Employment and employee benefits in South Korea: overview

A Q&A guide to employment and employee benefits law in South Korea.

The Q&A gives a high level overview of the key practical issues including: employment status; background checks; permissions to work; contractual and implied terms of employment; minimum wages; restrictions on working time; illness and injury; rights of parents and carers; data protection; discrimination and harassment; dismissals; redundancies; taxation; employer and parent company liability; employee representation and consultation; consequence of business transfers; intellectual property; restraint of trade agreements and proposals for reform.

To compare answers across multiple jurisdictions, visit the Employment and Employee Benefits: Country Q&A tool.

The Q&A is part of the global guide to employment and employee benefits law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employment-guide.

Jeong Han Lee and Anthony Chang, Bae, Kim & Lee, LLC
Contents

Scope of employment regulation

1. Do the main laws that regulate the employment relationship apply to:
  • Foreign nationals working in your jurisdiction?

  • Nationals of your jurisdiction working abroad?

Laws applicable to foreign nationals

All employment and labour laws apply to foreign nationals who work in South Korea. Under choice of law rules, if parties to an employment contract agree to an alternative governing law, employees are not deprived of the protections given to them by the law of the country where they provide employment services. Laws that relate to employment matters include:

  • Article 32 of the Constitution, which establishes some basic principles of employment law, including:

    • that all citizens have the right to work;

    • contemplating legislation providing for minimum wages and working conditions to ensure human dignity;

    • forbidding gender discrimination in employment and work conditions;

    • allowing for special protection for working minors; and

    • allowing for preferential work opportunities for military personnel and policemen or their family members following injury or death in the line of duty.

  • The Labour Standards Act (LSA), the main law regulating minimum standards for a wide range of work conditions. These standards supersede any provision that is less favourable from the employee's point of view in:

    • employment contracts;

    • collective bargaining agreements (CBA); or

    • rules of employment (ROE).

  • Other statutes and related regulations govern various aspects of employment including:

    • various minimum standards set out in the: Minimum Wage Act, Employee Retirement Benefit Security Act, Act on the Protection of Dispatched Workers, Act on the Protection of Fixed-term and Part-time Employees and the Industrial Safety and Health Act;

    • mandatory hiring guidelines set out in the: Employment Security Act, Employee Vocational Capability Promotion Act, Equal Employment Opportunity and Work-Family Balance Assistance Act, Act on Promotion of Employment and Vocational Rehabilitation of Disabled Persons, and the Act on Honourable Treatment and Support of Persons of Distinguished Service to the State;

    • mandatory social insurance provisions set out in the: National Pension Insurance Act, National Medical Insurance Act, Employment Insurance Act, Industrial Accident Compensation Insurance Act and Wage Claim Guarantee Act;

    • labour unions and labour-management relations set out in the Labour Union and Labour Relations Adjustment Act covering labour union activity and dispute resolution, and the Promotion of Employee Participation and Co-operation Act, that concerns labour-management councils and grievance procedures.

Laws applicable to nationals working abroad

Unless the employee and the employer agree on a governing law other than South Korean law, South Korean law applies.

 

Employment status

2. Does the law distinguish between different categories of worker? If so, what are the requirements to fall into each category, the material differences in entitlement to statutory employment rights and are there any maximum time periods for which each category of worker can be engaged?

Categories of worker

Mandatory Labour Standards Act (LSA) standards and other key restrictions apply only to employees. Employees include:

  • Temporary and permanent employees.

  • Full-time and part-time employees.

The LSA defines an employee broadly as a person who offers work to a business or workplace for the purpose of earning wages. Expanding on that definition, the Supreme Court has determined the following set of factors that point to an employer-employee relationship:

  • The employer determines the individual's duties, time and location of work.

  • There are applicable work rules and the person the employer substantially supervises and orders the employee.

  • The duties are not such that the individual is able to delegate them to a third party.

  • The individual does not own work equipment and materials.

