Hire employees in South Korea using an Employer of Record

You've been interviewing for weeks. Finally found the right person in South Korea. Now you need to actually hire them legally. This is where most companies hit a wall.

South Korea's employment laws don't mess around. Get the contract wrong and the entire agreement could be invalid. Miss mandatory benefits like the 13th-month salary equivalent, and you'll owe back payments plus penalties when employees find out. Most companies discover these requirements after they've already made promises they can't legally keep.

You've got three options to hire in South Korea, and each comes with different costs and headaches.

Option 1: Set up your own entity

• Cost: €15,000-45,000 upfront, €8,000-15,000 annual maintenance
• Timeline: 4-6 months minimum
• Complexity: Full tax registration, payroll system, legal compliance, HR infrastructure
• Makes sense when: Hiring 20+ people long-term, permanent market presence

Option 2: Hire contractors

• Cost: None upfront, but limited control
• Timeline: Immediate
• Risks: Misclassification fines (€25,000+), back taxes, legal disputes
• Makes sense when: Short projects (< 6 months), specialized skills
• Note: Hire with Columbus also handles contractor agreements and payments

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee
• Timeline: 2-3 days to hire
• Complexity: None - we handle everything
• Makes sense when: 1-50 employees, testing markets, multi-country teams

If you're hiring 1-10 people, entity setup costs more than 3-4 years of EOR fees ($179/month = $2,148/year per employee vs €15,000+ upfront). An EOR like Hire with Columbus handles employment contracts, payroll, taxes, benefits, and compliance updates while you focus on managing your team. For 3 employees, that's $537/month vs €20,000+ entity setup plus €10,000/year maintenance.

Ready to hire in South Korea without the legal headaches? Get started with Hire with Columbus.

What employment types can you use?

You've got three ways to bring someone onboard in South Korea. Here's how the costs and risks compare.

Most companies jump straight to thinking about permanent vs. fixed-term contracts. But that's the second decision. First, you need to figure out how you'll legally employ someone in South Korea at all.

How can you hire in South Korea?

Here's your decision framework:

Setting up your own entity means you're in this for the long haul. You'll need a Korean corporate bank account, local accounting firm, payroll system, and someone who understands Korean labor law inside and out. The incorporation process alone takes 4-6 months, and you're looking at ₩35-50 million in setup costs before you pay your first employee.

This makes sense if you're planning to hire 20+ people and stay in Korea permanently. But for most companies testing the waters? It's overkill.

Hiring contractors looks tempting because it's fast and cheap upfront. But Korea's labor authorities are aggressive about contractor misclassification. If someone works set hours, uses your equipment, or takes direction like an employee, they probably are one legally.

The penalties hurt: up to ₩50 million in fines, plus back taxes and social contributions. We've seen companies get hit with ₩200+ million bills for misclassifying just three people over two years.

Using an employer of record is the sweet spot for most international companies. Hire with Columbus becomes the legal employer in Korea while you manage the day-to-day work. You get compliant employment without the entity setup costs or legal risks.

The math is simple: five employees cost $895/month with an EOR vs. ₩50+ million to set up properly. You'd need to run payroll for over four years just to break even on entity costs.

Employment contract types in South Korea

Once you've decided to hire (whether through your entity or an EOR), you need to pick the right contract type.

Korea recognizes four main employment contract types:

Regular (permanent) employment contracts are your go-to for core team members. No end date, full benefits, standard notice periods. About 67% of Korean employees work under regular contracts.

Use these for anyone you want to keep long-term: developers, sales managers, operations leads. They get full job security protections, which Korean employees expect for permanent roles.

Fixed-term contracts work for specific projects or temporary needs, but Korea limits them heavily. Maximum two years total (including renewals), and if you renew more than once, the contract automatically converts to permanent.

You can't use fixed-term contracts just because you want flexibility. You need a legitimate business reason: covering maternity leave, seasonal work, or a project with a definite end date. Korean courts will convert "fake" fixed-term contracts to permanent ones.

Part-time contracts are for anyone working less than 15 hours per week or fewer than 60 hours per month. They get prorated benefits and simpler termination rules.

But here's the catch: work someone 16+ hours per week and they're legally full-time, entitled to full benefits and job protections. No exceptions.

