South Korea: Decrypting South Korea's Labour Environment

Last Updated: 24 October 2016
Article by TMF Group

South Korea's HR legislation covers everything from labour standards and equal opportunity employment, to trade unions and insurance. Let's take a look at HR and payroll in the country.

Social Security System

  • The social security system in Korea comprises employment insurance, industrial accident compensation insurance, national pension and health insurance
  • The contribution rates are:

    Type of Contribution Employer Contribution (of taxable salary) Employee Contribution (of taxable salary)
    Employment Insurance*1 0.65% +
    Occupational ability development: 0.25% - 0.85%
    (depending on company size)
    0.65%
    Industrial Accident Compensation
    Insurance* 1& 2
    0.7% - 34%
    (depending on business category)
    National Pension 4.5% of Annual salary/365*30 4.5% of Annual salary/365*30
    Health Insurance
    (Including Long Term care insurance)*1
    3.2601297 % 3.2601297 % *

Hiring/Retrenchment Issues

  • Under the Labor Standards Act (LSA), employers must enter into a written employment agreement with employees. These can also enter into collective bargaining agreements.
  • An employer cannot terminate an employee without establishing a "just cause" (includes the employee's misconduct or poor performance, or the employer's substantial business or economic reasons).
  • A company must give a written notice of at least 30 days or 30 days ordinary wages in lieu of the notice before dismissing an employee (exceptions apply).
  • Employees can challenge the termination at the Regional Labour Relations Commission (RLRC), if they believe that there is no "just cause". In case of a successful challenge, a dismissed employee can be reinstated with pay.

Work Permits

  • Foreign nationals need to obtain one of the following working visa to work/invest in Korea:

    • Temporary Visa (C-3): For foreigners to enter and engage in a business activity. Valid for 90 days.
    • Short-Term Employment Visa (C-4): For foreign employees dispatched to Korea less than 90 days.
    • Supervisory Intra-Company Transfer Visa (D-7): For foreign employees coming to work in the branch or liaison office of foreign parent company. The foreigner must have been working for the parent company for one year or more.
    • Corporate Investment Visa (D-8): For foreign employees of a foreign-invested corporation in Korea, who possesses some expertise, and is employed in a position related to the management, administration, production and/or technological aspects of the local company
    • Technology Transfer Visa (E-4): For foreigners invited by Korean public or private organisations for the specific purpose of providing professional knowledge in natural sciences or technology with respect to a specialised industrial field
    • Special Activity Visa (E-7): For foreigners who have certain skills or knowledge that are not available in the Korean domestic market and are willing to work for a domestic Korean company
    • Other employment visas are: E-1 for professors and other academicians, E-2 for foreign language conversation teachers and E-3 for researchers.

HR/Payroll rules and benefits

  • The minimum wage rate is KRW 6,470 per hour, valid from January 1 to December 31, 2017.
  • The minimum wage rate is KRW 6,030 per hour, valid from January 1 to December 31, 2016.
  • For extended (overtime) hours worked, night work, work on a Sunday or any other public holiday, an employee must be compensated at a rate of at least 150% of the normal wages.
  • Employees, who have attended work for at least 80% of the each full working year, are entitled to 15 days of paid annual leaves.

    • Employees, who have worked for three or more consecutive years, are entitled to an additional day of paid leave for each two years of service thereafter up to a maximum of 25 days.
  • A paid maternity leave of 90 days is granted to female employees.

    • The relevant authority subsidizes 80% of the ordinary wages, up to maximum KRW1, 350,000. For the first 60 days, the employer shall match up for the rest.

Legislation

  • The Labour Act in Korea is divided in three categories:

    • Labor Standards Act: covers labour standards, minimum wages, occupational safety and equal employment opportunity, among others.
    • Trade union and Labor relations Adjustment Act: covers trade union issues and promotion of workers' participation issues, among others.
    • Employment Insurance Act: covers issues related to employment insurance, vocational rehabilitation of disabled persons and age discrimination issues, among others.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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