Expand your business into South Korea - without an entity
Horizons provides global employment solutions for businesses wanting to hire employees and distribute payroll in South Korea. Through our South Korea PEO and EOR, we manage your company’s payroll, benefits, and expenses in South Korea. Additionally, we oversee HR duties, as well as employment and tax compliance.
Horizons will act as your employees’ Employer of Record, which means you can begin doing business in South Korea without a local entity. This not only allows your business to go to market faster, but also has the potential to save your business thousands in expansion costs.
As the only South Korea PEO with an in-house recruitment team, Horizons will source, hire, and onboard your South Korea workforce. We hire employees in accordance with South Korea’s labor regulations and coordinate all expense claims and benefits payments. Although we act as your employees’ Employer of Record, you still maintain full autonomy and control over all employees.
Our South Korea PEO simplifies your expansion
Horizons enables your business to expand its operations into South Korea – without setting up a legal subsidiary.
Horizons ensures day-to-day guidance to help your business navigate South Korea’s labor laws and regulations. We also provide mandatory monthly payroll requirements, and absorb all local employment liabilities. Partnering with our South Korea PEO is the quickest and most cost-effective way to enter the South Korean market.
Employment & Labor Laws in South Korea
📝 South Korea employment contract types
In years gone by, South Korean employment contracts were indefinite. As such, employees would generally work for the one company until retirement. However, fixed-term, part-time, and temporary contracts are increasingly become standardized in South Korea.
Fixed-term contracts are unable to exceed two years in length. For anything beyond two years, employees would need to be treated as if they have an indefinite contract. In South Korea, part-time employees are entitled to the same working rights as employees who perform the same job full-time – in proportion to the hours that are being worked.
Best practice in South Korea is for employers to draft a clear, written employment contract. It should be drafted in the local language and include compensation, benefits, job responsibilities, and rules around termination. Letters of offer and employment contracts should state compensation figures in South Korean Won (KRW), as opposed to any foreign currency.
By partnering with our South Korea PEO, Horizons’ team of local experts can provide assistance for drafting strong employment contracts that are compliant with local regulations.
⏰ Working hours in South Korea
Whilst South Koreans are known for working long hours, employers must provide their employees with at least one day off per week. In most circumstances, Sunday is allocated as the paid weekly day off. However, many professional employees choose to work a half-day on Saturday.
📅 Holidays in South Korea
New Year’s Day
Korean New Year Holiday
March 1st Movement
Legislative Election Day
Liberation Day Holiday
Harvest Festival Holiday
National Foundation Day
🏦 Income tax
In South Korea, residents are taxed on their income, regardless of whether income was earned at home or abroad. This differs from non-residents, who are only taxed on the income they received in South Korea. Tax is deducted at the source of income and individuals are required to file a tax return at the end of each year.
For expatriates in South Korea, a special tax regime applies. Their income is taxed at a total rate of 20.9%. This is comprised of 19% income tax and 1.9% local income tax. There are certain foreign nationals in South Korea that can choose between the flat rate at 20.9% – without any deductions or progressive rates between 6.6% and 44% after deductions.
For residents and citizens of South Korea, the income tax rate is as follows:
- 0-12000000 KRW – 6%
- 12-46000000 KRW – 15%
- 46-88000000 KRW – 24%
- 88-300000000 KRW – 35%
- More than 300 million KRW – 38%
🏥 Health insurance
In South Korea, universal healthcare is distributed by the National Health Insurance (NHI).
Both employers and employees need to contribute towards National Health Insurance. Each party pays 50% of the contribution and the rate is determined by an employee’s salary.
🏖 Vacation leave
Businesses with full-time, salaried employees are required by law to provide 15 day’s of paid annual to employees, once they reach one year’s company service.
- There is an additional paid vacation day for each two years’ service thereafter
- By law, the statutory vacation days per year are capped at 25 days
😷 Sick leave
In South Korea, it is not mandatory for employers to provide employees with leave for non-work related illnesses or injuries. However, many employers elect to provide at least some paid sick leave to employees – regardless of whether an injury or illness is work related.
