- Overview: South Korea
- Global HR Compliance
- Global PEO and payroll
- Work permit for hiring expats via PEO
- Expand without a company set up
- Contractor vs. employee: which is better?
Global HR Compliance in South Korea
If you hire an international workforce, or plan to hire, then Hiring and Firing Workforce in South Korea Guide below will help you understand the nuances of labor legislation in the country.
When the company is planning to enter a new foreign market of South Korea and has a need to employ a local national there, the first question to answer is how it is going to make local hires.
We have designed a Global Employer of Record service to help you outsource global employment of your foreign workforce to companies like ours.
This solution helps you employ your global sales force in South Korea as well as in other countries of the world, and provide pay and benefits to your employees, as well as administer any business expenses with our help.
Our solution is different from other hiring modes in that it helps you engage your foreign workforce in full compliance with the local labor legislation. This means you are protected from any non-compliance and employee misclassification risks while we bear all employment risks, not you.
So, it looks very much like hiring your in-house sales force in your home country. However, you focus on only on your global business development while we admin your global HR. In addition, you don’t need to open your own entities in the foreign countries and can leverage our infrastructure in South Korea instead. With our service, you can become a global company with reduced costs and minimized time and effort on your end.
Your employed foreign sales force will devote 100% of their time to your company product and may stay with you longer than foreign independent sales reps.
Global Employer of Record solution is 100% compliant solution that guarantees you and your employees fully compliance with local legislation in South Korea .
We are experts in global workforce employment in South Korea, and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.
Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.
With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in South Korea.
See Hiring and Firing Workforce in South Korea Guide below for a general overview of labor rules and regulations in the country. Or contact us if you need to employ workers in South Korea or would like to get more details.
Hiring and Firing Workforce in South Korea Guide
Korean long history of continuous economic growth, its political/economic policies that are investment-friendly, highly-evolved infrastructure, well-informed consumers, especially with respect to modern technology and its strategic position in the Asian world make it a very competitive and attractive destination for business – one that cannot be ignored when considering the list of fertile grounds for global expansion.
South Korea has a social, legal and political framework that can be complicated and success-threatening if not properly considered. Consequently, familiarizing yourself with the employment and labor laws, as well as the legal obligations and restrictions is a sine qua non for successful business operation in Korea.
Below are some key facts to note about doing business in South Korea.
# Employment Agreements
Among various types of employment contracts, the two major types are “employment contracts without a fixed term” (ie, indefinite employment contracts) and “employment contracts with a fixed term” (ie, definite employment contracts). The Labor Standards Act does not have provisions that separately govern the duration of employment contracts. Therefore, employers and employees may freely determine the employment contract durations. Labor Standards Act provides that employment contracts must explicitly provide for the terms and conditions of employment in writing. In particular, employment contracts must include provisions on:
- Wages (eg, composition of wages, methods for calculating wages and methods for paying wages)
- Contractual working hours
- Weekly holidays and
- Annual paid leaves.
Moreover, employers are obliged to deliver such employment contracts to the employees.
#Employment Termination and Severance Pay (Dismissal)
Employee terminations in Korea require just-cause. Just-cause is a very high standard to satisfy. Courts have defined just-cause abstractly as a “cause that is attributable to the employee that renders the continued employment impossible from a societal perspective.” Courts consider the totality of the circumstances when determining whether just-cause existed for an employee’s termination. Examples of reasons that may constitute sufficient just-cause include, but are not limited to:
- Serious and repeated violation of an internal employment regulation
- Conviction of a serious crime
- Falsification of one’s resume and detrimental reliance by the company
- Disclosure of trade secrets
- Workplace sexual harassment.
A complete business closure may also constitute just-cause under Korean law. For example, in performance cases, an employee’s poor performance must be well documented and severe, and an employer must give the employee an opportunity to rectify it or risk having the dismissal overturned. A key exception to the just-cause requirement: the just-cause requirement does not apply to workplaces with fewer than 5 employees.
Mutual termination refers to termination of employment upon the employer and employee’s mutual agreement. Mutual terminations can further be narrowed down to, among others, cases where:
- Employees voluntarily resign upon submission of a letter of resignation.
- Employees accept the employer’s suggestion to resign, in which case the employment relationship is terminated upon the parties’ execution of a separation agreement.
#It is prohibited to dismiss
In principle, an employer must: adhere to the disciplinary procedures (if any) outlined in its policies or regulations; and provide a written notice of termination (either served in advance or with immediate effect pursuant to an appropriate payment in lieu thereof). If the employer does not follow the prescribed procedure, the termination would be held invalid for procedural error. Please note that these consequences of an invalid termination are the same for layoffs.