  • Remuneration is in correlation to the amount of work the individual does, based on a fixed rate of pay, and income tax is withheld.

  • The relationship is continuous and the individual works exclusively for the employer.

  • Other regulations that class the individual as an employee.

The economic and social circumstances of the parties also indicate an employment relationship.

Entitlement to statutory employment rights

Only employees are entitled to the minimum standards under the LSA. These include:

  • Maximum working hours.

  • Overtime.

  • Night time and holiday work allowances.

  • Minimum annual leave.

  • Minimum severance payment and restrictions on dismissal.

The LSA does not regard independent contractors as employees. Independent contractors are therefore not entitled to the employment rights in the LSA.

Time periods

Fixed-term employees and dispatched employees receive additional protection under the Act on the Protection of Fixed-term and Part-time Employees (Fixed-term Employees Act) and the Act on the Protection of Dispatched Workers (Dispatched Workers Act). A dispatched employee is a worker employed by a temporary work agency and dispatched to work in a company.

  • An employee employed on a fixed term for over two years may be deemed employed for an indefinite term. Certain exceptions apply.

  • If a dispatched employee has worked for two years for the same company, the dispatched employee may be deemed a company employee. Certain exceptions apply.

 

Recruitment

3. Are any grants or incentives available for employing people? Does any information/paperwork need to be filed with the authorities when employing people?

Grants or incentives

Certain grants or incentives are available to employers who hire workers who are:

  • Unemployed.

  • Aged.

  • Veterans.

  • Disabled.

  • Interns.

For detailed information regarding above grants and incentives, see: www.moel.go.kr/english/main.jsp and elaw.klri.re.kr/ eng_service/main.do.

Filings

No filing is required when hiring employees.

 

Background checks

4. Are there any restrictions or prohibitions on carrying out background checks in relation to applicants?

The employer should obtain the consent of the applicant if the background check covers access to certain of the applicant's protected personal information (section 15, Personal Information Protection Act).

 

Permission to work

5. What prior approvals do foreign nationals require to work in your country? What information/paperwork needs to be kept or filed with the authorities when they start work?

Visa

The immigration system only consists of visas. There is no concept of a work permit.

Foreign nationals must generally obtain the appropriate visa before they enter South Korea for business or work purposes. Employers may not use or employ foreigners who do not have appropriate work visas.

There are 36 types of visa. Nine specifically relate to business and employment in South Korea. These visas can be categorised as visas for:

  • Foreign nationals doing business in South Korea (business visas).

  • Foreign nationals employed by South Korean companies (employment visas).

There are four types of business visa:

  • Temporary business visas (C-3 visas).

  • Intra-company transfer visas (D-7 visas).

  • Corporate investments (D-8 visas).

  • Trade management visas (D-9 visas).

The D-7 visa is the most common visa for a foreign national:

  • Employed by a foreign company that has made an investment in South Korea.

  • Dispatched to an affiliated company, subsidiary, branch or office of the foreign company on a long-term basis as an essential professional worker.

Employment visas are issued to foreign nationals who wish to be directly employed by a South Korean entity:

  • C-4 visas are for foreign nationals working for the South Korean employer for 90 days or less. There are no special restrictions on the type of work the foreign national can perform.

  • There are four other employment visas: research (E-3), technology consulting (E-4), licensed profession (E-5), and specially designated activities (E-7). These are long-term visas issued only to foreign nationals taking high-skilled work such as researchers, technology consultants, lawyers, certified public accounts, medical doctors or other professions requiring a master's a higher degree.

Procedure for obtaining approval. The foreign national submits a visa application and other supporting documents, including:

  • A letter of assignment.

  • A certificate of employment.

  • The certificate of incorporation or establishment of a company.

  • Diplomas and licences to practice.

