Payroll & Employment Guide South Korea

In South Korea, employment contracts must be in writing and clearly outline the terms of employment, including wages, working hours, holidays, and termination conditions. Contracts can be fixed-term or indefinite.

Notice periods: Typically 30 days

Termination of employment: Must be justifiable and documented. Severance pay applies to employees who have worked for at least one year.

Employers in South Korea are legally required to offer several core benefits. Many companies also provide additional perks to remain competitive in the market.

Mandatory benefits: National pension scheme, national health insurance, employment insurance, industrial accident compensation insurance, severance pay, etc.

Common perks: Meal allowances, transportation allowances, performance bonuses, health and wellness programs, flexible working hours, professional development, and company events.

Leave policies: Annual leave, maternity leave, paternity leave, parental leave, sick leave, and family care leave.

South Korea has progressive marginal tax rates on individual income, meaning the tax rate increases as taxable income rises. The employer is responsible for calculating and withholding income tax from employees’ wages each pay period.

Individuals are classified as residents if they have a domicile in Korea or maintain a place of abode in Korea for 183 days or more during a tax year. Residency is determined based on the overall facts and circumstances, including duration and continuity of stay, rather than a mechanical “continuous across two tax years” test.

Personal income tax:

• Up to KRW 14M: 6%
• KRW 14M – 50M: 15%
• KRW 50M – 88M: 24%
• KRW 88M – 150M: 35%
• KRW 150M – 300M: 38%
• KRW 300M – 500M: 40%
• KRW 500M – 1B: 42%
• Over KRW 1B: 45%

Withholding and contributions: Here are the withholding rates in South Korea:

• Dividends: 14% for residents; 20% for non-residents
• Interest: 14% for residents; 20% for non-residents
• Capital gains: For non-residents selling Korean shares, buyers withhold the lower of 11% of the sale price or 22% of the gain.

Tax allowances and non-taxable benefits:

• Relocation expenses paid by the employer are non-taxable
• Korean-language courses, if required for work
• Health insurance which the employer pays to the National Health Insurance

Deductions and tax reliefs: Pension contributions are capped at KRW 6.37M (max ~KRW 302,570/month). Housing savings (for eligible foreigners) allow a 40% deduction up to KRW 3M yearly. Meal and childcare allowances are tax-free up to KRW 200,000/month each.

Salaries must be paid at least once per month, on a fixed payday agreed in the contract. Employers must retain detailed payroll records and ensure timely payment of taxes and contributions.

Salary payment deadline: Monthly, on a predetermined payday

Taxes and contributions payment deadline: By the 10th of the following month

Payroll declarations deadline: Minimum 3 years

Payroll currency: South Korean Won (₩)

South Korea’s labour laws are defined by the Labour Standards Act and related legislation. These govern employment conditions, working hours, probation, severance, and workplace rights.

Total employment cost:

• Employer’s social security contributions: In South Korea, employers must contribute to four main social security schemes: the National Pension, National Health Insurance, Employment Insurance, and Industrial Accident Insurance.
  
• Employer’s health insurance costs: The cost is typically split between the employer and the employee, with each contributing approximately 3.495% of the employee’s salary. However, this rate may vary slightly depending on annual adjustments.
  
• Employees’ social security contributions: Employees in South Korea contribute to the same social security schemes as employers.
  
• Employee’s health insurance costs: The cost is usually split equally, with each party contributing around 3.495%, though rates may vary slightly each year.

Minimum wage: ₩10,030/hour

Probation period: 3-6 months

Using EOR services in South Korea allows you to legally employ individuals in the country without opening legal entities there. The EOR takes over all the legal responsibilities as an official employer, including:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees
  

Using PEO services in South Korea provides HR and administrative support, while you remain the legal employer. PEO services are ideal for employers who already have legal entities in South Korea but need support to manage their workforce operations, including:

• HR support and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance
  

Native Teams provides a payroll calculator adjusted per South Korea’s labour laws. Estimate gross-to-net salaries, tax withholdings, and employer costs in South Korea with our localised calculator. Designed to meet all payroll and compliance requirements.