Employment laws in South Korea

Three key principles guide employment laws in South Korea. These are included under the Labor Standards Act (LSA), the Trade Union and Labor Relations Adjustment Act, and the Equal Employment Opportunity and Work-Family Balance Assistance Act. 

You can use these principles to develop a compliance policy governing salaries, working time, holiday entitlements, and other employee rights in South Korea. Moreover, termination in South Korea is governed by statutory limitations for employers. 

In this guide, you will find more details about the labor law compliance in South Korea and the support Payoneer Workforce Management provides to employers.

Key employment laws in South Korea

Several laws govern employees’ rights in South Korea, among them are:

1. Labor Standards Act (LSA): The law covers aspects such as labor hours, minimum wages, leave pay, termination of employment, and health at work. All the laws mentioned above have application in enterprises with five or more workers.
2. Minimum Wage Act: This Act states the legal wage rate, which is updated each year by the Minimum Wage Council in the Ministry of Employment and Labor (MOEL).
3. Trade Union and Labor Relations Adjustment Act: The Act concerns itself with trade unions, collective bargaining, industrial disputes, and the settling of such disputes.
4. Equal Employment Opportunity and Work-Family Balance Assistance Act: Gender discrimination concerning employment and promotions is prohibited by the Act; issues relating to paternity and maternity leave are included in it.
5. Act on the Guarantee of Employees’ Retirement Benefits: Severance pay and pension for retirement are governed by the Act.
6. Industrial Accident Compensation Insurance Act: Issues relating to wage replacement and medical treatment due to occupational injuries and diseases are governed by the Act.

Moreover, the employment laws in Singapore may also be compared with those in this region.

Contract employment laws in South Korea

Employment contracts in South Korea must be in writing. It can be in English or Korean, but the LSA requires that the employee clearly understand the employment terms in the contract.

Before drafting one, you need to pick the right contract type for the role.

Types of employment contracts

• Contract without a definite term: It is a standard type of contract. The employee is permanent and has all the statutory rights.
• Contract with a definite term: It cannot exceed a predetermined period. Any employment past that term automatically makes the employee permanent.

Essential contract terms

An employment contract in South Korea should include at least:

• Job title, scope of job, and responsibilities
• Working place and dates (end date for a definite term)
• Remuneration terms, payment period, and currency (in Korean won)
• Working hours, rest times, and overtime working terms
• Leave entitlements
• Probation period (if any) and notice period
• Termination conditions and process
• Confidentiality, non-disclosure, and dispute resolution clauses

Minimum wage in South Korea

The national minimum wage rate is KRW 9,860 per hour, determined by the Minimum Wage Council and announced by the Ministry of Employment and Labor (MOEL). This typically applies uniformly across all areas and sectors, but employers must check government sources for recent numbers.

Working hours in South Korea

The workweek is 40 hours, consisting of eight hours per day without rest periods. In addition, overtime regulations in South Korea allow for 12 extra hours per week through negotiation. Hence, the maximum number of working hours in South Korea stands at 52 hours per week. 

In addition, overtime rates are fixed at 150 percent on working hours above the 40-hour work week.

For any night work between 10 PM and 6 AM or work on public holidays, employees must be paid 200% of their regular wages.

Mandatory benefits

Apart from remuneration and work hours, mandatory benefits under employment laws in South Korea must be extended to employees. These are not optional incentives but obligatory requirements subject to penalties in cases of violation.

• Insurance schemes: South Korea’s National Health Insurance (NHI) system covers nearly all residents and is funded through a combination of employer–employee contributions and government subsidies. 
  
  It provides access to affordable healthcare services, including hospital care, outpatient treatment, and preventive services, with co-payments that vary based on income level and type of service. Both the employee and employer contribute equally, each paying 3.545% of the employee’s gross income.
• Annual leave with pay: The employees who have worked more than 80% of the working days of the previous year get 15 days leave annually. For every two years after three years of employment, they get an extra day up to a maximum of 25 days.
• Public holidays: There are 12 public holidays, which are paid days off in South Korea.
• Maternity leave: The employees can take 90 days of paid maternity leave (120 days in case of multiple or complex births). In addition, paternity leave is granted for ten days.

Termination

Termination laws in South Korea are among Asia’s most protective. The labor laws prohibit an employer from dismissing a worker without just cause. 

Valid grounds for termination

• Dismissal is typically permitted in these scenarios
• Voluntary resignation by the employee
• Mutual agreement between the employer and the employee
• Termination during probation (relaxed just-cause threshold, still not at-will)
• Dismissal for serious misconduct, repeated performance issues after a Performance Improvement Plan (PIP), or prolonged unauthorized absence
• Redundancy for urgent managerial reasons, and subject to strict procedural requirements

Probation period in South Korea

The labor laws in South Korea prescribe no fixed probation framework. 

The Labor Act states that no notice of termination is required during the first three months of employment, including any probation period. This implies that while probation may extend beyond three months, employees generally begin to receive the protections of regular employees after this initial period. 

Notice period in South Korea

You must give 30 days of advance notice for any employee with three or more months of service. Such notice must be in writing and state the reasons for dismissal. 

Restrictions on dismissal

The employment laws in South Korea typically protect certain employees during special periods as follows:

• Pregnant employees or those who are on maternity leave, together with 30 days after resuming work
• Employees who are taking childcare leave
• Employees who sustained an injury while working, together with 30 days after recovery
• Employees who have complained about labor practices or workplace discrimination

Severance pay

Severance pay in South Korea is mandated for all employees who have worked continuously for at least a year, either by resignation or termination of employment.

One month’s average pay per year must be made as severance, based on the salary for the previous three months, inclusive of regular allowances but excluding lump sums. 

Also, severance must be settled within 14 days after the final day of work, unless the employer and employee reach an agreement on another date.

Navigate employment laws in South Korea with trusted support

The labor law compliance in South Korea leaves little margin for casual interpretation. Three things need attention from day one: just-cause rules for termination, tight severance deadlines, and the four social insurance programs. This is especially tricky for companies without a Korean entity.

That’s where Payoneer Workforce Management can support by offering an Employer of Record (EOR) in Korea, handling locally compliant contracts, payroll, social insurance filings, and severance accruals. 

For contractors, Agent of Record (AOR) and contractor management services offer support and guidance on misclassification risks. 

Book a demo today.

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