Dispatched worker contracts are Korea's version of temp staffing, but they're heavily regulated. You can only use them for specific roles (manufacturing, cleaning, security) and specific timeframes. Most international companies won't need these.

Which contract type should you use?

For most international hires, regular employment contracts make the most sense. Korean job candidates expect permanent contracts for professional roles, and the legal protections actually work in your favor - they create clear expectations for both sides.

Fixed-term contracts seem appealing for "trial periods," but Korea's probationary period system works better. You can include a 3-6 month probationary period in a regular contract, giving you easier termination rights during that window.

If you're using Hire with Columbus, we handle all the contract drafting and ensure you're using the right type for each role. We've seen too many companies get burned by using fixed-term contracts incorrectly or missing probationary period requirements.

The key is matching the contract to your actual needs, not trying to game the system. Korean labor law is employee-friendly, but it's predictable. Work with it, and you'll avoid the expensive surprises that come from cutting corners.

How does payroll and taxation work?

Your €60,000 employee in South Korea actually costs €78,600 per year once you add employer contributions and taxes. That's a 31% markup you need to budget for upfront.

South Korean payroll runs on a strict monthly cycle. Employees expect payment by the 25th of each month, and there's zero flexibility on this deadline. Miss it, and you're looking at penalties starting at ₩500,000 (about €350) plus daily interest charges.

Income tax brackets

South Korea uses a progressive tax system with rates that climb quickly. Your employees will pay these rates in 2025:

Plus there's a 10% local income tax on top of national rates. So that 24% bracket becomes 26.4% in reality.

Social security contributions breakdown

This is where costs add up fast. Both you and your employee contribute to Korea's social insurance system:

*Workers' comp rates vary by industry risk level. Tech companies typically pay 0.7%, manufacturing can hit 2.7%.

Your total employer contribution rate sits around 10.75% of gross salary, not counting the variable workers' comp piece.

Payment schedule and bonuses

Korean employees expect their base salary split into 12 monthly payments. But most companies also pay substantial bonuses that can equal 2-4 months of additional salary per year.

The bonus structure isn't legally required, but it's so culturally expected that you'll struggle to hire without it. Budget for at least 200% of monthly salary in annual bonuses (100% mid-year, 100% year-end).

Severance pay is mandatory and equals one month's salary for each year worked. This gets paid into a company severance fund monthly at 8.33% of salary.

Total employment cost example

Let's break down that €60,000 salary mentioned earlier:

• Base salary: €60,000
• Employer social contributions (10.75%): €6,450
• Severance fund contribution (8.33%): €4,998
• Workers' compensation (0.7% for tech): €420
• Estimated bonus provision (200% of monthly salary): €10,000

Total annual cost: €81,868

That's a 36% markup on the base salary, higher than most European countries.

Payroll cycle and deadlines

Korea's payroll calendar is unforgiving. Monthly salary payments must be made by the 25th of each month. If the 25th falls on a weekend or holiday, payment moves to the last business day before.

Tax withholdings get filed by the 10th of the following month. Miss this deadline and penalties start at 3% of the unpaid amount, with additional daily charges.

Year-end tax settlement happens in February-March. This is when employees get refunds or pay additional taxes based on their actual annual income versus monthly withholdings.

Common payroll mistakes

The biggest error? Miscalculating overtime rates. Korea requires 150% pay for overtime hours, and the definition of "overtime" is stricter than many countries. Regular work hours are capped at 40 per week, with a maximum of 12 additional overtime hours allowed.

Another gotcha: holiday pay calculations. Korea has 15 public holidays, and if employees work on these days, they get 150% pay plus a compensatory day off. Many companies forget the comp day part.

Severance fund contributions trip up newcomers too. This isn't optional. You must contribute 8.33% of each employee's monthly salary to a severance insurance fund or maintain your own qualifying fund.

Setting up payroll in South Korea yourself:

• Local accounting firm: €800-1,200/month
• Payroll software: €300-500/month
• Compliance risk: Fines up to €50,000 for errors
• HR expertise needed: €65,000+ salary

With Hire with Columbus: $179/month per employee, fully compliant, zero risk.

