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06 JAN 2020

Hiring Korean Employees for your Business

Every so often, firms keen on making a mark in the Korean market will wonder how it would be to hire locals for their new company in South Korea.

A few other jurisdictions in Asia do disallow the establishment of a direct employment liaison between a non-resident foreign company and a local employee or succeed at making it too inconvenient for both parties that foreign employers will lay down their arms in disappointment.

Korea is poles apart from China. Speaking, for all the challenges of doing business in South Korea, it can be quite an easy expedition in a lot of ways. This is one among the many. Of course, it is easy to hire a Korean employee directly and pay him or her straightaway, via wire transfer from overseas.

The process is very basic; the employee is just required to register with his or her regional district tax office in the capacity of a self-employed individual, or “Class B” taxpayer. The form can be filled in around 10 minutes.

Apart from this, the tax service provides registered Class B taxpayers with a break that takes care of a large part of the employer-side payroll taxes that are to be borne by the self-employed person.

South Korea’s employment law seems to be complicated as well as baffling from an outsider’s point of view, even though there are ways in which resembles the law of other nations. Other elements that add to the complexity of the situation include the variation in rules, based on the configuration of the business structure and the strength of the workforce.  

This and several other factors have led to the creation of the guidelines in a broad sense, and specialist legal advice is suggested while hiring in South Korea.

Korea employees, Korea staff, Korea Recruitment

Consider this while you hire in South Korea

One must be cautious of various core areas within South Korea’s employment legislative regime, typically for firms that intend to set up an entire domestic office and people management department. These threats can be eased by way of using a regionally-seeded payroll provider who knows all the laws and rules of the land concerning both, local employees and also foreign citizens.


For employees in South Korea, it is mandatory to have employment contracts that fulfil all the criteria of the Fair Labor Standards Act.


Based on legal resource site, Korean Labor Law, the Labor Standards Act of Korea has no clear regulations on the duration of probation. Nevertheless, the law has a statement that mentions that there is no requirement for a notice of termination in the case of employees that are within a probation period (of 3 months or lower). 

This leads to a deduction that even though a probation period may exceed 3 months, in normal circumstances, the employee will be entitled to the rights of a regular employee, once he or she has crossed a tenure of 3 months.


Employment Insurance

Employment Insurance comes along with benefits to employees who are jobless because of being sacked from their offices. This insurance also subsidizes the training of employees in accordance with South Korea’s Employment Insurance Act.

Every employee needs to mandatorily pay employment insurance, leaving out the director of a company, employees who have crossed the age of 65 years and casual workers.

Companies and offices having one or multiple permanent employees are required to subscribe to employment insurance. Both, the employee, as well as the employer, equally add 0.65% of the entire wage.

From time to time there is the employer adds an extra contribution, which is known as ‘occupational ability development’. This is between 0.25 – 0.85%, in terms of the size of the company.

Accident Insurance

The law makes it mandatory for businesses to have a kind of accident reimbursement insurance for all employees. Average monthly wages decide the appropriate insurance premiums. Companies and offices having one or multiple regular workers are required to subscribe to occupational injury compensation insurance.

The employer contribution needs to range between 0.6 – 0.34% of the entire salary, according to the category of business.

National Pension

The Republic of Korea has a mandatory state pension service. The employer, as well as the employee, add their contributions to it. The National Pension Scheme is governed by the National Pension Service (NPS). All Koreans and foreigners between 18 to 59 years of age, living and working in South Korea are required to make contributions to the national pension scheme.

A company only needs to start contributing when it has 5 or more employees (else, employees need to separately take care of their contributions).


Health Insurance

Employer to contribute 2.995% of the regular monthly wage

Employee to contribute 2.995% of the regular monthly wage


Employers Social Security and Legal Offerings

Both the employer and the employee pay the following social security contributions that are based on the gross income of employees: national pension, unemployment insurance and medical insurance premiums. They contribute 4.5% of the monthly salary to the national pension fund. The employer and employee also contribute 2.945% and 0.55% of the average monthly wage as a national medical insurance premium and an unemployment insurance premium, respectively. In addition to the unemployment insurance, the employer contributes an insurance premium, which varies from 0.25% to 0.85% of an employee’s average monthly wage based on the number of employees. The long-term care insurance contribution is imposed on the national medical insurance premium at a 6.55% rate.


