South Korea's remarkable economic has been driven by export-oriented industries and a skilled, educated workforce, backed by a business-friendly government. In this dynamic environment, Employer of Record (EOR) services are essential partners for businesses entering the South Korean market. Leveraging the nation's highly skilled workforce, EOR services navigate government regulations and facilitate seamless entry, ensuring compliance with labor laws and taxation. By managing employment functions such as payroll and benefits administration, EOR services enable businesses to focus on core competencies, fostering agility in response to the dynamic economic landscape.

For employers unfamiliar with South Korea’s labor landscape, navigating the rough waves of its labor slows can be challenging.

Usually, labor laws in business-friendly nations (like in the USA, and Singapore) favor employers. However, South Korea has continued to maintain a pro-business environment while also strictly regulating working hours, minimum wages, and terminations. For example, employers in the USA need not offer severance pay and can fire employees at will. However, in South Korea, employers are statutorily required to offer severance pay to employees who have worked for a company for one year or more, regardless of the reason for termination. Moreover, South Korea has a strong tradition of labor unions and collective bargaining, playing a significant role in negotiating working conditions, wages, and benefits. 

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Hiring compliant with these laws can be difficult for employers unfamiliar with these nuances. Partner with a South Korea employer of Record (EOR) like Gloroots to onboard local talent compliantly in under a day. We make your hiring compliant with local labor laws so that hiring and payrolling become less complex and more streamlined. Our South Korea EOR will ensure full compliance with local employment obligations, and you can fully focus on core business functions

Usually, EORs charge based on two pricing models – fixed and variable. An EOR based on the fixed pricing model charges a transparent fee of $200 – $1000 per employee per month.

With Gloroots, you pay a fixed fee for our EOR services. Unlike EORs that offer variable pricing (where pricing changes with the employee’s salary), our prices are fixed no matter what the number of employees you onboard using our platform. The final cost depends on the complexity of employment laws of the employee’s jurisdiction.

Our prices are designed to ensure that you get the most out of your employee spending. 

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Key Metrics For Foreign Employers 

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South Korea ranks 24th in INSEAD’s 2023 Global Talent Competitiveness Index. For employers planning to hire from South Korea, here are some key indicators of talent competence.

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Source: The Global Talent Competitiveness Index 2023

Through the Gloroots’ Recrew platform, you can discover amazing talent in South Korea.

Misclassifying employees in South Korea poses risks, potentially depriving them of legal protections. Engaging a PEO/EOR in the country mitigates these risks by ensuring compliance with labor laws, accurate classification, precise payroll management, and comprehensive benefits. This strategic approach allows businesses to concentrate on core operations while entrusting employment responsibilities to seasoned experts.

In South Korea, the primary legislation governing employment laws is the Labor Standards Act. This act provides the fundamental framework for labor relations in the country, covering a wide range of issues including working hours, wages, holidays, leave, workers' health and safety, child labor, female labor, and the resolution of labor disputes.

Additionally, several other laws and regulations complement the Labor Standards Act in governing specific aspects of employment in South Korea. These include the Minimum Wage Act, the Industrial Accident Compensation Insurance Act, the Equal Employment Opportunity and Work-Family Balance Assistance Act, and the Trade Union and Labor Relations Adjustment Act.

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Employment contract

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The LSA (Labor Standards Act) states that the contract should mention all the following conditions:

• The names of both the employee and the employer(s)
• The effective start date of the contract
• Wage or salary, including the duration for which it applies
• Job description outlining the employee's role
• Information on working hours
• Provisions for sick leave
• Terms related to vacation leave
• Clauses stipulating notice periods for both parties
• Information about any probationary period, if applicable
• Policies related to discipline and conduct
• Mechanisms for addressing employee grievances, and more

It's important to note that any alterations to essentials such as job title, promotions, demotions, transfers, and remuneration must be documented in writing.

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Working time

In South Korea, the standard workweek consists of eight hours per day and 40 hours per week.

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Overtime

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Public Holidays

The country observes 17  public holidays that employees can take as paid days off.

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Minimum Wage

The national minimum wage in South Korea stands at 9,620 KRW per hour and is applicable universally to all companies and employees, irrespective of their residency status.

