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.

An individual is considered a tax resident in South Korea if they have a domicile (juso) in Korea, determined by the objective facts of their living relationships, such as family living with them and assets located in Korea, or if they have a place of residence (geoso) in Korea for 183 days or more.

Personal income tax:

• Up to 14,000,000: 6%
• 14,000,001 to 50,000,000: KRW 840,000 + 15% of the excess over 14 million
• 50,000,001 to 88,000,000: KRW 6,240,000 + 24% of the excess over 50 million
• 88,000,001 to 150,000,000: KRW 15,360,000 + 35% of the excess over 88 million
• 150,000,001 to 300,000,000: KRW 37,060,000 + 38% of the excess over 150 million
• 300,000,001 to 500,000,000: KRW 94,060,000 + 40% of the excess over 300 million
• 500,000,001 to 1,000,000,000: KRW 174,060,000 + 42% of the excess over 500 million
• Over 1,000,000,000: KRW 384,060,000 + 45% of the excess over 1 billion

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 10% of the sale price or 22% of the gain.

Tax allowances and non-taxable benefits:

• Meal allowance: Up to KRW 200,000 per month is tax-free if the employee is not also provided with meals by the employer.

• Self-driving allowance: Up to KRW 200,000 per month is tax-free for employees who use their own cars for business purposes and receive the allowance under company rules instead of reimbursement for actual travel costs.

• Business travel expense reimbursement: Business travel expenses reimbursed at actual cost under company rules are not taxable.

• Childbirth support payments: Fully tax-free if paid under company-wide rules within two years of the child's birth, with a maximum of two payments per child.

• Childcare allowance: Up to KRW 200,000 per month per child aged six or under is tax-free.

• Employee discount allowance: Discounts on the employer's or its affiliates' goods and services are tax-free up to the greater of 20% of the market price or KRW 2.4 million per year, provided the applicable conditions are met.

• Overseas work allowance: Monthly earnings for work performed abroad are tax-free up to KRW 1 million, increasing to KRW 5 million for eligible workers on overseas vessels and construction sites.

• Research allowance: Up to KRW 200,000 per month is tax-free for eligible teaching staff and researchers at qualifying research institutions and R&D centres.

• Employer social insurance contributions: The employer's share of social insurance contributions is not considered taxable employment income.

• Statutory childbirth and parental leave benefits: Benefits paid under the Employment Insurance Act are not taxable.

Deductions and tax reliefs:

• Pension savings tax credit: 12% (15% for gross salaries up to KRW 55 million) on eligible pension contributions, up to KRW 6 million annually or KRW 9 million including IRP contributions.

• Medical expense tax credit: 15% on eligible medical expenses exceeding 3% of gross salary, with higher rates for certain treatments.

• Education expense tax credit: 15% on qualifying education expenses for employees and their dependents.

• Donation tax credit: 15% on donations up to KRW 10 million and 30% on the excess, with separate rates for Hometown Love donations.

• Monthly rent tax credit: 15% (17% for gross salaries up to KRW 55 million) on eligible rent payments, up to KRW 10 million annually.

• Housing subscription savings deduction: 40% of eligible annual contributions, up to KRW 3 million.

• Housing rental loan deduction: 40% of eligible principal and interest repayments, up to KRW 4 million.

• Long-term mortgage interest deduction: Deduction of mortgage interest payments, ranging from KRW 6 million to KRW 20 million, depending on loan terms.

• Childbirth and adoption tax credit: KRW 300,000 for the first child, KRW 500,000 for the second and KRW 700,000 for the third or subsequent child.

• Marriage tax credit: KRW 500,000 per spouse, available once in a lifetime for marriages registered between 2024 and 31 December 2026.

• SME employment income tax reduction: Eligible employees receive a 90% tax reduction for five years if aged 15–34, or 70% for three years if aged 60 or older, disabled or returning from a career break, subject to an annual cap of KRW 2 million.

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.