The maximum amounts of the national medical insurance premium and national pension premium are KRW 4,901,380 and KRW 350,100, correspondingly, combining both, the employee and the employer’s share.


Minimum Hourly Wage in South Korea 2009-2019

In 2019, the lease legal hourly wage in South Korea was calculated to be 8,350 South Korean won. This is approximately 10.9 percent higher than the previous year. This was the second-largest yearly hike after 2001. A permissible minimum wage was fixed by the South Korean government in 1988, pushed by the flourishing economy during those days.

President Moon Jae-in has committed to increasing the minimum wage up to 10,000 won by 2020; a debatable step that has been supported by intellectuals but caught the disapproval of both, traditional and liberal political analysts throughout the country. According to the latest opinion survey, just 50% of the population is positively inclined in support of the course their country is following.

Small and mid-sized enterprises (SMEs) have also not been in favor of increasing the minimum wage. Majority of the entrepreneurs of this magnitude said that hiking the revenue and preserving cost-effectiveness were the main barriers and these were in essence, connected with the minimum wage that is being paid to their employees.

On the same lines, a large percentage of entrepreneurs were not sure about starting a new enterprise in South Korea. On the other hand, the economic perspective for South Korea is favorable, with the gross domestic product per capita expected to rise consistently.


Irrespective of how you run a company, branch office, it is important to know the intricacies of hiring local inhabitants of Korea in your company as against hiring foreigners.

Contact us to help you hire the best talent in South Korea for the smooth running of your business.

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All About Korea Foreign Direct Investment 2021

In the aftermath of the Asian financial crisis in 1997, South Korea committed to liberalizing its economy and promoted foreign direct investment (FDI) to open its market to foreign investors. FDI allows foreign investors to acquire and own stocks or shares of Korean companies. According to UNCTAD's 2020 World Investment Report, South Korea’s FDI stocks increased from US$ 135 billion in 2010 to US$ 238.5 billion in 2019. Other forms of FDI include a contribution to Non-Profit Organizations (NPO) and offering long-term loans to domestic companies. Acquisition of stocks or shares of a domestic company guarantees your participation in technology transfer and the management of the company you invested in. As a foreign investor, your investment in South Korea will be facilitated and legally supported by the Foreign Investment Promotion Act. You can also rely on the Rules on Foreign Investment to guide your business operations or Consolidated Public Notice to protect your investment. The South Korean government has cultivated a conducive environment for doing business, with robust measures and policies to help you make the most out of your investment and business capabilities. These measures have enticed investors from across the world and increased inbound investment steadily in the past 15 years. Now is the perfect time to invest in South Korea.   Why Invest in South Korea? South Korea is appealing for foreign direct investment for many reasons. The Korean Government has been reducing tax incentives and increasing cash grants. In January 2019, the government increased cash incentives for foreign companies to around $46 million (50 billion KRW) to entice investors. Cash grants now drive the government’s comprehensive incentive program for foreign investors, which include industrial site support, financial support for staff training, and many more. Companies that invest in the IT sector and related industries qualify for generous cash grants provided by the central and local governments of Korea on a matching fund basis. From January 2020, the number of eligible technologies was expanded to 2,990 in 33 fields, which now includes high-tech products like IoT emotional diagnosis and biometric authentication payment. But South Korea has more to offer foreign investors than FDI cash incentives. Investors are also attracted by the country’s rapid economic development, specialization in ICT, and strong industrial base, high-potential emerging sectors, and expanding market.   Factors to Consider Before You Invest in South Korea In 2009, financial, insurance, and other services made up 64% of inbound investments, compared with 35% invested in manufacturing. Investment opportunities have diversified over the years to include trade, hospitality, real estate, ICT, transportation, and many more. Industries like semi-conductors, auto manufacture, logistics, displays, and environmental products and services are attracting more investors. Under the Foreign Investment Promotion Act, foreign investors can set up a company, foreign branch, or liaison office. Even you'll need to invest in opening a branch in South Korea; it will not fall under FDI since it is not locally incorporated. A liaison office conducts functions like market research and R&D but cannot undertake profit-generating business in South Korea. To set up a local corporation, you’ll need to invest a minimum of around US$ 100,000 (100 million KRW) and does not have a maximum limit. On the other hand, establishing a domestic branch of a foreign company in Korea does not have any limits. Before setting up a business in South Korea, you have to consider how the implications of identification. The act recognizes foreign investors and foreign-invested companies as separate entities and requires independent accounting and settlement. The Foreign Exchange Transactions Act identifies a branch and headquarters as a single entity, which requires consolidated accounting and settlement. The foreign-invested company pays taxes based on domestic and overseas income, while taxes for the branch and liaison office considers income from domestic sources only.   How to Establish a Company in South Korea Since the early 2000s, the government has focused on simplifying the FDI process and established a one-stop services platform to help foreign investors and multinationals invest in South Korea. The FDI procedure starts with foreign investment notification, which is conducted by your foreign exchange bank or accredited agencies like Pearson & Partners. Then, you remit your investment via customs or exchange bank before proceeding to the registration of incorporation at the court registry office. You will be notified once your business registration and incorporation process is completed. Then, you transfer your paid-in capital to a corporate account and wait for a notification confirming the establishment of your foreign-invested company.   How to Set Up a Stock Company in South Korea The Commercial Act of South Korea recognizes five forms of companies, and three types of business forms are available to foreign companies, including the stock company. Each of these business forms has distinct registration requirements, minimum investment limit, and differ in terms of scope. The procedure for establishing a company may differ slightly depending on the degree of commitment or how much you invest in South Korea. There are two ways of setting up a stock company in South Korea. You can use either promotion or subscriptive incorporation, but both procedures involve registration of incorporation that takes about two weeks to complete. Registration tax is charged for both promotion and subscriptive incorporation, which costs around 0.4% of the capital you’ll be investing. You will also have to pay 20% of the registration tax for local education tax. If you invest in stock companies established in overconcentration control areas, the total costs accrued from both taxes can increase by up three times more. Other charges include registration application fee to get revenue stamp of the Supreme Court and notarization fee. The most important step in this procedure is filing your business registration, which should be completed within 20 days from the day your stock company opens its doors for business. To avoid issues down the line, hire an expert in South Korea’s FDI like Pearson & Partners to help you establish a company.   South Korea is ranked 5th globally in the Doing Business 2020 ranking by the World Bank. It has laid a solid foundation across all sectors that will guarantee its position as a global business hub for many years to come. You can rely on Pearson & Partners to help you become part of South Korea’s inspiring journey and join the long list of the success stories of the FDI. Contact us today to start your journey.