When an employer intends to dismiss a worker (including dismissal for managerial reason), he or she shall give the worker a notice of dismissal at least 30 days in advance of such dismissal, and, if the employer fails to give such advance notice, he or she shall pay that worker ordinary wages for not less than 30 days. That this shall not apply where a natural disaster, calamity or other unavoidable circumstances prevent the continuance of the business or where the worker has caused a considerable hindrance to the business or inflicted any damage to the property on purpose and it falls under any cause determined by Ordinance of the Ministry of Employment and Labor.
Employers must also make a statutory severance payment to any employee with at least one year’s service, equating broadly to 30 days’ pay for each year of employment. This must be paid regardless of the reason for termination and whether it was voluntary or for cause. Maintenance of a qualifying severance pension plan with respect to an employee can satisfy the obligation to pay severance.
#Employee Benefits and Contributions
Mandatory benefits required by law to be provided by an employer
Foreign worker, like native Korean workers, should be covered by the four social insurances (health insurance, national pension, employment insurance & industrial accident compensation insurance). However, according to the principle of reciprocity, foreign workers are excluded from the coverage of Korea’s national pension system if their home country’s law does not allow Korean nationals to be covered by its national pension scheme. And employment insurance is taken out on a voluntary basis.
Non-mandatory benefits that are offered by an employer
- Cafeteria meal or Meal allowance
- Festival gift
- Child education support
- Housing loan interest subsidy
- Resort support
- Long service award
- Transportation allowance (for Sales office and Seoul design center)
- Physical leisure activity subsidy (for Sales office and Seoul design center).
The Labour law do not limit the duration of a probationary period. However, most Korean companies set a probationary period of between three and six months. The courts allow dismissal of an employee during or upon expiration of the probationary period more broadly than dismissal of regular employees, but courts require that there should be an objectively reasonable cause for dismissal.
Overtime refers to the work done in excess of the statutory standard working hours, and up to 12 hours a week of overtime is allowed where there is an agreement to that effect between the employer and employee. However, the maximum hours of overtime work can be extended to 16 hours per week for the first three years from the implementation date of the 40-hour working week, which is scheduled to come into effect in different stages depending on the size of business or workplace. For overtime work, additional wages of no less than 50 per cent of the ordinary wages shall be paid. In case the maximum hours of overtime work is extended to 16 hours per week, the employer may pay additional wages at no less than 25 per cent of ordinary wages for the first four hours of the overtime work.
The Labor Standarts Act (LSA), in principle, limits the working hours to eight hours a day and 40 hours per week. However, a flexible working hours system is allowed whereby in a certain day or week, working hours may exceed the statutory standard working hours as long as the average working hours for one day or one week for the calculation period of less than two weeks or three months, respectively, does not exceed the statutory standard working hours. A selective working hours system is also allowed whereby in a certain day or week, working hours may exceed the statutory standard working hours as long as the average working hours for one day or one week for the calculation period of less than one month is not exceeded. However, even under the flexible working hours system, the total working hours cannot exceed 52 hours in a given week and 12 hours in a given day.
An employee who works a full year is entitled to 15 days of annual paid leave. This entitlement can rise up to a maximum of 25 days according to length of service. Eligible employees are only entitled to minimum statutory annual leave if they have at least 80% attendance during the previous year, while employees who do not meet the overall yearly requirement of 80% attendance in the previous year must be afforded at least one day of paid annual leave for each full month of attendance
Employees are not legally entitled to time off in relation to non-work related illnesses or injuries. However, it is not an uncommon practice for employers to allow this. Practices vary widely but generally several months of unpaid leave and/or up to several weeks of paid leave is not uncommon, if the illness or injury requires it. Employers are required under the LSA to provide partially paid leave for work-related illnesses or injuries and to pay for treatment and additional compensation for any lasting disability (though workers compensation will often fully or partially relieve the employer of these obligations).
Pregnant employees are entitled to 90 days’ paid maternity leave which can be used before and after childbirth, provided at least 45 days must be used after the birth. Additional paid leave is available in the event of multiple births. The employer must pay for the first 60 days while the remainder is paid – subject to certain conditions and a cap – by the government. Unpaid childcare leave and reduced hours for childcare purposes are also available in certain circumstances. Employees are also entitled to up to three days’ leave for fertility treatment (of which only the first day must be paid).
Fathers are entitled to three days’ paid paternity leave and two additional days of unpaid leave, which can be taken at the employer’s discretion within 30 days of the child’s birth.