How to use an Employer of Record in South Korea

South Korea has become one of Southeast Asia’s most industrialized nations, with gains in automobile manufacturing, networking and IT, shipbuilding, chemicals, and steelworks. The country has a well-educated middle class and has become one of the primary destinations for companies looking to offshore their operations to cost-effective hubs.

To hire employees in South Korea, you’ll have to establish a local entity in the country, stay compliant with labor laws, and set up a suite of HR services to manage your employees. Instead of doing the heavy lifting yourself, an employer of record (EOR) can help you hire, onboard, and pay workers on your behalf. An EOR can manage all the processes required to manage taxes, payroll, benefits for your workers, and comply with employment legislation in South Korea.

This article explains how you can use an EOR to scale operations in South Korea, the costs and benefits of using an EOR, and how to choose a partner that’s right for your business.

Six steps to hiring employees in South Korea using an employer of record

There are dozens of EOR service providers on the market today, ranging from legacy giants and niche labor law offices to modern, tech-enabled startups. You have to choose an EOR that has a proven record of supporting its clients' global employment needs, especially in South Korea.

Use the following six steps to help you choose the best EOR for your business:

Step 1: Weigh up the pros and cons of each potential partner

What service options do they offer? How do they structure their offerings? You need to compare different EORs by metrics, such as:

• Pricing: How much does it cost? Do they tack on additional fees? How expensive does their service get as you add more employees? 

• Do they own their local entities, or are they a fly-by-night operation using entities owned by third-party companies?

• How long have they been operating? If the EOR is a startup, have they raised enough money to stick around (or become profitable)?

• What does their UX look like? Can you get a few employees to take a demo of the product and rate it? How efficient is the onboarding process? How easy is it for employees to submit invoices, update their personal details, apply for paid leave, or make inquiries on their platform?

• Do the contracts they enter with your employees (on your behalf) secure rights to the IP your employees produce using your company’s resources?

Step 2: Make sure your EOR partner owns its legal entity in South Korea

Some EOR operators don’t own their own local entities in the countries they operate. For certain services, these EORs use third parties who have entities registered in the countries they operate. But, working with such EORs may expose you to security risks or can end up being expensive, as you’re not directly partnering with these providers, and hence, don’t have control over these.

Make sure the employer of record you partner with has local entities in Korea and that those entities are in compliance with the rules required to legally hire employees in South Korea. Learn more about owned-entity versus partner-dependent global employment providers in our article.

Step 3: Check the reviews, testimonials, and coverage of your shortlist of providers

Websites like Saasworthy, G2, Capterra, or Trustpilot have reviews for most of the mainstream EOR providers which can help you understand how the company operates. Reviewing online press coverage, and client testimonials can give you information about:

• Whether the EOR is compliant with relevant regulations or if they have a history of defaulting on their legal obligations

• Unresolved issues customers keep complaining about

• How responsive their customer support is and how long it takes to resolve issues.

Step 4: Ensure that the EOR for South Korea will provide a best-in-class employee experience

Before adopting an EOR’s service, it’s a good idea to get a demo of the product to see how it works from your employee’s standpoint. Your aim here is to confirm that it:

• Onboards employees and collects and processes employee details securely

• Has a simple user interface that allows employees to navigate it easily

• Generates detailed payslips that show employee earnings and deductions

Step 5: Work with your partner to make sure you always provide a fair and equitable compensation package

One of the biggest reasons why remote work took off is the ability to hire international talent for a fraction of what you’d pay in your home country. For instance, a software developer based in Seoul, South Korea earns ₩72 million ($56,614) per year, while the same role nets at least $136k in San Francisco. 

Keep in mind that remote workers on the higher end of the talent spectrum will charge a bit more than local rates. So, you might need advisory services to determine what’s a fair rate and negotiate salaries with your potential hires. Additionally, your EOR should also have the capability to offer a modern benefits package to all global employees, factoring in the specific labor laws of the location, as well as the individual’s experience, role, and level. This will help you attract and retain top talent in South Korea.