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Top 3 Major Business Districts (CBD) in Seoul, Korea

Seoul, the capital city of South Korea, belongs to the league of Asia Pacific’s highly sustainable workplace markets, along with being a cultural hub of the region. Korean cuisine, cinema and pop music have an immense influence all over Asia, transforming the city into a tourist resort of global appeal, while Seoul’s rank as a business hub, depends on the might of its financial services sector and the power of Korean chaebols (corporations) makes it a well-liked investment terminus. Close to 10 million people have their homes in Seoul, but the bigger built-up area houses 25 million, which is close to 50 per cent of the population of South Korea. The city’s key sectors are finance, manufacturing and retail. The internet speed provided within the country is among the worlds fastest and public WiFis can be easily reached. The city proudly carries three primary office districts: the CBDGwanghwamun, the Yeouido Business District (YBD) and the Gangnam Business District (GBD). These CBDs are the country’s heart and soul and longest-serving business districts and also the major shopping areas of Seoul. They take account for a diverse range of businesses. Though research statistics show a CBD vacancy rate of 16.7%, however, it has exhibited a significant rise in rents since the past few months. Gwanghwamun – Rise through the Ranks as Seoul’s Premium Business District Gwanghwamun, in the heart of Seoul, rules the topmost position in the listing of the country’s business districts, on the parameters of annual sales and sales volume per individual. Business districts can be ranked on the basis of the statistical data of geography, population, sales, type of business and consumer’s trends of consumption, as well as information on a map. According to a report, places around Gwanghwamun Station registered the highest sales of 5.8 trillion won ($4.6 billion) in a single year, around approximately eight times hike as against the 2013 review. 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Applying for D-7 Visa in Korea : Eligibility and Requirements

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