The Ministry of Justice reviews most long-term visas. Overseas South Korean embassies or consulates do not review long-term visas. An expedited processing system exists for these visas under the Ministry of Justice's authority as it can take a long time to obtain for the Ministry of Justice to approve applications. Under this expedited processing system, the immigration offices in South Korea review applications and issue a Certificate of Visa Issuance on behalf of the Ministry of Justice. Once the Certificate has been issued, the foreign national presents it to the overseas embassy or consulate. The embassy or consulate will issue the visa.

A person with a long-term visa who wishes to stay for longer than 90 days must register with the immigration office with jurisdiction over their place of residence. They must register within 90 days of entry. If the relevant status is granted, the person receives an Alien Registration Card.

A registered foreign national should:

  • Report any changes in registration matters within 14 days to the immigration office with jurisdiction over his place of residence.

  • Submit a move-in report for any change in residence within 14 days to the local government authority or to the immigration office with jurisdiction over his place of residence.

Most long-term visas are renewable by obtaining a permit of extension or renewal from the immigration office before the end of the initial stay.

Cost. The cost for the application and issue of the visas is nominal; usually less than US$100.

Time frame. Short-term visas are usually issued within one week of the application. Longer-term visas are usually issued in around three weeks.

Sanctions. Employers who hire a foreign national with no right to work in South Korea are subject to criminal penalties of imprisonment for up to three years or a fine of up to KRW20 million.

Permits

There is no work permit system in South Korea.

 

Restrictions on managers and directors

6. Are there any restrictions on who can be a manager or company director?

Age restrictions

There is no age restriction on managers or company directors.

Nationality restrictions

There is no nationality restriction on managers or company directors.

Other

There is no other restriction on who can be a manager or company director except in certain highly regulated businesses, for example financial institutions.

 

Regulation of the employment relationship

7. How is the employment relationship governed and regulated?

Written employment contract

The Labour Standards Act (LSA) does not require an employment contract to be in writing, unless the contract is for a part-time employee. However, certain terms relating to wages, working hours, annual paid leave and weekly holiday must be in writing. The employer must provide these written terms to the employee at the time the employee enters the employment contract. The employer must retain a copy for at least three years after the employment contract ends.

Even without a written agreement, either side may claim the existence of a verbal or implied agreement. A verbal or implied agreement is enforceable if proven.

The employment contract does not have to be in South Korean.

Implied terms

A workplace with ten or more employees must prepare the Rules of Employment (ROE). The ROE governs the calculation of wages, the timing and method of payment, hours of work, paid leave, training, maternity care, workplace health and safety, disciplinary procedure and other work conditions. The employer files the ROE with the Ministry of Employment and Labour (section 93, LSA).

Certain statutes, mainly the LSA, restrict the terms of employment contracts. Other conditions under the ROE or a collective bargaining agreement (CBA) can supersede the terms of the contract.

Unwritten conditions may be implied into the contract based on the course of conduct over a meaningful period or other circumstances.

Collective agreements

Employees are free to form a labour union that may negotiate a CBA with the employer. Generally, the CBA applies only to union members. Employment conditions may therefore vary between union members and non-union members.

However, the CBA will also apply to the non-union employees engaged in the same work at the same workplace or in the same business, if both (section 35, Labour Union and Labour Relations Adjustment Act):

  • A majority of the employees ordinarily engaged in a given type of work at a given workplace or in a given business are union members and the CBA applies to the union members.

  • The general employment rules contain conditions less favourable than those under the CBA.

The CBA prevails for any employees covered by the CBA.

 
8. What are the main points to consider if an employer wants to unilaterally change the terms and conditions of employment?

Employees must consent to changes in the terms and conditions in their employment contracts.

If the change to the Rules of Employment (ROE) terms and conditions is disadvantageous to employees, the employer must:

  • Obtain the consent of the majority-representing labour union if there is one.

  • The consent of a majority of the employees if there is no majority-representing union.

For other changes to the ROE, the employer only needs to consult with employees.