Step 5: Make sure your partner will guard your intellectual property and maintain data security for your business

At the very least, an EOR should be able to demonstrate that they have strong security measures in place that adhere to industry standards like SOC2, GDPR, and ISO270001.

Likewise, the employment contracts your potential EOR signs with your employees should specify that your company retains the IP rights that your remote workers create using your company’s resources. This prevents litigation risks in the future.

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What are the benefits of using an employer of record in South Korea?

An employer of record saves you the time and money you’d have spent creating (and maintaining) local entities in the countries you want to hire remote workers from.

Additionally, an EOR handles the intricacies of employment taxes, levies, contributions, payroll and benefits administration, and HR operations needed to stay compliant with local laws. Working with an EOR gives you the time and mind space to focus on finding the best employees for your business.  

An EOR helps you:

• Pay your employees and contractors across the world, in their currency of choice.

• Oversee benefits administration and ensure you’re providing mandatory benefits required by local law, including stock options, pension contributions, worker’s injury insurance, etc.

• Reduce your exposure to legal liability by entering into contracts with your employees on your behalf.

• Classify your employees and contractors accurately to avoid penalties and fines by local labor authorities.

• Secure rights to the intellectual property your remote workers produce using your company’s resources.

• Stay up to date with proposed changes to South Korea’s labor rules that might increase your tax bill or become a compliance burden.

• Withhold and remit any mandatory payroll contributions to the government, including PAYE, social security, medicare, and unemployment insurance taxes.

Can you hire employees in South Korea without an EOR? Of course, you can. But you’ll need to deal with the constant threat of noncompliance, that can haunt you with legal liability, fines, or a loss of your right to hire Korean remote workers.

How much does it cost to use an EOR in South Korea?

EOR providers tend to charge different prices, depending on their services and how they operate. On one hand, legacy employers of record usually bill you a percentage (15% to 18%) of your total payroll expense, or a flat rate of $2,000 per employee, per month — whichever is higher.

If you opt for smaller startups, it might cost you less, but you’ll probably end up paying more, with additional fees tacked on. Smaller EOR providers may not support certain countries, offer benefits or payroll services (for example), or may not provide a high level of security or compliance. 

In comparison, Remote has an extensive global employment service that covers everything you need to hire abroad compliantly — onboarding, benefits, payroll, taxes, and compliance — at an affordable, flat fee. We also have discount programs for startups, companies who hire refugees (Remote for Refugees), and nonprofits that can set you up at a lower price for up to 12 months.

Hiring in South Korea

Most employment-related issues are covered by provisions specified in Article 32 of South Korea’s 1948 Constitution and the Labor Standards Act of 1997 which covers contract law, collective bargaining agreements, and employment rules.

Employment contracts in South Korea

By default, all employment contracts sealed under South Korean law are assumed to be indefinite, long-term contracts that make the worker in question a full-time employee. Fixed-term contracts must be limited to two years, after which it’s assumed that a contractor transitions to being a full-time employee on an indefinite contract.

Written contracts are only required for part-time employees, although details such as the worker’s salary, working hours, annual paid leave, and weekly holiday must be put down in writing. It must also be retained by the employer for at least three years, for all types of employees.

Any employer or workplace with at least 10 staff must have clearly defined rules of employment (ROE) that state details such as:

• How salaries and wages are calculated

• How working hours (i.e., duration) are counted and compensated

• Effective working hours

• Paid leave

• Training

• Maternity care provisions

• Workplace health and safety arrangements 

• Measures in place to prevent and punish workplace harassment

• Disciplinary procedures, etc.

Employment contracts can only be revised with an employee’s consent. If an employee is covered by a collective bargaining arrangement (CBA), the terms of their CBA supersede their contract.

Payroll and payroll taxes in South Korea

South Korea’s minimum wage is fixed yearly and it applies to all employees with limited exceptions. Starting January 1, 2023, the effective minimum hourly wage is currently ₩9,620 ($7.55) or ₩2,010,580 ($1,577) per month.

