1. Employees in South Korea are afforded mandatory protections for employment benefits as part of their employment contracts. These protections cover working hour limits, certain leave entitlements, minimum wage, and termination rights.
2. There are obligations for employers and employees to make various contributions to various insurance schemes as part of a salary package. This includes retirement insurance, national health insurance, and worker compensation insurance as the major types of payroll contributions.
3. It is recommended to offer extra optional discretionary benefits to give your company a competitive edge when looking to hire top talent in South Korea. Some discretionary employee benefits can include a premium pension plan, extra leave entitlements, company car or travel stipends and wellness benefits.
4. Using the support of a Global PEO can support your company to move into the South Korean market by managing all benefits administration when hiring employees in South Korea.
South Korea has a relatively complicated set of employment taxes and compulsory contributions: This is because employers and employees are legally required to make several different contributions that benefit their employees. This article will act as an employer’s guide to employee benefits in South Korea.
What are the main employee benefits in South Korea?
In South Korea, there are over 35 different legislative tools that govern the relationship between an employer and employee, as well as all general employment protections and rules. The most relevant statutes include:
- The Labour Standards Act (LSA)
- The Framework Act on Employment Policy
- The Employment Security Act (ESA)
- Act on Equal Employment
- Industrial Accident Compensation Insurance Act
- Labour Adjustment Act (LAA)
In terms of finding where the mandatory employee benefits are specified, key protections are found within the Labor Standards Act. For international companies looking to hire employees in South Korea, the provisions within the LSA are where you will find employer obligations that you need to incorporate to ensure a compliant employment contract.
The Labour Standards Act (LSA)
The minimum standards and protections outlined in the LSA only cover those deemed employees within their written formal contract arrangements and are working either on a permanent or temporary basis, and in a full-time or part-time capacity. These protections are stricter for all companies with five or more employees on their books. The protections afforded by the LSA do not extend to independent contractors, but do in part extend to dispatch workers, a third type of employment arrangement unique to South Korea. The LSA prevails if conditions outlined in an employment contract, a collective bargaining agreement (COE) or rules of engagement (ROE) are less favorable to the employee than those minimum standards found within the LSA.
Mandatory Employee Benefits
Under the LSA, employees are entitled to specific working hours limits, overtime, night-time and holiday work award rates, minimum annual leave, compensation for unused leave, minimum retirement benefits, severance pay and have certain restrictions around unfair dismissal. All those working legally within South Korea are also entitled to a statutory minimum wage. Let’s go through the specifics for each benefit.
As of 2022, the statutory minimum wage in South Korea stands at 9160 KRW (equivalent to 7.32 USD) per hour. This rate steadily increases each year. Anyone working in South Korea, citizen or foreigner is entitled to this base rate.
Working hour limits and overtime rules
An average work week spans Monday to Saturday with Sundays considered the only required day off. There are daily and weekly limits for how long employees can work. These are:
- Daily limit of 8 hours a day
- Weekly minimum of 40 hours for full-time employees
- Maximum limit of 48 hours every two weeks
- Employers cannot ask females to work between 10pm and 6am or on holidays
There are also strict rules for overtime, including an obligation for employers to compensate employees who work overtime hours. Some rules around overtime include:
- Employees cannot work over 52 hours a week including overtime
- All overtime hours must be compensated
Employees are also entitled to be paid for award rates for night work at an 50% rate on top of the regular wage for up to 8 hours over their usual hours.
The LSA mandates certain leave entitlements to anyone working in South Korea. This includes annual leave, sick leave, maternity leave, paternity leave and rules around unused leave compensation.
In the first year of working, an employee is entitled to 1 day off leave per month, or 11 days for the year. After 1 year of service, employees are entitled to 15 days of annual paid leave each year. Like many countries, South Korea also has several public holidays that they celebrate. Companies with more than five employees are obligated to give their employees paid time off on all public holidays. There are 10 government-recognized public holidays in South Korea.
There are no statutory obligations for private companies to pay sick leave in South Korea. However, if an employee is injured the workplace, employees must pay this time off for the employee to recover. It is common though for employers in Korea to offer paid sick leave entitlements as a discretionary benefit.
Employees who are expecting in South Korea are entitled to a minimum of 90 days maternity leave. For large companies, this type of leave is a shared payment by social security and by the employer, with the employer covering 100% of maternity leave for 60 days. For smaller companies, the full term of maternity leave is supported by social security through. For companies with more than 300 female employees, childcare facilities must be provided at the workplace.
Partners of expecting employees are entitled to 10 days paternity leave each child.
Rights around unfair dismissal
It is difficult to be terminated in South Korea as an employee and any terminations must be backed by a serious cause. If a cause meets the criteria for general termination, then an employer must give an employee 30 days’ notice or compensation if the employer or employee chooses to cease tasks upon notification of the notice. Employees are also protected from dismissal within 30 days of returning from maternity leave, or any medical illness or workplace injury leave period.
If a contract of any sort is terminated early for a relevant reason, employers must pay a certain amount to that employee. The amount will depend on the length of working relationship.
As part of an employment package, employers and employees contribute a shared portion of each salary to different insurances. Mandatory payroll contributions include:
- National pension
- National Health Insurance
- Employment insurances (This differs per industry)
- Long term care Insurance
- Worker Accident Compensation insurance (Employer only contribution)
What are the optional discretionary employee benefits in South Korea?
Providing the statutory minimum may not be enough to be considered competitive in the South Korean market, as it is common for companies to offer optional discretionary benefits to their employees. Some extra perks include:
- Travel reimbursements or a company car
- Extra leave entitlements
- Assistance with housing
- Child care and education renumeration
- Wellness stipends
If you are looking to hire talent in South Korea, be sure to keep up to date with what other competitors are offering in optional employee benefits so you can make sure your company can attract and retain top talent.
Manage South Korea Employee Benefits with Horizons
If you are looking to diversify your team and hire employees in South Korea, a Global PEO such as Horizons can help. Horizons can help your company manage benefits administration in South Korea, as well as guide you through what your company is obligated to provide your new employees under South Korean labor laws. They can also guide you on some of the optional discretionary benefits that will give you company a competitive advantage in the South Korean employment market.
Frequently Asked Questions (FAQ)
Employees in South Korea get several mandated benefits that must be included as minimum conditions as part of their employment contracts. Benefits include annual leave, maternity leave, paternity leave, working hour limits, compensation for overtime, statutory minimum wage, and certain protections around unfair dismissal.
South Koreans value having a healthy retirement plan as one of the top benefits that can be provided by an employer. Although there are statutory minimum contributions for every employee, offering a discretionary retirement contribution on top of these minimums can be an enticing benefit to attract top talent in South Korea.