Key Takeaways for Hiring in South Korea
- Employees earn statutory annual leave based on tenure and attendance, with unused leave generally expiring if not properly managed by the employer
- Severance pay is mandatory for employees with at least one year of continuous service, including in resignations and mutual terminations
- Final wages and severance must be paid within 14 days of termination unless a written extension is agreed
- Employment visas are employer-specific, and terminations involving foreign nationals require prompt immigration reporting and compliance actions
Continent
Asia
Capital
Seoul
Currency
South Korean Won (KRW)
Language
Korean
Payroll Cycle
Monthly
Pay Date
25th of the month
VAT
10%
South Korea Employment Contract Overview
What Do You Need To Include In A Korea Employment Contract?
To remain compliant in South Korea, employment contracts must clearly document specific legal and employment terms. These are the required inclusions.
Employee Information
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Full name
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ID number
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Address
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Role / Job title
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Start date
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Contract duration
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Working hours
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Probation and notice conditions
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Termination provisions
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Compensation details
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End date (if applicable)
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Leave entitlements
Payroll
Average employer cost
16.34% to 34.84%
| Category | Details |
|---|---|
| 13th Salary | Not mandatory; subject to employer discretion |
| Avg employer tax | 16.34% – 34.84% |
Tax Breakdown
Personal Income Tax (PIT)
| Category | Rate / Details |
|---|---|
| 0 – KRW 12,000,000 | 6% |
| KRW 12,000,001 – KRW 46,000,000 | 15% |
| KRW 46,000,001 – KRW 88,000,000 | 24% |
| KRW 88,000,001 – KRW 150,000,000 | 35% |
| KRW 150,000,001 – KRW 300,000,000 | 38% |
| KRW 300,000,001 – KRW 500,000,000 | 40% |
| KRW 500,000,001 – KRW 1,000,000,000 | 42% |
| Above KRW 1,000,000,000 | 45% |
Corporate Income Tax (CIT)
Taxable Income (KRW)
| Category | Rate / Details |
|---|---|
| 0 – 200 million | 9% |
| 200 million – 20 billion | 19% |
| 20 billion – 300 billion | 21% |
| Above 300 billion | 24% |
Social Security Contributions
Employer Contributions
| Category | Rate / Details |
|---|---|
| National Pension Fund | 4.5% |
| National Health Insurance | 3.545% |
| Long-Term Care Contribution | 6.405% |
| Employment Insurance | 1.05%–1.65% (based on number of employees) |
| Industrial Accident Compensation Insurance | 0.76%–18.5% (industry-dependent) |
Employee Contributions
| Category | Rate / Details |
|---|---|
| National Pension Fund | 4.5% |
| National Health Insurance | 3.545% |
| Long-Term Care Contribution | 6.405% |
| Employment Insurance | 0.9% |
VAT
| Category | Rate / Details |
|---|---|
| VAT | 10% |
Mandatory Employee Benefits in South korea
Employment of expats is supported in South Korea, depending on individual assessment and feasibility.
| Benefits | Provider | Funded Through | Notes |
|---|---|---|---|
| Health Insurance | Government | Payroll Contributions | It includes Long-Term Care Insurance and applies to most residents and long-term expatriates, with employers required to register employees from their very first day of work. |
| Pension/Social Security | Government | Payroll Contributions | Mandatory for employees aged 18–59. Foreigners may be exempt via social security treaties |
| Other Statutory Benefits | Government | Payroll Contributions | Employment Insurance provides coverage for unemployment benefits, parental leave pay, and training subsidies, and applies to all employees on a mandatory basis. Workers’ Compensation covers work-related injuries, illnesses, and death, and employers fund it in full. |
Leave And Holiday Entitlement In South Korea
Annual Leave
Employees with less than one year of service, or with attendance below 80 percent, accrue one paid leave day for each month worked. Employees with one to three years of service are entitled to 15 days of paid annual leave. After three years, employees receive one additional day of paid leave for every two additional years of service after the first year.