Income tax rates range from 6% on ₩14 million ($10,985) to 45% on annual incomes of ₩1 billion ($784,667).

Employers are required to collect and remit social security contributions, including:

• Pensions: 9%, up to a maximum taxable income of ₩5.53 million, split between employer and employee

• Health insurance: 7.09%, plus 12.27% of the health insurance premium for long-term care insurance, split between both parties

• Industrial accident compensation insurance: The employer pays between 0.6% and 18.5% of the employee’s monthly paycheck

• Unemployment insurance is capped at 1.8%, split between both parties. The employer contributes between 0.25% and 0.85% of their employee’s monthly paycheck for job security and vocational capability insurance.

South Korean employee benefits and compensation

All full-time employees are covered by National Health Insurance, Industrial Accident Compensation Insurance, and unemployment insurance, funded by the premiums we introduced in the section above.

• Annual vacation/paid time off: Workers are entitled to at least 15 days of paid leave per year (11, if the employee has been employed for less than a year) after they’ve worked for an employer for at least a year. For every two additional years, workers must receive an additional day off, capped at 25 days off per year.

• Public holidays: There are 12 official public holidays.

• Overtime: Normal working hours are capped at 40 hours per week, and any excess is considered overtime and must be compensated at 1.5 times their normal pay rate. Overtime is capped at 12 hours per week.

• Maternity leave: Maternity leave lasts 90 days (120, if the mother has multiple births or experiences complications) and benefits for the first 60 days off are paid for by the employer, while the government funds the rest.

• Fertility treatment: Employees can take three days off per year for fertility treatments and will be compensated at their normal wage rate for the first day.

• Paternity leave: 10 days off, to be used within 90 days after the mother’s delivery.

• Family care leave: Up to 10 unpaid days off.

• Menstrual leave: Once a month.

Read our article on employee benefits in South Korea explaining the statutory benefits you’re required to provide by default, extra perks you can tack on, and the different types of vacations and holidays workers are entitled to.

Severance pay and employee terminations in South Korea

In South Korea, employees are entitled to a severance package equal to a month’s pay for every year they’ve been employed.

In addition, employees must be notified at least 30 days in advance before they’re dismissed. The exception to this rule is when they’re dismissed for a grievous (or intentional) offense if they’ve been employed for less than three months, or if the employer’s business has to suspend operations due to unforeseen, unavoidable circumstances.

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What are the risks of employee misclassification in South Korea?

Whether an employee qualifies as an employee or a contractor depends on the nature of their work relationship with you. When hiring workers abroad, 

You have to be careful to classify your workers correctly to avoid misclassification risks when you’re hiring abroad.

If the authorities determine that an employee has been misclassified as a contractor, you might face regulatory fines, penalties, legal disputes, and be required to pay back wages to your employees.

To mitigate the risks of misclassification, it’s best to work with an employer of record that has solid knowledge of employment laws. Remote can classify workers correctly and help you avoid misclassification risks while staying compliant with labor laws in South Korea.

Get started with an employer of record in South Korea 

If you’ve found the ideal candidate in South Korea, the hassles of international hiring shouldn't stop you from employing them. Instead of doing the hard work yourself, you can rely on an employer of EOR to serve as an entity via which you can hire talent, pay them, and offer localized benefits. 

Instead of spending weeks (or months) setting up local entities and trying to understand labor rules, an employer of record can help you scale up quickly and safely. With Remote, you can: 

• Hire employees via a local entity in South Korea

• Seamlessly onboard new employees in South Korea or globally

• Offer localized benefits to attract top candidates

• Stay compliant with local labor rules and regulations

• Manage global payroll and make sure your workers are paid in the local currency 

• Protect your IP rights and data security

Learn how Remote can help you hire international employees and expand your operations globally. Get started with Remote and hire employees in South Korea in minutes! 

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