South Korea

Registrations and Establishing an Entity

To establish a business and employ staff in South Korea, companies must be registered with the local tax office and the Ministry of Employment and Labor.

Entities must establish a local bank account to remit salaries and taxes. Foreign companies can register a local branch or establish a wholly foreign-owned entity.

Business registration includes:

• Certificate of Business Registration
• VAT registration (if applicable)
• Registration with the National Tax Service
• Notification to the Social Insurance Information Center
  
  

Working Week

• 40 hours/week (8 hours/day)
• Maximum of 12 hours/week in overtime, paid at 150% of normal wage

Under the Labor Standards Act, the maximum number of working hours is 52 per week including overtime, with special agreements for flexible work arrangements.

The Labor Standards Act provides a legal framework for employment terms, including work hours, leave, minimum wage, termination procedures, and severance pay.

Rest day: one day/week is mandatory (usually Sunday)

Night work (10 PM – 6 AM) and holiday work must be compensated with an additional 50% pay.

Overtime provisions do not apply to managerial and supervisory positions or workers handling confidential information.

Employment contracts are required for all employees, stating wages, working hours, job duties, and employment conditions. An employment contract must be concluded at the start of employment and retained for 3 years.

Income Tax

Personal income tax is progressive, ranging from 6% to 45%.

• Employers must withhold income tax monthly
• Year-end settlement (tax adjustment) is mandatory
• Non-residents are taxed only on Korea-sourced income

Local Income Tax

A local income tax of 10% of the national income tax is levied.

Social Insurance Contributions (2024)

Employers must report and remit taxes and contributions to the National Tax Service and four major social insurance providers.

Payroll Process

Payroll is typically processed on a monthly basis, with payments made by the end of each month.

Payslips must include:

• Base salary
• Overtime
• Bonuses
• Allowances
• Deductions for income tax and social contributions
• Fringe benefits such as meal coupons or childcare subsidy if applicable

Employers must:

• File monthly withholding tax returns
• Submit year-end income settlement reports
• Report new hires and terminations to social insurance authorities

Hiring

Employers must:

• Verify identity and work eligibility
• Report new hires to the Social Insurance Center within 14 days
• Register the employee with the four social insurance schemes
• Issue a written contract
• An employment contract must be retained by the employer for at least 3 years

Termination

Employees are entitled to:

• Minimum 30-day notice or pay in lieu
• Severance pay (mandatory) for employees with at least 1 year of service:
• One month’s average wage per year of service

Termination must be reported to the Social Insurance Center.

Minimum Wage (2025)

• KRW 10,200/hour
• Approximately KRW 2.14 million/month based on 209 hours/month

Annual Leave

• Minimum 15 days after 1 year of service
• Increased by 1 day for every 2 additional years, up to 25 days

Bonuses & Allowances

Bonuses are customary but not mandatory

• Allowances may include:
  • Transport
  • Meals
  • Housing
  • Communication

Foreign nationals must obtain a work visa and Alien Registration Card (ARC).

Common work visa types:

• E-7: Foreign professionals in specific industries
  
  
• D-8: Intra-company transferees
  
  
• E-1 to E-6: Varying professional and special occupations
  
  

Employers must sponsor the visa and apply through the Immigration Office.

Documents typically required:

• Employment contract
  
  
• Business registration certificate
  
  
• Passport
  
  
• Academic and professional credentials
  
  

Visa processing time: 2–4 weeks

Employers must ensure that foreign workers apply for an ARC within 90 days of arrival.

All filings (tax, payroll, social contributions) must be submitted online via Korea’s Hometax (NTS) and 4Major Social Insurance Information Centre (SIIC) portals.

South Korea has 17 national holidays; if employees work on these days, they are entitled to additional compensation.

Payroll and tax records must be retained for 5 years.

Use of Korean language in contracts and tax forms is generally required.

Electronic tax invoicing is mandatory for business expenses and salary reporting.

Severance pay is a legal entitlement for all employees with 1+ year service.

All employees must be covered by the four social insurance schemes.

Employers must file IR21 for all non-resident employees before termination or departure, and withhold all salary until tax clearance is obtained.

Further Information

For more information, or assistance with South Korea tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.