Employer of Record in South Korea

Businesses can only operate smoothly in South Korea if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in South Korea below, to avoid any compliance issues.

Employment Contract Requirements

In South Korea, employment contracts must be written and can be in a foreign language. Both indefinite and fixed-term employment are allowed, but the latter cannot exceed 2 years. If it does, the employee becomes permanent. Mandatory contract elements include:

Onboarding Process

We can help you get a new employee started in South Korea quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Probation Period in South Korea

In South Korea, probation periods for permanent employees are optional and usually last 1-3 months. Employers seldom terminate contracts after probation/training due to the associated unemployment costs for the company.

In South Korea, employers must adhere to strict regulations regarding working hours and overtime to ensure compliance with labor laws and promote employee well-being. The standard workweek is capped at 40 hours, with a maximum of 12 overtime hours permitted. Overtime work must be mutually agreed upon and is compensated at a rate of at least 1.5 times the regular hourly wage. It is crucial for employers to provide adequate rest periods, including a minimum of 30 minutes for breaks after 4 hours of work, and ensure compliance with night shift and weekend work regulations, which may involve additional compensation.

Employers should be mindful of industry-specific exceptions, such as in healthcare and transportation, where extended working hours may apply. Additionally, managerial and exempt employees may not be subject to the same working hour restrictions, but this varies based on their specific roles.

As of January 1, 2025, South Korea's minimum wage is set at 10,030 KRW per hour, reflecting a 1.7% increase from the previous year. This amounts to ~1,740,808 KRW per month for a typical 40 hour work week.

This wage applies uniformly to full-time, part-time, temporary, and foreign workers, ensuring fair labor practices across industries. While interns and trainees are generally covered under minimum wage laws, exceptions exist for probationary periods under specific conditions. The South Korean government, through the Minimum Wage Commission, conducts annual reviews to determine adjustments based on economic factors such as inflation and employment rates.

Employers must comply with these regulations to avoid penalties and ensure fair compensation for their workforce. Industry-specific variations, government policies, and economic conditions all influence wage decisions, making it essential for businesses to stay informed about updates. Additionally, employers should be aware of differences between the minimum wage and the living wage, especially in regions like Seoul, where the cost of living is higher. Understanding and adhering to these regulations is crucial for maintaining compliance and supporting fair labor practices in South Korea.

Employers in South Korea must manage key payroll and employment tax obligations, including income tax withholding, social security contributions, and local income tax, all of which have strict deadlines to ensure compliance. Accurate calculations and timely submissions are essential to avoid penalties and maintain smooth operations.

Employers are required to register with the relevant authorities, adhere to progressive tax rates, and ensure compliance with contribution rates for programs like National Pension and Health Insurance. Leveraging payroll management software can greatly assist businesses by automating tax calculations, consolidating payroll data, and simplifying compliance processes in South Korea.

In South Korea, work permits and visas are necessary for employers hiring foreign workers. The application process involves submitting various documents, paying visa fees, and meeting specific eligibility criteria. Key visa types include the E-2 (Foreign Language Instructor), E-7 (Specialty Worker), E-4 (Technological Expert), and D-8 (Business Investment). Employers must ensure compliance with local labor laws, manage visa sponsorship, and oversee renewals or extensions for foreign workers. The process can take 2 to 4 weeks, and work permits typically last 1 to 3 years, depending on the visa type.

In South Korea, leave policies are designed to support employees' well-being and work-life balance. Annual leave entitlements are based on tenure and attendance, with employees earning additional days as their service length increases.

While there is no statutory requirement for paid sick leave, employers often provide it as part of their internal policies. Maternity, paternity, and parental leave provisions are well-defined, offering support to parents during critical family periods. Employers should stay informed about these regulations and implement best practices to ensure compliance and foster a supportive work environment.

South Korea mandates several key employee benefits, including the National Pension Scheme, National Health Insurance, Employment Insurance, Workers' Compensation Insurance, and provisions for maternity and paternity leave, as well as paid annual leave. These benefits are designed to ensure the well-being and financial security of employees.

Additionally, many employers offer supplemental benefits such as private health insurance, life and disability insurance, well-being programs, flexible working hours, home office assistance, and additional retirement benefits to attract and retain top talent. Employers must adhere to the legal requirements governing mandatory benefits and consider offering supplemental benefits to enhance employee satisfaction and competitiveness in the job market.

In South Korea, employment termination is strictly regulated under the Labor Standards Act (LSA) to protect employee rights and ensure fair treatment. Employers must have a justifiable reason for dismissal, such as gross misconduct, insubordination, or economic necessity. A minimum notice period of 30 days is required, except in cases of severe misconduct where immediate termination may be allowed. Employees who have completed at least one year of continuous service are entitled to severance pay, calculated as one month's average wages per year of employment, which must be paid within 14 days after termination.

The termination process in South Korea involves proper documentation, written notice, and final compensation settlements, including wages, unused leave, and severance pay. Employees are protected against unfair dismissal, and non-compliance with legal procedures can lead to reinstatement and back pay. Employers handling redundancies or collective dismissals must follow strict legal procedures, including consulting employees or their representatives. Understanding and adhering to these regulations is crucial for employers to avoid legal disputes and ensure compliance with South Korea’s labor laws.

Termination Process in South Korea

In South Korea, employers are not permitted to terminate employees at will; terminations must be justified. Acceptable justifications for compliant terminations include:

• Voluntary employee resignation
• Mutual agreement
• Unilateral decision by the employer (based on employee misconduct or criminal offenses, neglect of duties, receiving 3 warning letters, inability to perform assigned duties, engaging in criminal conduct while on duty, and business failure leading to imminent bankruptcy)
• Contract expiration

Notice Period in South Korea

There is no mandatory notice period in the South Korean Labour Law unless specified in the employment contract or company manual. Nevertheless, it is customary to give 1 month notice to employees.

Severance in South Korea

Under the statutory severance pay system in South Korea, employees, regardless of the reason for termination, including voluntary resignation, are entitled to severance pay if they have been employed for at least 1 year. This pay amounts to 30 days of their average wage, which includes bonus pay from the preceding 3 months, for each year of continuous service.