Employer of Record in South-Korea

How an Employer of Record Works in South Korea

In South Korea, an Employer of Record (EOR) makes it easy for foreign companies to hire employees within the country without having to establish a local entity. The EOR becomes the legal employer in the country, handling everything from onboarding to ensuring compliance, and the employer focuses on day-to-day operations.

Rivermate provides EOR services in South Korea. Via a combination of network partners and the Rivermate platform, we make hiring in South Korea quick, easy, and compliant.

South Korean labor market: At a glance

The hiring market
Greatest hiring activity:	Seoul
Hiring timelines:	48 hours for local hires, 1–2 weeks in practice. Up to 3 months for foreign nationals.
In-demand sectors:	Electronics, cars, aviation, shipbuilding.
Sectors with skills shortages:	Semiconductors

The salary market
Employer tax contributions:	National Pension: 4.75% National Health Insurance: 3.595% Employment Insurance: 1.15–1.75% Accident Insurance: 0.7–18.6% Long-Term Care: 0.47% Severance: 8.33% (separate cost)
Minimum wage:	KRW 10,320 per hour / KRW 2,156,880 per month
Average gross annual salary:	KRW 56–58 million
Income tax brackets:	6%: Up to KRW 14,000,000 15%: KRW 14,000,001–50,000,000 24%: KRW 50,000,001–88,000,000 35%: KRW 88,000,001–150,000,000 38%: KRW 150,000,000–300,000,000 40%: KRW 300,000,001–500,000,000 42%: KRW 500,000,001–1,000,000,000 45%: Over KRW 1,000,000,000 A local income tax of 10% of the national tax owed is also added.

What it costs to hire an employee in South Korea

Hiring in South Korea can cost more than the upfront numbers suggest, so it’s worth knowing where the extra costs can add up.

Employer contributions

Contributions are national, and they’re identical for both locals and expats. They’re easy to calculate and based on the following figures:

• National Pension: 4.75%
• National Health Insurance: 3.595%
• Employment Insurance: 1.15–1.75%
• Long-Term Care: 0.47%
• Accident Insurance: 0.7–18.6%

This normally comes to about 10.7% to 12.5% of wages, but when you add in the severance pay of 8.33%, the total is closer to 19% to 21%.

The full amount paid depends on accident insurance. The employer is responsible for paying all of this, and the amount ranges from 0.70% to 18.60%, but this rate depends on the type of business and the nature of the role. The total employment cost comes in at closer to 29% when the top rate is paid. With severance pay added, it comes to 37–38%.

You don’t have to pay pension contributions for employees aged 60 and over, which saves 4.75%. Pension and health insurance also have monthly income ceilings.

Severance and notice

Severance pay, often called retirement pay, is paid out when employment comes to an end. For each full year of service, the employee is owed a month’s pay. It’s only owed to the employee after one year in the role. You always have to pay this, whatever the reason the employment ends, and it doesn’t only apply to dismissals. It should be considered a cost of any departure after a year.

Severance isn’t the same as notice. Notice is 30 days’ pay in lieu of notice, and it’s paid in addition, so make sure you don’t blur the two. You must pay final wages and severance within 14 days of the role ending.

Overtime

The standard week is 40 hours, and overtime is allowed up to 12 hours. The premium for overtime is 150% of normal pay. For night work, the premium is at least 50%, and holiday work has its own premium. Be aware that these can stack up, so working overtime at night will combine the two premiums.

Pay structure

Structuring pay can save taxes for the employee and make a job opening more appealing. Paying child support, meal, and car allowances is not mandatory, but most employers offer them. Each has a non-taxable limit of KRW 200,000 every month.

Employees often get a base pay with allowances on top, which lowers their taxable income. If one employee gets everything as base salary and the second gets the same amount but with a lower base salary and allowances, the second will pay less tax.

The employer spends the same amount in total, so this isn’t a way to save money. But it can make an offer more attractive if competing for candidates. It’s worth planning for this in advance, which is something an EOR can do.

Employer cost calculator

Use our employer cost calculator for an accurate idea of the total costs in South Korea.

What it’s really like to hire in South Korea

Market condition	What an employer needs to know
Speed of hiring	48 hours for local hires, up to 3 months for international employees.
Talent availability	Highly educated workforce
Benefits	Strong statutory system, private cover not usually expected. Allowances for meal, car, and child support are common.
Key employer challenge	Ending the job can be very difficult.

South Korea is an easy market to enter. It has a simple setup and no special requirements for hiring, and it’s also a developed country where many foreign companies operate.

The economy is dominated by a few large family-controlled groups called chaebol. These companies, like Samsung and Hyundai, control a lot of the economy. The most important industries include shipbuilding, electronics, cars, and aviation, but all major industries are present.

When hiring people in South Korea, relationships and personal networks are important. The workforce is also highly educated, so there’s a strong pool of candidates to recruit from.

