Source: Pixabay
Overview
South Korea, officially known as the Republic of Korea (ROK), is an East Asian country located in the southern portion of the Korean peninsula. As a highly developed country, South Korea has a Human Development Index (HDI) of 0,877 (12th in the world) and a GDP of USD$1.61 trillion as of 2020.
Since the 21st century, South Korea has maintained a stronghold as a major influence on pop culture with Korean Pop (K-Pop)being one of the most listened to genres of music in the world. Beyond its dominance of the music industry, the country surfaces as one of the most important and influential in the region, making South Korea a strategic place for companies to settle in and start new operations.
South Korea is home to a highly qualified employee population of roughly 27.9 million people that are part of major industries such as electronics, automobiles, telecommunications, shipbuilding, steel and chemicals.
Its influence in the regional market, its innovative people, its qualified labor force, and the fact that English is widely spoken as a second language makes South Korea a great place for companies to consider setting up shop.
| Capital | Seoul |
| Languages spoken | Korean, English, Japanese, Mandarin |
| Population size | 51.7 million |
| Payroll frequency | Monthly |
| Currency | South Korean Won (KRW) |
| VAT | 10% all other goods / 0% Exports and associated transport services; finance and insurance services; services rendered overseas; some business support services |
Taxes in South Korea
The South Korean government has established that there are two groups of taxpayers: residents and non-residents.
Residents are subject to tax on their worldwide income, and non-residents are taxed only on their Korean source of income. To become a resident, workers have to either have a domicile in the country or spend 183 days or more in South Korea.
Employer contributions in South Korea
These are the contributions companies must make in South Korea in order to stay compliant. All business-related expenses such as medical, educational, donations and insurance premiums are also tax deductible.
Rate
The tax rate (not considering local tax) is:
- 10% on KRW200 million of taxable income
- 20% on KRW200 million up to KRW20 billion
- 22% on KRW20 billion up to KRW300 billion
- 25% of over KRW300 billion.
Surtax
The local income tax rate is:
- 1% on KRW200 million of taxable income
- 2% on taxable income over KRW200 million up to KRW20 billion
- 2.2% on taxable income over KRW20 billion up to KRW300 billion
- 2.5% on taxable income over KRW300 billion.
Alternative minimum tax
Corporate taxpayers are subject to a minimum tax that is imposed at a rate of:
- 7% for all small to medium enterprises
- 10% on up to KRW10 billion
- 12% on over KRW10 billion up to KRW100 billion,
- 17% on over 100 billion
Employee contributions
The workforce is also subject to taxes in South Korea. These rates are collected at the time of payment and go straight to the government.
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As of January 2023, expatriate workers in South Korea can be put on a flat PIT (personal income tax) rate of 20.9% for a period of 20 years from the date they first pay tax in the country. This would be applied if more beneficial for the worker than the above progressive tax rates.
Social security
There are four different social security programs in South Korea. They have their own contribution rates and are evenly divided between employer and employee. The employers are required to withhold the workers' contributions at the time of payment; the exception is only on a few occasions for foreign employees.
National pension (NP)
Employee contribution – 4.5% (maximum monthly pension)
Employer contribution – 4.5%
International assignee participation – is required if there is no agreement between Korea and the home country
The National pension contribution is capped at a monthly salary of KRW 5,530,000 and the maximum monthly pension contribution to be paid by an employee is KRW 248,850 (subject to change every July) for the period from July 2022 to June 2023.
National health insurance (NHI)
Employee contribution – 3.335%
Employer contribution – 3.335%
International assignee participation – Is required
Employment insurance (EI)
Employee contribution – 0.80%
Employer contribution – 0.80% to 1.65% depending on size of workforce
International assignee participation – required if no agreement between Korea and the home country
Worker’s compensation insurance (WCI)
Employee contribution – 0% (employer only)
Employer contribution – 0.73% to 18.63% of total wages and payroll (rate depends on the type of industry)
Minimum wage in South Korea
The minimum wage in South Korea is set to KRW9160 per hour (the equivalent to USD 1036 USD per month). This new rate was revised as of 2022 and is revised every year.
For 2023, the rate will go up by 5%. This was agreed upon by the Ministry of Labor of South Korea and the Minimum Wage Commission in August 5th and is set to start taking effect on January 1st of 2023.
This constant revision ensures that the national minimum wage is based on what the population needs to earn to access the basics essential to their livelihood.
Employee benefits in South Korea
In South Korea there are several laws in place for the government to protect workers rights and maintain a healthy relationship between employers and employees. The most important one is The Labour Standards Act (LSA), which contains the mandatory benefits for workers and also the employers' obligation that companies need to incorporate to start hiring. As mentioned earlier, minimum wage and working hours limits are some of them. Other mandatory benefits include:
- Annual leave
- Sick leave
- Maternity leave
- Paternity leave
- Protection against unfair contract termination
- National pension
- National health insurance
- Insurances specific for field of action
- Accident compensation insurance
- Long-term care insurance
Attracting talent in South Korea
A healthy retirement plan is valued as one of the top benefits that can be provided by an employer. To offer a discretionary retirement contribution on top of what is already mandatory is seen with good eyes and can in fact attract the top talent in South Korea.
Extra benefits are also a way to attract top talent. Not only the salary but also other things are really important to create a commitment to the job, such as building a good and healthy work environment, a cooperative culture, leadership development programs, financial incentives for studies and more.
Healthy work environment and cooperative culture
This is always a good one. Healthy and cooperative work environments are key to attracting and retaining the best work talent. Not only makes life at work easier but also people feel that they belong and are heard and this leads to the overall happiness of the workforce.
As a matter of fact, research by Oxford University's Saïd Business School stated that happy workers are, on average, 13% more productive.
Leadership development programs
A good way to keep workers interested and focused on building their future within the company is the creation of internal development programs. That makes people feel appreciated and more prepared for leadership positions.
According to the Global Leadership Forecast of 2021, only 28% of HR professionals believe that their companies have high-quality leadership. That shows how critical it is to develop better leaders at all levels inside a business. This is to say that leadership courses are a great way to stand out among other companies while attracting and retaining the best talent possible.
Financial incentives for studies
This one is very straightforward. To keep the workforce engaged, it is good to offer financial incentives for workers to study and continue to grow in their field of action. Research co-authored by Bayes Business School showed that one in four workers are considering leaving their job in the next 12 months, and 34% said that it's to them the feeling of not being valued by their companies.
This study also revealed that productivity is not only boosted when workers believe that their efforts will enhance rewards in the future but also because they feel they’re appreciated by the organisations. Financial incentives for education are a way for companies to invest in their top talent and can include postgraduate, extension and even language courses.
Talent acquisition
We can help you source and deliver the people you need across a wide variety of sectors by using our extensive network of employees in South Korea.
We're here to help you find a contractor who fits your needs. If you're looking for someone to fill a short term role, we offer flexible contracts that fit into your busy schedule.
Finally, if you're looking to hire people who can grow with your company, we have professional search services that provide access to highly qualified workers who are ready for work. We also handle everything from shortlisting potential employees to screening and hiring them.
Employer of record
For businesses that want to hire people remotely without having to set up a physical office, an Employer of record (EoR) makes it easy for them to do so with minimal compromises on time and expenses.
An employer of record allows you to skip the hassle of setting up an actual company structure and focus on growing your own business instead. An EOR can assist you with tasks including overseeing locally compliant payroll and administering statutory benefit schemes.