We handle all the tax calculations, social contributions, bonus payments, and deadline management. Your employees get paid on time every month, and you get detailed cost breakdowns so there are no surprises in your budget.

What benefits and leave are required?

South Korean employees get a minimum of 15 paid vacation days after one year of employment, and these days must be paid out if not used. Beyond salary, mandatory benefits add about 9% to your employment costs through required social insurance contributions.

Here's what you're legally required to provide and what happens if you don't.

Annual vacation leave

South Korea's vacation system is straightforward but has some quirks you need to know about.

Minimum entitlements:

• 15 days after completing one year of service
• 1 additional day for every two years of service after that (capped at 25 days)
• Employees with less than one year get 1 day per month worked

The catch: Unused vacation days must be paid out at regular salary rates if employees don't take them within two years. You can't just let them expire.

Most companies encourage employees to actually take their vacation to avoid these payouts. Some offer incentive bonuses for employees who use their full allocation.

Sick leave and medical leave

South Korea doesn't mandate paid sick leave, but employees can take unpaid sick leave for legitimate medical reasons. Here's how it actually works:

Short-term illness (under 4 days):

• Unpaid leave unless your company policy provides paid sick days
• Medical certificate required for absences over 3 consecutive days

Extended medical leave:

• Available for serious illness or injury
• Unpaid, but job protection for up to one year
• National Health Insurance may provide some income support

Many competitive employers offer 5-10 paid sick days annually to attract talent, even though it's not required.

Parental leave

South Korea offers generous parental leave, with most costs covered by government insurance rather than directly by employers.

Important details:

• Maternity leave is mandatory - employees must take at least 45 days after birth
• Fathers can take paternity leave within one year of birth
• Both parents can take childcare leave, but not simultaneously
• Job protection applies during all parental leave periods

Public holidays 2025

South Korea has 16 official public holidays in 2025. Employees who work on these days must receive 150% of their regular pay.

Substitution rules: When holidays fall on weekends, the following Monday typically becomes a substitute holiday. This happened with several holidays in 2025, giving employees extended weekends.

Mandatory social insurance

Four social insurance programs are required for all employees. Here's who pays what:

Additional employer-only costs:

• Workers' compensation insurance: 0.7-34% depending on industry risk
• Severance pay reserve: 8.33% of annual salary

The employment insurance rate varies by company size - larger companies pay higher rates.

Mandatory severance pay

This is the big one that catches many foreign employers off guard. Every employee who works more than one year is entitled to severance pay equal to 30 days of average wages for each year worked.

How it works:

• Calculated on final year's average monthly wage
• Includes base salary plus regular allowances and bonuses
• Must be paid within 14 days of termination
• Required regardless of termination reason (resignation, dismissal, etc.)

Most companies set aside 8.33% of each employee's annual salary monthly to cover this obligation.

Optional competitive benefits

Beyond legal requirements, competitive employers in South Korea typically offer:

Common additional benefits:

• Meal allowances (often provided as cafeteria or meal vouchers)
• Transportation allowances for commuting
• Housing allowances (especially for foreign employees)
• Private health insurance supplements
• Annual health checkups
• Performance bonuses (often 100-400% of monthly salary)

Popular perks:

• Flexible working hours
• Work-from-home options (more common post-2023)
• Professional development budgets
• Company retreats and team building events

Common benefit mistakes and penalties

Biggest compliance risks:

• Missing social insurance registration: ₩3-10 million fines plus back contributions
• Incorrect severance calculations: Full amount owed plus 20% penalty
• Unpaid vacation payouts: Back pay plus damages up to 50% of amount owed
• Working holiday violations: 150% premium pay plus potential labor inspection

Administrative headaches:

• Social insurance rates change annually (usually in July)
• Holiday substitution rules create payroll complications
• Severance calculations get complex with bonuses and variable pay
• Leave tracking across multiple types (vacation, sick, parental)

Administering these benefits correctly requires significant local expertise. You're looking at hiring HR staff with deep knowledge of Korean labor law, implementing benefits administration systems, and staying current with frequent regulatory changes.

Hire with Columbus handles all benefit administration, social insurance registration, and compliance monitoring for $179/month per employee. We calculate severance obligations, manage leave tracking, and ensure you're always compliant with changing regulations - no local HR team required.