It takes about 48 hours to hire a local employee through an EOR if everything’s in order, but you should plan for it to take up to a couple of weeks. Foreign hires take longer, mainly due to the work visa application and approval, so plan for about three months.

If foreign nationals have an F-4 or F-6 visa, they can be hired like locals. They don’t need a separate work permit or visa, and they receive the same benefits as local employees. The F-6 visa is for people married to Korean nationals. Because of the real impact on how long it can take to hire, find out about a candidate’s visa status early on in the process.

Country-specific problem that employers must know about

Ending a job is very difficult in South Korea, even if you have a good reason for doing so. This can be a big surprise.

You can’t dismiss someone without just cause, which means it must be a serious reason that relates to their professional conduct or business circumstances where no other option is possible. If you do need to dismiss an employee, you have to follow a strict legal procedure to make sure it’s lawful.

If you’re carrying out layoffs for business reasons, you’ll need to follow a formal process that involves informing the labor office and holding a hearing with the employee.

Rivermate experts had one experience where a client’s business was struggling and it wanted to lay off a senior employee who was in his sixties on a two-year contract. The client wanted to end it after a year, which would have meant going through a formal government process.

Rivermate advised a mutual termination with an offer to pay him for the rest of the contract, but he refused. An employee can insist on staying even when there’s no work, and staying until the end of the contract means they can claim unemployment benefits. In this case, the client had to keep him on.

Don’t assume you can end a job in South Korea just because business slows. Plan for how much it will cost at the end of a role when you make a hire, and get advice before starting a termination.

Key compliance issues employers must know about

Probation doesn’t necessarily make termination easier

Some employers assume that cancelling a contract during probation is easier, but you’ll still need a good reason backed by evidence. Probation isn’t a legal requirement. While three months is normal, there’s no legal maximum. The best thing to do is treat the hire as fully protected from the first day.

Employees can’t carry over their seniority to another role

You might want to move existing staff to a new employer and keep their seniority, including leave and benefits, but this isn’t an option in South Korea. Whenever an employee leaves, the old employer has to pay severance first, and the employee then starts again at zero seniority.

This issue could come up if you close a South Korean entity or move long-term contractors to employment contracts. An EOR has no legal relationship with the old business. Plan and budget for this before telling staff about a move, and make it clear that they cannot keep their seniority.

Labor dispatch

Labor dispatch is a regulated category under Korean law, and it’s triggered when an employee carries out their job under the supervision of the client company instead of the EOR. It requires government permission and is restricted to specific roles. Make sure you check the type of license your provider holds.

Part-time workers and holiday pay

Full-time work is up to 40 hours per week. Part-time work can start at any number of hours, but at 15 hours per week, employees will receive holiday pay. It’s important to make sure you include holiday pay in the monthly gross salary.

Social insurance

Employees must be enrolled in the four statutory insurances: Employment Insurance, National Pension, National Health Insurance, and Industrial Accident Compensation Insurance. Start enrollment when employment begins, and always as soon as possible. If enrollment is late, you’ll have to pay back payments, and penalties and interest may be added.

While an employee can technically start work before enrollment finishes, it’s not recommended. It’s always best to collect the required documents before work begins and enroll them as soon as they start.

How Rivermate can help you stay compliant when hiring in South Korea

When hiring in South Korea, our experts will help you avoid any compliance problems. We know South Korea’s labor laws and can handle all aspects of the employment relationship, so you can focus on finding talent while we take care of the rest.

Learn more about EOR services

Benefits of hiring employees through an EOR in South Korea

Hiring via an EOR is much faster than setting up a local legal entity in South Korea. Hiring a local employee can take as little as 48 hours this way, while setting up an entity can take 2–3 months. The EOR already has a registered entity, making local onboarding quicker.

A foreign worker’s right to work is tied to their work visa, and the sponsor must be legally registered. Because an EOR can be the sponsor, this removes the problem.

As mentioned earlier in the guide, ending a job is complex, and it’s essential to handle exits properly. When an EOR like Rivermate handles everything, from final wages to severance and unused leave, you can be sure that it’s following the rules to ensure compliance.

It will also handle Korean documents correctly and make sure contracts are compliant. An EOR can also advise on structuring the same total pay as base salary plus non-taxable allowances to lower the employee’s taxable income.

Ready to hire in South Korea?

Rivermate makes the process of hiring in South Korea straightforward for foreign companies. We manage payroll, ensure compliance, and deal with taxes, so you can focus on hiring with confidence.

Talk to a South Korea Hiring Expert

Sources:

https://employsome.com/hire/south-korea/average-salary-south-korea/
https://taxatlas.io/country/south-korea/income-tax
https://asianews.network/south-koreas-chip-talent-shortage-crisis-reinforced-by-med-school-obsession/
https://tradingeconomics.com/south-korea/wages
https://kosis.kr/visual/nsportalStats/detailContents.do?listId=E&statJipyoId=3688&vStatJipyoId=5124