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Annual Leave

Paid leave in South Korea is specified in the employment agreement, ensuring a minimum of 11 days of paid leave annually after one year of service, alongside recognized public holidays. This allowance extends to 15 days during the second and third years of an employee's tenure. Beyond the third year, an extra day of paid leave is incrementally granted for every two years of service, reaching a maximum of 25 days. Carryover allowances are subject to the employer's discretion.

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Paid Sick Leaves

While there are no legally mandated sick leave entitlements in South Korea, it is customary for employers to provide sick leave as a benefit.

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Maternity leaves

• Maternity benefits in South Korea are universal for female employees.
• The entitlement includes a 90-day paid leave, extending to 120 days for multiple or complicated births.
• Maternity leave is typically distributed as 45 days before the due date and 45 days after.
• Funding for maternity pay involves a combination of social security/governmental payments and employer contributions.
• In larger companies, employers are required to cover maternity pay at 100.00% of the regular salary rate for the initial 60 days.
• Subsequently, social security/government provides support allowance for the remaining 30 days, capped at two million KRW per 30 days.
• Employers have the option to supplement any difference to meet the employee's regular salary rate.
• For smaller companies, social security/government supports the employer throughout the entire 90-day maternity leave period.

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Paternity leaves

The father is eligible for compulsory paid paternity leave, amounting to a total of 10 days. This includes five days covered by the employer and an additional five days paid by social security/government. The paternity leave can be taken from the day of the child's birth up to 90 days thereafter.

Tax and Social Security contribution:

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Employer

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Employee

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Employee Income tax

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Local Income SurTax

• Up to 12 million KRW: 0.60% tax rate
• 12 million to 46 million KRW: 1.50% tax rate
• 46 million to 88 million KRW: 2.40% tax rate
• 88 million to 150 million KRW: 3.50% tax rate
• 150 million to 300 million KRW: 3.80% tax rate
• 300 million to 500 million KRW: 4.00% tax rate
• 500 million to 1 billion KRW: 4.20% tax rate
• 1 billion KRW and above: 4.50% tax rate

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Alternative Minimum Tax

(business income of a resident individual and Korean-source business income of a non-resident individual):

The greater of: 45% of income tax liability (35% applied to income tax liabilities of up to KRW 30 million) before exemptions

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Actual tax after exemptions

Non-Resident Tax:

• Flat rate: 19.00%
• Inclusive of local income tax: 20.90%

‍Termination 

The termination process in South Korea follows a standard procedure primarily based on two main grounds for termination. Employers are obligated to demonstrate a justifiable and legally acceptable reason for termination, as outlined in the Korean Labour Standards Act. Additionally, when initiating a layoff, employers must establish the presence of an urgent managerial necessity as a prerequisite for employee termination.

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Severance Pay

Employers are required to implement a retirement benefit system, with the statutory severance pay system serving as the default. According to this system, when employment is terminated for any reason, including employee resignation, and the employee has been in service for at least one year, they are entitled to severance pay equivalent to 30 days' average wages for each year of continuous service. Average wages encompass all earnings, including bonuses received within three months.

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Notice Period

Under South Korean general labor laws, a mandatory notice period is not required unless specified in the employment contract or company manual. Nevertheless, it is customary to give one month's notice as a standard practice.

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Probation period

Probation periods for permanent employees in South Korea are discretionary and typically range from one to three months. It is uncommon for employers to terminate a contract after the probation or training period has concluded due to the obligation to provide unemployment compensation.

When expanding globally, ensuring compliance poses unique challenges. Employers must navigate employment laws, adhere to payroll protocols, uphold DE&I standards, comply with GDPR and data protection regulations, and more. While establishing local entities and commencing hiring can be daunting, staying abreast of a dynamic compliance landscape is even more demanding.

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Gloroots streamlines this process, offering a centralized platform to manage these tasks effortlessly. Our in-house experts provide comprehensive protection against cross-border employment and payroll compliance risks. We assist in crafting employment contracts, ensuring timely payments, and delivering compliant benefits, allowing you to concentrate solely on talent screening.

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Our commitment is to provide a seamless global employment experience, alleviating stress for both you and your employees.

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Connect with our experts today to launch your global recruitment initiative.

Expanding your team in South Korea demands strategic hiring aligned with business goals. Navigate the intricacies of local employment seamlessly with Gloroots's global Employer of Record (EoR) service. Entrust experts to manage compliance, payroll, tax, and benefits, enabling you to concentrate on nurturing your team and driving company growth in the dynamic South Korean market.