What are the compliance requirements?

Written contracts are mandatory in South Korea within 30 days of employment start. Verbal agreements don't count legally and expose you to back payment claims and penalties.

The Labor Standards Act requires contracts in Korean (English translations are acceptable as supplements but not replacements). Miss this requirement and face fines up to ₩10 million ($7,500) plus potential contract nullification.

Employment contract requirements

Every employment contract must include these mandatory clauses:

• Job title, duties, and workplace location
• Start date and contract duration (if fixed-term)
• Working hours, rest periods, and holidays
• Base salary, payment method, and payment date
• Termination conditions and notice periods
• Social insurance enrollment details

Missing any mandatory clause makes the entire contract legally invalid. You'll owe back payments under more favorable terms determined by labor courts, plus legal fees averaging ₩5-15 million ($3,750-$11,250).

Contracts must be registered with the local labor office within 14 days of signing. Late registration triggers ₩5 million ($3,750) fines and delays social insurance enrollment.

Probation periods

Standard probation in South Korea is 3 months, with a maximum of 6 months allowed by law. During probation, you can terminate with 30 days' notice instead of the standard notice periods.

After probation ends, full employment protections kick in immediately. You'll need just cause for termination plus longer notice periods and potential severance payments.

Probation can't be extended once the initial period expires. Attempting to extend probation is considered unfair dismissal, triggering reinstatement orders plus compensation averaging 6-12 months' salary.

Working time regulations

Maximum working hours are 40 per week (8 hours daily) with mandatory 12 hours of overtime compensation available. Total weekly hours can't exceed 52 including overtime.

Employees get 30-minute breaks for shifts under 8 hours, 1-hour breaks for 8+ hour shifts. Rest periods between shifts must be at least 11 consecutive hours.

Overtime violations cost ₩20 million ($15,000) in fines plus 150% back pay for unpaid overtime. You must maintain detailed time records because missing documentation doubles the penalties.

Notice periods

Notice requirements vary by tenure:

Payment in lieu of notice is acceptable but must equal full salary plus benefits. Partial payments or salary-only calculations trigger wrongful dismissal claims averaging ₩30-50 million ($22,500-$37,500) in settlements.

Termination process

Just cause termination requires documented evidence of serious misconduct, poor performance with improvement opportunities, or economic necessity with government approval.

For economic dismissals affecting 10+ employees, you need 50 days advance notice to the Ministry of Employment and Labor plus consultation with employee representatives.

Terminating without proper cause and process results in automatic reinstatement orders. If reinstatement isn't feasible, compensation ranges from 4-24 months' salary depending on tenure and circumstances.

Severance pay

Severance is mandatory for employees working over 1 year:

Average wage includes base salary, regular bonuses, and overtime from the previous 3 months. Underpaying severance triggers 150% penalty payments plus interest at 20% annually.

Data protection

South Korea's Personal Information Protection Act (PIPA) governs employee data handling. You need explicit consent for collecting personal information beyond basic employment requirements.

Employee data must be stored on Korean servers or approved overseas locations with adequate protection standards. Data breaches affecting 10,000+ individuals require immediate government notification.

PIPA violations cost up to ₩300 million ($225,000) or 3% of annual revenue, whichever is higher. Regular data audits and employee privacy training are legally required.

Common compliance mistakes

Invalid employment contracts happen when companies use English-only agreements or miss mandatory clauses. Cost: Contract nullification plus ₩10 million ($7,500) fines.

Wrong termination processes occur when skipping consultation periods or lacking documented cause. Cost: Reinstatement orders plus 6-24 months compensation averaging ₩40-80 million ($30,000-$60,000).

Missing probation documentation lets employees claim immediate permanent status. Cost: Full severance and notice payments as if they worked past probation.

Improper overtime calculations using base salary only instead of total compensation. Cost: 150% back pay plus ₩20 million ($15,000) fines.