The maximum amount of paid annual leave an employee can take in a single year is capped at 25 days. Annual leave must generally be used within one year of being earned. If the employee does not use their leave within that period, it is forfeited unless the employer is responsible for the employee being unable to take it.
Employers must begin notifying employees about their annual leave usage starting on July 1 each year. Unused leave days may be paid out only if the employer fails to provide written notice of expiration at least three months in advance.
Public Holidays
The only government-mandated paid public holiday in South Korea is Labor Day, observed on May 1. Employers may choose to provide additional paid public holidays, but they are not legally required to do so.
Sick Leave
Employers are legally required to provide paid sick leave only when the illness or injury is work-related. For non-occupational illnesses, many employers voluntarily offer paid sick leave if the employee submits a valid medical certificate. In addition, female employees are entitled to one day of menstrual leave per month upon request.
Maternity Leave
Pregnant employees are entitled to 90 days of maternity leave. In cases of multiple pregnancies, maternity leave extends to 120 days, with at least 60 days required after childbirth.
Mothers must take 45 consecutive days of leave following childbirth. Of the standard 90 days of maternity leave, at least 60 days are paid by the employer, or 75 days in the case of twins, with the remaining period paid by the government.
Paternity Leave
Fathers are entitled to 10 days of paid paternity leave. Of these 10 days, five days are paid by the employer, while the remaining five days are paid through Employment Insurance.
Other Types of Leave
Employees with a child aged eight or younger, or in the second grade of elementary school or below, are eligible for up to one year of child care leave per qualifying instance.
They may also take an additional year of reduced working hours for the same child. Any unused child care leave may be converted into reduced working hours, and employees receive a wage-replacement subsidy during the leave period.
Military leave applies to mandatory service requirements. All men in South Korea must complete two years of active military service, followed by periodic training. Employers are prohibited from penalizing employees for absences related to military duties.
Employees are also entitled to three days of leave for fertility treatments. Only the first day is paid, and employers may not discipline employees for requesting or taking fertility treatment leave.
Termination and Offboarding in South Korea
Offboarding in South Korea follows defined legal standards. Employers and employees must meet notice obligations, follow fair procedures, and ensure all final entitlements are settled correctly.
| Type | Possible? |
|---|---|
| Termination for Cause (poor performance, misconduct, etc.) | Yes |
| Termination without Cause | No. Korean labor law prohibits employers from dismissing, laying off, suspending, transferring, reducing pay, or imposing any other disciplinary actions on employees without valid justification. |
| Mutual Termination Agreement (MTA) | Yes |
| Redundancy | Not possible under the EOR setup |
South Korea Employee Resignation
Notice
Form
The law does not require a specific form for resignation notice. However, it is common to submit a written resignation letter or notice to the employer to have a clear record.
Notice period
There is no statutory notice period for employees resigning under the Korean Labor Standards Act (LSA). Employees can resign without prior notice, but it is customary to provide at least 30 days’ notice to allow the employer time to adjust.
Payment in lieu of notice or notice waiver
Not applicable.
End-of-Service Benefits
Severance/Gratuity
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Under Article 34 of the Labor Standards Act, employees who have worked continuously for one year or more are entitled to severance pay (called “퇴직금” or “retirement allowance”).
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Severance pay is generally calculated as one month’s average wage for each year of continuous service. If the employee resigns voluntarily after one year, they are entitled to receive severance pay.
Other Benefits
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Employees are entitled to accrued annual leave payment if they have unused annual leave at the time of resignation, unless otherwise agreed.
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Employees should receive all unpaid wages, including any overtime or bonuses due at the time of final payment.
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Social insurance benefits (National Pension, Health Insurance, Employment Insurance, etc.) will be handled as per the standard procedures for termination.
Termination Documentation
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Employers usually provide a certificate of employment or proof of employment period upon request by the employee.
