Employment Law

Korean Employment Contract Types

In the past few years, employment contracts in South Korea were indefinite. Therefore, employees typically work for a company until retirement. However, fixed-term contracts, part-time contracts and temporary contracts are increasingly standardized in South Korea.

The length of a fixed-term contract cannot exceed two years. For any contract exceeding two years, the employee needs to be deemed to be on an indefinite contract. In South Korea, part-time employees have the same work rights as full-time employees doing the same job—proportional to the hours worked.

Best practice in Korea is for the employer to draft a clear written employment contract. It should be drafted in the local language and include pay, benefits, job responsibilities and dismissal rules. Offer letters and employment contracts should state salary figures in Korean Won (KRW) and not in any foreign currency.

Working with our Korean PEO, Remoly's team of local experts can provide assistance in drafting strong employment contracts that comply with local regulations.

Fixed Term

Indefinite

Working Hours in Korea

Although Koreans are known for their long working hours, employers are required to provide employees with at least one day off per week. In most cases, Sunday is assigned as a paid weekly rest day. However, many professional employees choose to work a half-day on Saturdays.

Income Tax

In South Korea, residents are taxed on their income, regardless of whether the income is earned domestically or abroad. This is different from non-residents, who are only taxed on their income earned in Korea. Taxes are deducted at source and individuals are required to file a tax return at the end of each year.

For expats in South Korea, a special tax regime applies. Their total income tax rate is 20.9%. This includes an income tax of 19% and a local income tax of 1.9%. Certain foreigners in South Korea can choose between a flat tax rate of 20.9% without any deductions or a graduated tax rate between 6.6% and 44% after deductions.

For residents and citizens of South Korea, the income tax rates are as follows:

• 0-12000000 Korean Won – 6%
• 12-46,000,000 Korean Won – 15%
• 46-88,000,000 Korean Won – 24%
• 8.8-3 billion won – 35%
• Over KRW 300 million – 38%

Health Insurance

In South Korea, universal health care is distributed by the National Health Insurance (NHI).

Both employers and employees are required to contribute to National Health Insurance. Each party contributes 50%, and the proportion is determined based on the employee's salary.

Holiday Policy

Take a Vacation

Companies with full-time salaried employees are required by law to provide employees with 15 days of annual pay after one year of service with the company.

• After that, you can enjoy one extra day of paid vacation every two years of service.
• According to the law, the number of statutory vacation days per year shall not exceed 25 days

Sick Leave

In South Korea, employers do not require employees to take leave due to non-work-related illness or injury. However, many employers choose to provide at least some paid sick leave to their employees—regardless of whether the injury or illness is work-related.

If paid sick leave is not available, employees will often use their annual leave as sick leave.

Under the Korean Labor Standards Act, employers are required to provide paid leave for work-related illness or injury.

Maternity and Paternity Leave

Korean female employees are entitled to 90 days of maternity leave. The start date of maternity leave is usually mutually agreed between the employer and employee. 45 consecutive days of leave must be taken after childbirth.

Depending on the size of the business, the employer or employment insurance pays for maternity leave. The amount paid to employees also depends on the size and scope of the business.

Employees who have worked for the company for more than one year can take parental leave.

• Parental leave applies to parents whose children are under six years old
• Each parent can take up to one year of leave
• Parents are prohibited from taking leave at the same time
• Parents are entitled to employment insurance at 40% of their monthly income

Termination and Severance

Employers in South Korea are required to give employees at least 30 days' notice before terminating a contract. Alternatively, the employer may choose to pay 30 days' wages in lieu of the notice period.

Individual employment contracts often provide for longer notice periods. In rare circumstances, employees may be entitled to up to 12 months' notice.

Full-time employees receive severance pay equal to one month's salary for every year of service with the company. This rule applies if the employee has been with the company for at least one year and works more than 15 hours per week, or 60 hours per month. Severance pay must be paid within two weeks of an employee's termination.

An employee with more than six months' service may make an unfair dismissal claim if any of the following conditions apply:

• Employees are protected by modern awards or enterprise agreements - no matter how much they earn
• The employee does not have an award or agreement and their earnings are below the relevant earnings threshold

In most cases, when unfair dismissal is proven, the employee will be reinstated. If this does not apply, compensation may be available for up to six months.

For companies expanding overseas for the first time, dealing with employee layoffs and dealing with severance packages can be complicated. Remoly's Korean PEOs can reduce risks for foreign companies and provide guidance in the process.  

Salary and Benefits

Korean Compensation Law

The minimum wage in South Korea is 8,350 won (KRW) per hour. Although South Korea is known for its long working hours, it recently passed a law reducing the maximum working week from 68 hours to 52 hours. Normal working hours per week have also been reduced to 40 hours. If an employee works overtime, it must be paid at a rate between 50% and 100% of regular wages.

South Korea Welfare Security

Employers in Korea need to be aware of all guaranteed benefits provided by law. These benefits include holidays and vacation days.

Korean employees enjoy Labor Day (March 1) as a mandatory paid holiday. Employers are not required to provide paid leave on public holidays other than Labor Day. Still, many employers allow employees to take paid time off.

Full-time salaried employees are entitled to 15 days of paid leave in accordance with the law after working for the company for one year. For every two years of service thereafter, the employee is entitled to a subsequent day off. The maximum number of vacation days per year is 25 days.

Maternity and paternity leave are another guaranteed benefit in South Korea. Female employees are entitled to 90 days of maternity leave, the start date of which is agreed upon by the employer. Depending on the size of the business, the employer or employment insurance will pay for maternity leave. For employees who have been with the company for more than one year, they may be entitled to parental leave, but strict conditions must be met.

Korea Welfare Management

To implement an effective benefits administration plan, employers should also consider supplemental benefits. Employers in South Korea often provide supplemental health and life insurance benefits to their employees.

When you work with Remoly, our experts will advise you on the insurance costs you need to budget for in your business plan. We will also support you in allocating appropriate benefits to your employees in Korea.

Benefits and Compensation Limitations

In South Korea, collective bargaining agreements (CBA) are not as common as in other countries. Nonetheless, we still advise employers to ensure that their industry and its employees are not protected by the CBA. In order to comply with Korean employment regulations, employers need to stay up to date on the country's compensation laws.