bonuses: Add any overtime payments (150% of the regular hourly rate) or discretionary bonuses.
- Allowances: Include additional perks like meal, transport, or housing allowances if applicable.
Step 3: Apply deductions
- Income tax: Calculate income tax based on the progressive tax brackets and withhold the appropriate amount.
- Social security contributions: Deduct the employee’s share of contributions for National Pension, National Health Insurance, Employment Insurance, and any other mandatory schemes.
Step 4: Generate payslips
- Format: Create detailed payslips outlining gross pay, deductions (taxes and social security), and net pay.
- Language: Provide payslips in Korean to meet local compliance standards.
Step 5: Disburse salaries
- Payment method: Transfer net salaries to employees’ bank accounts in Korean won (KRW).
- Timing: Ensure payment is made on the agreed date, typically the last working day of the month.
Step 6: File tax and social security contributions
- Monthly filings: Submit payroll taxes and social security contributions to the relevant authorities by the deadlines.
- Income tax: Pay to the National Tax Service (NTS).
- Social security: Remit contributions to the NHIS, NPS, and Employment Insurance funds.
- Year-end adjustments: Perform tax reconciliations at the end of the year to ensure compliance.
Step 7: Maintain records
- Keep detailed payroll records, including employee contracts, payslips, and tax filings, for a minimum of five years as required by law.
Step 8: Update for legislative changes
- Regularly review and adjust payroll processes to reflect changes in tax rates, minimum wage laws, or social security contributions.
Hiring process in South Korea
Recruitment
- Job posting: Use local platforms such as Saramin or JobKorea.
- Interviews: Korean hiring culture often involves multiple interviews and sometimes aptitude tests.
- Reference checks: Verify qualifications and past employment.
Employment onboarding
- Ensure compliance with work permits for foreign workers.
- Register the employee with the National Health Insurance Service (NHIS) and National Pension Service (NPS).
- Provide a copy of the employment contract in Korean.
Payment methods and frequency
Payment frequency
- Salaries are typically paid monthly, on a fixed date agreed upon in the contract.
Payment methods
- Bank transfers are the standard mode of payment.
- Ensure compliance with the currency regulations if paying from abroad. Payments are usually made in Korean won (KRW).
Cultural considerations
Work culture
- South Korea has a hierarchical work environment with an emphasis on respect and formality.
- Long working hours are common, although recent reforms aim to promote work-life balance.
Employee benefits
Offering additional benefits, such as meal allowances, housing stipends, or education subsidies, can help attract top talent.
Key compliance tips for employers
- Use local expertise: Partner with a payroll provider or HR service to navigate complex regulations.
- Stay updated: Employment laws and tax rates can change annually.
- Language considerations: Ensure all documents, including contracts, are available in Korean.
- Cultural sensitivity: Adapting to Korean work culture can significantly improve employee relations.
Hiring and paying employees in South Korea may seem intricate, but with proper planning and expert guidance, international businesses can establish a compliant and thriving workforce.
FAQ
Yes, foreign companies can hire employees in South Korea, but they may need to establish a local entity or work through a local employer of record (EOR) or payroll provider to manage legal compliance and employment obligations.
Employers must report payroll taxes, including income tax and social security contributions, to the National Tax Service (NTS) and relevant agencies monthly. Additionally, annual reconciliations are required to ensure accurate withholding and compliance.
Yes, foreign workers need valid work visas, such as the E-7 or H-2 visa, depending on their role and nationality. Employers must also register them with the relevant social security schemes unless they are exempt under a bilateral agreement.
Allowances, such as meal and housing stipends, are generally considered taxable income unless they meet specific exemption criteria outlined by the National Tax Service.
Penalties vary depending on the violation. For example:
1. Non-payment of wages can result in fines of up to ₩20 million or imprisonment.
2. Failing to enrol employees in social security schemes can lead to retroactive payments and additional penalties.
Yes, probation periods are common in South Korea and typically last three months. During this period, employees are entitled to the same rights and benefits as permanent employees.
Stock options can be offered to employees, but they must be approved by the company’s board and registered with the Ministry of Employment and Labour. Tax implications for stock options vary depending on the plan and timing of exercise.
Expatriates are subject to Korean income tax on income earned within the country. Double taxation agreements may apply, allowing certain tax exemptions or credits based on their home country.
Yes, industries such as construction, manufacturing, and IT may have additional collective bargaining agreements or sector-specific rules for wages and working conditions. Employers should review these agreements before hiring.
Employment disputes are typically addressed through mediation by the Ministry of Employment and Labour. If unresolved, disputes can escalate to the Labour Relations Commission or civil courts.