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Employers must provide a final wage statement including details of severance pay, final wages, unused leave payment, and other settlements.
Employer Termination With Cause in South Korea
Acceptable grounds
Valid reasons for termination include inadequate skills, persistent poor performance, serious illness, violation of the employment contract, gross misconduct at work, falsifying educational or work history, inappropriate relationships with colleagues, or committing a criminal offense.
Notice
Form
Employers are required to provide employees with either 30 days of written notice before dismissal or 30 days of pay in lieu of notice.
However, this notification rule does not apply in certain situations:
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Employees hired on a daily basis for less than three months
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Workers contracted for a fixed term of two months or less
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Employees on monthly contracts lasting under six months
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Seasonal workers hired for six months or less
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Probationary employees employed for under three months
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Employees who cause significant harm to the business or deliberately damage workplace property
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Situations where business continuation is impossible due to extraordinary events such as natural disasters, armed conflict, or bankruptcy
End-of-Service Benefits
Severance
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Employees who have worked continuously for one year or more are entitled to severance pay (퇴직금) even if terminated with cause, except in cases where the dismissal is due to severe misconduct that legally justifies forfeiture (which is rare and must be clearly substantiated).
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Severance pay is calculated as one month’s average wage per year of service.
Other Benefits
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Final wages, including accrued but unused annual leave, overtime pay, and bonuses, must be paid at the time of termination.
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Social insurance contributions will be handled according to standard procedures.
Termination Documentation
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Employers should provide the employee with a written notice of termination detailing the reason for dismissal.
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A final wage statement including severance pay and other dues must be issued.
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Upon request, the employer should provide an employment certificate or proof of employment period.
Employer Termination Without Cause in South Korea
This termination type isn’t possible under the Employer of Record setup in South Korea due to local labor law restrictions. For compliant termination options, see:
- Mutual Termination Agreements
- Employee Resignation
- Fixed-term Contract Expiry
If you need termination without cause, you’ll need to establish your own South Korea entity.
Mutual Termination Agreements in South Korea
Notice
Form
There is no legally required format, but the mutual agreement must be clearly documented in writing and signed by both employer and employee.
Notice period
There is no statutory notice period for mutual termination. The parties can agree to any date for the end of employment.
Waiver of notice
Not applicable.
End-of-Service Benefits
Severance
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If the employee has worked for at least one year continuously, they are legally entitled to severance pay (퇴직금), even in a mutual termination situation. This is mandated by Article 34 of the Labor Standards Act.
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Severance is calculated as one month’s average wage for each full year of continuous service.
Other Benefits
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Any unused annual paid leave must be compensated in cash
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All unpaid wages, bonuses, overtime pay, and other accrued benefits must be paid in full
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Social insurance (pension, health, and employment insurance) is terminated as of the resignation or termination date and must be reported accordingly
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Any additional compensation or incentives included in a mutual termination agreement must be clearly stated in the agreement
Termination Documentation
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A written termination agreement signed by both parties is strongly recommended and often required in practice.
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A final wage statement must be provided, detailing regular wages, severance pay, unused leave payment, and other settlements.
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Upon request, the employer must issue an employment certificate (재직증명서 or 경력증명서), stating employment period and duties.
Offboarding Process for the End of Fixed-term Contracts in South Korea
If the Fixed-Term Contract Ends Normally:
Notice
South Korea law generally does not require the employer to give advance notice when a fixed-term employment contract ends as scheduled, provided the fixed term or the lawful reason for temporality has been validly applied. However, if the employment contract or internal rules require notification of the contract’s expiration, the employer must follow those terms.
End-of-Service Benefits
Severance/Gratuity
- If the employee has worked continuously for one year or more, they are entitled to severance pay (“퇴직금”) even if the fixed‐term contract simply expires.
- The amount is generally one month’s average wage per year of service.
