Using an Employer of Record in South Korea

Hiring and paying employees in South Korea can be complex due to the need to comply with evolving local labor and employment laws. Employers must manage South Korea payroll, taxes, employment agreements, and statutory benefits correctly to remain compliant.

Using an Employer of Record in South Korea helps simplify this process. An EOR Payoneer Workforce Management enables businesses to seamlessly build, manage, and pay global teams.

Find out more about Payoneer Workforce Management, or keep reading to discover how to use an EOR in South Korea.

How to hire employees in South Korea

To engage employees in South Korea, companies have three options: setting up a local entity, hiring contractors, or working with an Employer of Record in South Korea. 

1. Establishing a local entity: This gives companies total operational control but involves significant set-up costs and ongoing obligations. It also means you’ll have to manage payroll, taxes, and benefits locally.
2. Hiring contractors: Best suited to short-term or project-based work, this option offers flexibility. However, South Korea’s labor laws do not clearly define contractors versus employees, and misclassification can result in penalties.
3. Working with an Employer of Record: This allows businesses to legally engage talent in South Korea without setting up a local entity. The EOR assists with managing payroll, taxes, benefits, and labor law requirements.

Payoneer Workforce Management acts as an Employer of Record in South Korea. We assist you in setting up onboarding, payroll, and localized benefits in accordance with local laws and requirements.

How to onboard employees in South Korea

When engaging employees in South Korea, it’s essential to provide them good experience and a smooth integration.

The employee onboarding process generally includes:

• Payroll enrollment and mandatory benefits setup: Register employees in the local payroll system and complete all statutory benefits requirements in line with regional labor regulations.
• Equipment provisioning and workspace preparation: Supply the necessary devices, tools, and access so employees can begin work smoothly from day one.
• First‑week orientation: Host an introductory session during the employee’s first week to explain company procedures, onboarding timelines, and expectations for their role.
• Introductions to team and wider organization: Arrange meetings that help the employee connect with their immediate team and engage with colleagues across different departments.

Payoneer Workforce Management enables companies to compliantly engage talent across borders through its technology platform.

Pay employees in South Korea

Employers need to understand the basics of managing South Korean payroll. Employees in South Korea are paid in Korean won (KRW) on the last day of every month. 

The minimum wage in South Korea has been set at KRW 9,860 per hour.

Income tax 

South Korea uses a progressive income tax system. Employee income tax rates range from 6% to 45%, depending on earnings.

Employer social security contributions

Employers are responsible for several mandatory social security contributions. These cover pensions, healthcare, unemployment, and workplace injuries.

Employee benefits

Employees in South Korea are enrolled in public health insurance through the National Health Insurance system. Coverage includes hospital care, outpatient treatment, and preventive services, with co-payments varying by income and service type.

Private health insurance is optional. Employers may offer supplemental plans that cover employees and their dependents, with premiums charged separately.

An EOR like Payoneer Workforce Management offers a streamlined way to pay employees in South Korea. Our unified, all-in-one platform gives you a single dashboard to manage your entire global workforce and enables you to pay contractors and employees in just a few clicks.

Employment laws in South Korea

Anyone engaging talent in South Korea must comply with all local laws and regulations governing working hours, overtime, probation, and termination notice.

Working hours and overtime

The standard working week is 40 hours. Employees may agree to work up to 12 hours of overtime per week. 

Overtime must be compensated at a minimum of 150% of the employee’s ordinary wage.

Probation periods

The Labor Standards Act of Korea does not have an explicit regulation on probation periods.

The law states that notice of termination is not required for “employees under a probationary period (of 3 months or less).” This implies that while a probation period may be longer than 3 months, the employee will usually gain the rights of a regular employee after 3 months.

Notice periods

During probation of 3 months or less, notice is not required by law. However, the employer may provide as per company policy.

After probation, the statutory notice period is 30 days.

Severance pay

Employees with at least 1 year of continuous service are entitled to statutory severance pay. 

Severance is calculated as 30 days of average wages for each year worked and must be paid within 14 days of termination. Severance pay applies to resignations and dismissals.

Companies can get support to stay compliant with local labor laws by using Payoneer Workforce Management’s infrastructure. 

Minimum wage in South Korea

The minimum wage in South Korea has been set at KRW 9.860 per hour. 

Employees may agree to 12 hours of overtime per week, which must be paid at an additional 50% of ordinary wages.