Employees will most often use their annual leave as sick days, if paid sick leave is unavailable.
Under the South Korean Labor Standards Act, employers must provide paid leave for work-related illnesses or injuries.
👶 Maternity and paternity leave
Female employees in South Korea are entitled to 90 day’s maternity leave. The start date for maternity leave is generally agreed upon between the employer and employee. It is compulsory that 45 consecutive day’s leave be taken after childbirth.
Depending on the size of the business, either the employer or Employment Insurance pays for maternity leave. The amount that is paid to the employee will also depend on the size and scope of the business.
Parental leave may be available to employees that have worked for a company more than one year.
- Parental leave applies to parents whose children are under six years old
- Each parent is eligible for a maximum of one year’s leave
- Parents are prohibited from taking leave at the same time
- Parents are entitled to 40% of their monthly income from Employment Insurance
💰 Termination and severance
Employers in South Korea are required to provide employees with at least 30 day’s notice prior to termination. Alternatively, employers can elect to pay an 30 day’s salary, in lieu of the notice period.
Individual employment contracts will often provide longer notice periods. In rare circumstances, an employee may be entitled to as much as 12 month’s notice.
Full-time employees may be entitled to severance pay that is equal to one month’s salary, for each year of company service. This applies if an employee has at least one year’s company service and they have worked more than 15 hours per week, or more than 60 hours per month. Severance pay must be paid within two weeks of an employee’s termination.
Employees with more than six month’s service are able to make unfair dismissal claims if they meet either of the following criteria:
- The employee is covered by a modern award or enterprise agreement – regardless of how much they earn
- The employee is award or agreement free and they earn less than the relevant income threshold
In most cases, when unfair dismissal is proven, an employee will be reinstated in their role. If this is not applicable, then up to six month’s compensation pay may be granted.
Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. Horizons’ South Korea PEO can mitigate risk for foreign companies and provide guidance through this process.
💳 South Korea compensation and benefits
South Korea compensation laws
The minimum wage in South Korea is 8,350 won (KRW) per hour. Whilst South Korea is known for its long work hours, laws have recently been passed that have reduced the maximum hours in a work week to 52 – down from 68. Regular weekly work hours have also been reduced to 40. If an employee works overtime, it must be paid at a rate between 50% and 100% – on top of their regular wage.
Minimum Wage Country Comparison Chart
(Per month in USD)
Guaranteed benefits in South Korea
Employers in South Korea need to be aware of all guaranteed benefits that are legislated by law. These benefits will include time off for holidays and vacation days.
Employees in South Korea receive Labor Day (March 1st) off as a compulsory paid holiday. Aside from Labor Day, it is not mandatory for employers to provide paid days off for other public holidays. Despite this, many employers allow their staff to take these days off with pay.
Full-time salaried employees are legally entitled to 15 days of paid vacation after one year’s company service. For every two years of service thereafter, employees are entitled to a subsequent day off. The maximum number of vacation days per year is capped at 25.
Maternity and paternity leave is another guaranteed benefit in South Korea. Female employees receive 90 day’s maternity leave, with a start date that is agreed upon with their employer. Depending on the size of the business, either the employer or Employment Insurance will pay for maternity leave. For employees that have been with a company longer than a year, they may be entitled to parental leave – with strict conditions to be met.
South Korea benefit management
For employers to implement an effective benefit management plan, supplemental benefits should also be considered. Employers in South Korea will frequently provide their employees with supplemental health and life insurance benefits.
When you partner with Horizons, our experts will advise you on the insurance costs that need to be budgeted in your business plan. We’ll also support you to distribute the right benefits to your employees in South Korea.
Benefits and compensation restrictions
In South Korea, collective bargaining agreements (CBAs) are not as common as in other countries. Despite this fact, employers are still advised to make sure that their industry – and their employees – are not covered by a CBA. To maintain compliance with South Korea’s employment regulation, employers need to stay up-to-date with the country’s compensation laws.