Other Benefits
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Payment for days worked up to the contract end
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Accrued unused annual leave and any applicable vacation premium
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Any legally required bonuses, including contractual or stipulated bonuses
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Social insurance and pension contributions up to the end date, including deregistration where required
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Certificate of employment or proof of employment period, upon request
If the Employer Terminates Early:
Notice
- The employer must give at least 30 days’ notice or payment in lieu under the Labor Standards Act for dismissals unless there is a serious cause.
- If the employee has worked less than 3 months, or if there is a very serious misconduct, notice may not be required.
End-of-Service Benefits
Severance/Gratuity
- If an employee had worked at least one year, they remain entitled to severance even if terminated early (unless cause for forfeiture is applicable, e.g. serious misconduct).
- The amount is generally one month’s average wage per year of service.
Other Benefits
- Unpaid wages up to termination date.
- Pro rata unused annual leave and vacation premium.
- Any contractually promised benefits, bonuses, allowances.
- Social insurance & pension up to termination, including filings / deregistration.
Final Payment Timing & Immigration and Visa Compliance in South Korea
Final Payment Deadline
Under Article 36 of the Labor Standards Act (근로기준법 제36조), the employer must pay all wages, severance pay, and any other outstanding payments within 14 days from the date of termination of employment.
The 14-day deadline may be extended if both the employer and employee agree on a different date, in writing. Without mutual agreement, delay is not permitted.
Penalty
Under Article 43 and Article 43-2:
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If the employer fails to pay on time, the employee may file a complaint with the Ministry of Employment and Labor (고용노동부)
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The employer is subject to default interest (연체이자) of 20% per annum on the unpaid amount, starting from the 15th day after termination
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The employer may also face criminal penalties of up to three years’ imprisonment or a fine of up to KRW 30 million, depending on the severity and recurrence
Visa and Immigration Compliance
Under the Immigration Control Act (출입국관리법) and its enforcement regulations, D-8, E-7, E-9, and other employment visas are tied to the specific employer named in the visa application.
When employment ends, the employer must promptly notify Immigration Services of the termination.
The foreign employee must also take action. They must report the change in employment status within 15 days through the HiKorea immigration portal or directly at an Immigration Office. If they wish to remain in South Korea, they must apply for a change of workplace or a change of status of stay.
For most E-7 and E-9 visa holders, immigration authorities allow a 30-day grace period after termination to secure new employment and update visa sponsorship. Failure to report changes or overstaying beyond the allowed period can lead to visa cancellation, fines, or deportation.
Under Article 31 of the Immigration Control Act, employers who hire foreign workers must report the following to immigration authorities:
- The employee’s termination or resignation
- Any changes to employment terms
- Any violations of visa conditions
Supporting Guides
Frequently Asked Questions
Severance pay is required even when someone resigns?
Yes. If an employee has worked continuously for at least one year, they’re entitled to severance pay (퇴직금) regardless of how employment ends—resignation, dismissal with cause, mutual agreement, or contract expiration. It’s calculated as one month’s average wage per year of service. This is mandatory under Article 34 of the Labor Standards Act.
Why does Workers’ Compensation range from 0.56% to 18.56%?
It varies by industry risk level. Low-risk industries like office work pay around 0.56%, while high-risk industries like construction or manufacturing pay significantly more, up to 18.56%. The exact rate depends on your industry classification and historical accident rates.
Can I terminate someone without cause in South Korea?
No. Korean labor law prohibits dismissing employees without valid justification. You must have either just cause (serious misconduct) or justified reason (poor performance, business restructuring, economic need). “At-will” termination doesn’t exist. All dismissals require documented justification and 30 days’ notice or payment in lieu.
What’s the flat tax option for foreign employees?
Foreign employees may opt for a flat 19% income tax rate (20.9% including the 10% local surtax), instead of progressive rates ranging from 6.6% to 49.5%. This simplifies taxation but eliminates eligibility for most deductions, allowances, and tax credits. It’s often beneficial for higher earners.