Employment contracts in South Korea

Employment contracts in South Korea should generally include:

• Names of both the employer and employee
• Place of work
• Job title and role, plus a description of tasks
• Start date
• Contract duration, probation period, and notice periods
• Salary and remuneration
• Work schedule, including work hours and overtime compensation

Details will vary depending on factors such as industry, location, and contract type, so it’s important to always check the specific guidance that applies to you. 

With Payoneer Workforce Management, you can onboard talent quickly and securely with localized contracts and payroll.

Leave policy in South Korea

Employers in South Korea must provide several types of statutory leave, including vacation leave, public holidays, and family-related leave.

Public holidays and vacation time

South Korea observes 12 public holidays each year, with additional holidays occasionally announced by the government.

Employees who work more than 80% of scheduled working days in a year are entitled to 15 days of paid vacation leave. 

Employees with more than 3 years of continuous service receive 1 additional day of leave for every 2 years of service beyond the first year, up to a maximum of 25 days total.

Unused leave can be carried forward or encashed.

Sick leave

There is no statutory paid sick leave. However, employees undergoing medical treatment must be compensated at 60% of their average wage during the treatment period.

Parental leave

Maternity leave lasts for 90 days, increasing to 120 days for multiple or complicated births. Leave is typically split evenly before and after the due date.

Paternity leave is 10 days. The employer pays the first 5 days, while the remaining 5 days are covered by social security or government programs.

Parents of children under 8 years old may request up to 1 year of childcare leave, either full-time or part-time. Requests must be submitted at least 30 days in advance, and allowances are paid through social security or government schemes.

Other leave

Employees in South Korea may also be entitled to the following forms of leave, including:

Work permit in South Korea

Work permit rules in South Korea vary depending on the employee’s country of origin and the type of work being performed. Employers and employees should consult official government resources for the most accurate and up-to-date information.

Background check in South Korea

In South Korea, background checks may be carried out before engaging an employee. These typically include things like criminal checks, employment and education history, and social media checks. Before performing any checks, you’ll likely need the employee’s consent and to disclose what you’re checking. Always check local regulations before conducting any background checks.

Employment termination in South Korea

In South Korea, termination must be based on valid grounds. Termination without just cause may be considered unfair dismissal and can lead to legal ramifications for the employer. 

Valid termination scenarios

Employment termination may end due to:

• Employee resignation
• Mutual agreement between the employee and the employer
• Termination during probation
• Termination by the employer due to misconduct, performance issues, absence without leave, etc.

Notice period

During the first 3 months of employment, notice is not legally required.

After probation, employers must provide 30 days’ notice.

Severance pay

Employees with at least 1 year of continuous service are entitled to severance pay. Severance is calculated as 30 days of average wages per year of service.

Average wages include base salary and regular allowances but exclude one-time bonuses. Periods such as personal leave or military service do not count toward service length.

Severance must be paid within 14 days of the termination date.

Company registration in South Korea

Companies looking to engage and pay employees in South Korea may choose to register their business in the country. Details on registration requirements and processes are available through government resources. 

For many businesses, using an EOR in South Korea is a faster, streamlined option. Payoneer Workforce Management enables compliant onboarding and talent engagement across 160+ countries without setting up a legal entity.

PEO in South Korea

A Professional Employer Organization (PEO) in South Korea can support HR and payroll functions, but requires you to have a legal entity in-country. 

On the other hand, an Employer of Record in South Korea does not require a legal entity and instead acts as the legal employer for the local team. This often makes it the better choice for companies new to the South Korean market.

Payoneer Workforce Management’s Employer of Record services in South Korea

Payoneer Workforce Management helps growing companies onboard, pay, and manage employees in South Korea without setting up a local entity. 

As your EOR in South Korea, we offer assistance with employment contracts, benefits administration, taxes, and payroll.

Book a demo to learn more about Payoneer Workforce Management.

FAQs

1) What is an Employer of Record in South Korea?

An Employer of Record in South Korea is a third-party organization that legally employs workers on your behalf and manages payroll, taxes, and employment contracts, so you can engage talent without a local entity.

2) Does an EOR help with South Korean tax filings?

An EOR in South Korea may support or offer guidance with processing employee pay, handling required deductions, and submitting taxes and social contributions in accordance with South Korea payroll regulations.

3) Why hire South Korean talent with an EOR?

An Employer of Record, like Payoneer Workforce Management, allows you to onboard and pay independent contractors and employees across the globe in 70+ currencies. Get in touch for more details.