Penalties for violations

Common compliance failures in South Korea:

• Invalid employment contract: ₩10 million ($7,500) fine plus contract void
• Wrong termination process: ₩30-80 million ($22,500-$60,000) compensation plus legal fees plus potential reinstatement order
• Missing mandatory clauses: Contract deemed invalid, back payments owed under court-determined terms
• Improper overtime handling: ₩20 million ($15,000) fine plus 150% back pay
• Late contract registration: ₩5 million ($3,750) fine plus social insurance delays
• PIPA data violations: Up to ₩300 million ($225,000) or 3% revenue

Hire with Columbus ensures every contract and termination follows South Korean law exactly. Our local legal team handles contract registration, maintains compliant documentation, and manages termination processes to eliminate these costly violations entirely.

What has changed recently?

South Korea's employment rules got a major overhaul in 2025, and if you're hiring there, these changes will hit your budget and processes hard. The government rolled out sweeping reforms that affect how international companies hire and manage employees. The biggest change? The new Foreign Worker Integration Act that took effect in January 2025, requiring all international employers to register with the Ministry of Employment and Labor within 30 days of hiring their first Korean employee.

The minimum wage jumped to ₩10,030 per hour (about $7.50 USD) in 2025, representing a 5.1% increase from 2024. For full-time employees working the standard 40-hour week, this translates to approximately ₩2.1 million monthly ($1,575 USD). Companies that were budgeting based on previous rates got hit with unexpected payroll increases across the board.

New digital nomad visa requirements

Korea introduced the K-Digital Nomad visa in March 2025, but it's not as simple as it sounds for employers. If you're hiring remote workers who plan to work from Korea temporarily, you'll need to verify their visa status and ensure compliance with both Korean tax obligations and their home country requirements. The visa allows stays up to two years, but tax residency kicks in after 183 days.

Companies have been blindsided by the documentation requirements. You'll need to provide employment verification letters, salary confirmation, and proof of health insurance coverage that meets Korean standards. Miss any of these, and your employee's visa application gets delayed or denied.

Expanded parental leave benefits

The government extended paid parental leave benefits in 2025, and honestly, it's both generous and complicated. New parents can now take up to 15 months of combined leave (up from 12 months), with the first 3 months paid at 100% of salary up to ₩3 million monthly ($2,250 USD). The remaining months are paid at 80% of salary with the same cap.

What changed for employers: you're now required to hold positions open for the full 15-month period, and you can't hire permanent replacements. Temporary contracts are allowed, but you'll need to clearly document the arrangement to avoid wrongful termination claims when the original employee returns.

Stricter overtime regulations

Korea's Fair Labor Standards Act got serious enforcement power in 2025. The maximum overtime limit dropped from 52 hours per week to 48 hours, and penalties for violations increased to ₩20 million ($15,000 USD) per incident. Labor inspectors are conducting surprise audits, particularly targeting foreign companies after several high-profile cases made headlines.

The new rules also require explicit written consent for any overtime work, and employees can withdraw consent with just 24 hours' notice. You can't pressure employees to work overtime anymore. The law specifically prohibits "indirect coercion" through performance reviews or promotion decisions.

Updated severance calculation methods

Severance pay calculations changed in July 2025, and the new formula costs employers more. The standard rate increased from one month's salary per year of service to 1.2 months for employees with more than three years of tenure. For a mid-level employee earning ₩4 million monthly ($3,000 USD) with five years of service, severance jumped from ₩20 million to ₩24 million ($18,000 USD).

The government also eliminated the previous cap on severance calculations. Previously, severance was calculated on base salary only, but now it includes regular bonuses and overtime premiums from the past year. This change alone increased severance costs by an average of 15-20% for most companies.

New workplace harassment prevention requirements

Following several workplace harassment scandals, Korea implemented mandatory prevention programs in 2025. Companies with 10+ employees must conduct quarterly harassment prevention training, maintain anonymous reporting systems, and designate trained harassment prevention officers. Non-compliance results in fines up to ₩15 million ($11,250 USD) and potential criminal charges for executives.

The training requirements are specific. Generic online modules don't cut it anymore. You need Korea-specific content covering sexual harassment, workplace bullying, and discrimination based on gender, age, or nationality. International companies often struggle with the cultural specifics required in these programs.

Using an EOR like Hire with Columbus means you don't have to track these regulatory changes or worry about compliance updates. We handle all the new requirements, from visa documentation to harassment prevention training, so you can focus on managing your team instead of managing Korean labor law changes.