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Employment in South Korea

South Korean employment law appears complex and confusing when looking from outside view although in some ways there are many similarities to other countries. Other factors that complicate matters include the differences in rules depending on the type of business structure and number of employees.   For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in South Korea.

Key points on employment in South Korea

There are several key areas to be aware of within South Korea’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department.  These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

  1. Contracts

    South Korea requires that employees have employment contracts that meet the requirements of the Fair Labor Standards Act.  http://www.moel.go.kr/english/poli/poliLaw.jsp?tab=6

  2. Probation Periods

    According to legal information site Korean Labour Law, the Labor Standards Act of Korea does not have an explicit regulation on probation periods. However, the law does state that notice of termination is not required for “Employees under probationary period (of 3 months or less)”.  This infers that while a probation period may be longer than 3 months, usually the employee will gain the rights of a regular employee after 3 months.

  3. Termination Procedures

    A.  Notice Period

    The employer must notify the employee in writing. According to HR consultancy Compandben, 30 days’ advance notice of dismissal or 30 days’ pay in lieu of notice is required from the employer. Advance notice is not required from the employee if leaving the company.

    Additionally, Reuters’ Practical Law guide reported that notice may not be required if:

    • It is impossible to maintain the business due to a natural disaster or other unavoidable reason.
    • The employee commits any intentional wrongful act or omission that has a serious adverse effect on the company’s business or operations.
    • The employee is serving a probationary period of three months or less.
    • The employee is paid monthly and has worked for less than six consecutive months.
    • Other similar situations apply.

    B.  Procedure

    The employer must have just cause to dismiss an employee. According to Reuters’ Practical Law guide, it is a difficult standard to meet. Courts would consider the overall circumstances including the severity and frequency of any alleged misconduct or poor performance. Generally, a single instance of negligence or incompetence is unlikely to be enough to count as just cause, while gross and repetitive misconduct will constitute just cause.

    C.  Severance Pay

    As reported by Reuters’ Practical Law guide, a severance payment is required for each employee who has worked for at least one year, at the equivalent of 30 days’ average wages for each year of continuous employment. Average wages are calculated by using wages for the three months preceding termination.

    Severance payments apply to voluntary retirement as well as termination for cause.

  4. Statutory Leave

    A.  Annual Leave

    As reported on the InvestKorea website: employees who have at least an 80% attendance record at work are entitled to 15 days of paid holiday each year. For workers, who have worked for three or more years, one extra day of paid leave shall be provided for every 2 years of consecutive work after the initial year, up to a total of 25 days.

    If days of leave expire, as the worker does not take the leaves despite the employer’s encouragement, the employer is not obligated to compensate for the unused leave.

    B.  Maternity Leave

    Pregnant workers shall be given a 90-day protective leave before and after childbirth, with 45 days or more to be allocated after childbirth. Wages for the first 60 days of the leave period must be paid by employer, and the wages of the remaining 30 days are covered by employment insurance.

    Additionally, Reuters’ Practical Law guide states that women with infants under the age of one are entitled to at least 30 minutes of nursing time twice a day, and female employees are also entitled to one day of unpaid leave per month as menstruation leave.

    C.  Paternity Leave

    As reported by Reuters’ Practical Law guide, an employer must grant at least five days of paternity leave at the employee’s request. At least three days of the leave must be paid. Paternity leave requests must be made within 30 days of childbirth.

    D.  Sick Leave

    As reported by Reuters’ Practical Law guide, employees are not entitled to time off in relation to non-work-related illness or injuries. However, it is still a common practice to provide time off in relation to non-work related illness and injury.

    If the sickness or injury is work-related, the employer is obligated to provide time off. The industrial accident compensation insurance covers all payments associated with work related illness or injury.

  5. Pensions and Benefits

    A.  Employment Insurance

    Businesses and workplaces with one or more regular workers are obligated to subscribe to employment insurance.

    The employee and employer both evenly contribute 0.65% of the total wage. Sometimes there is an additional contribution by employer called “occupational ability development” which can range from 0.25 – 0.85% depending on the size of the company.

    B.   Accident Insurance

    Companies will be required by law to have some form of accident compensation insurance to cover any employees. Average monthly wages determine the relevant insurance premiums. Businesses and workplaces with one or more regular workers are obligated to subscribe to industrial accident compensation insurance.

    The employer contributed from 0.6 – 0.34% of the total salary, depending on the type of business.

    C.  National Pension

    Korea has a mandatory state pension service which is contributed to by both employer and employee. The national pension scheme is run by the National Pension Service (NPS). All Koreans and foreigners aged between 18 to 59 who live and work in South Korea must contribute to the national pension scheme. A company only needs to start contributing when it has 5 or more employees (otherwise, employees must individually manage their own contributions).

    The employee and employer both equally contributed 4.5% of the standard monthly wage.

    D.   Health Insurance

    Employer contribution 2.995% of standard monthly wage

    Employee contribution – 2.995% of standard monthly wage

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in South Korea. For companies which intend to employ their staff directly through their incorporated South Korea entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in South Korea.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into South Korea.

The Shield GEO solution is an attractive alternative where:

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in South Korea

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in South Korea

– the company needs help with tax, employment, immigration and payroll compliance in South Korea

Shield GEO can contract directly with the company to employ and payroll their staff in South Korea. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits.  Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.

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