 

Minimum wage

9. Is there a national (or regional) minimum wage?

The minimum wage rate is set each year under the Minimum Wages Act. It applies to all employees with very limited exceptions, for example employees in their probationary period. The minimum hourly wage rate from 1 January 2015 is KRW5,580.

 

Restrictions on working time

10. Are there restrictions on working hours? Can an employee opt out on either an individual or collective basis?

Working hours

The Labour Standards Act (LSA) imposes a maximum 40 hours week working week and eight hour day.

Generally, an employee may agree to an additional 12 hours a week in overtime. The employer must pay an additional 50% of ordinary wages for overtime.

Night work is work performed between 22:00 and 06:00. The employer must pay an additional 50% of ordinary wages for night work.

Rest breaks

There is a required rest break of one hour for each eight hours of work or 30 minutes for each four hours of work.

Shift workers

There is no exception for shift workers.

 

Holiday entitlement

11. Is there a minimum paid holiday entitlement?

Minimum holiday entitlement

Mandatory paid holidays are:

  • Weekly holidays (typically Sunday).

  • Labour Day (1 May).

Employees must receive 50% additional pay for working on a holiday.

An employee who works a full year is entitled to 15 days of annual paid leave. An employee with over three years of service is entitled to an additional one day of paid leave for every two years following the first year, to a maximum of 25 days (section 60, Labour Standards Act (LSA)).

Public holidays

The employer is not obliged to provide leave on public holidays. However, company policies usually designate public holidays as paid holidays. Public holidays designated by the government are:

  • New Year's Day: 1 January.

  • Lunar New Year's Day (Seollal): 31 December – 2 January by Lunar calendar.

  • Independence Movement Day (Sam Il Jul): 1 March.

  • Children's Day (Uhrininal): 5 May.

  • Buddha's Birthday: 8 April by Lunar calendar.

  • Memorial Day: 6 June.

  • Independence Day (Kwang Bok Jul): 15 August.

  • Harvest Moon Festival (Chuseok): 14 August – 16 August by Lunar calendar.

  • National Foundation Day (Kae Chun Jul): 3 October.

  • Christmas: 25 December.

 

Illness and injury of employees

12. What rights do employees have to time off in the case of illness or injury? Are they entitled to sick pay during this time off? Who pays the sick pay and, if the employer, can it recover any of the cost from the government?

Entitlement to time off for non-work-related illness or injury

Employees are not entitled to time off in relation to non-work-related illness or injuries. However, it is general practice to provide time off in relation to non-work related illness and injury.

Entitlement to paid time off for work-related illness or injury

The employer is obliged to provide paid time off until the employee recovers from work-related illness and injury. However, industrial accident compensation insurance covers all payments associated with work related illness or injury. Employers are obliged to subscribe to this insurance.

Recovery of sick pay from the state

The industrial accident compensation insurance covers relevant sick pay.

 

Statutory rights of parents and carers

13. What are the statutory rights of employees who are:
  • Parents (including maternity, paternity, surrogacy, adoption and parental rights, where applicable)?

  • Carers (including those of disabled children and adult dependants)?

Maternity rights

An employer must allow 90 days of maternity leave or 120 days for twins. At least 60 days or 75 days in case of twins of the leave must be paid. The government pays for the remaining 30 days or 45 days. At least 45 days of leave or 60 days in the case of twins must be taken after the birth.

Maternity paid leave is also payable for miscarriage and premature birth:

  • Five days for pregnancies lasting up to the 11th week.

  • Ten days for those entering the 12th week to 15th week of pregnancy.

  • 30 days for those entering the 16th week to 21st week of pregnancy.

  • 60 days for those entering the 22nd week to 27th week of pregnancy.

  • The full 90 days of leave for those pregnancies lasted at least 28 weeks.

Women with infants under the age of one are entitled to at least 30 minutes of nursing time twice a day.

Female employees are also entitled to one day of unpaid leave per month as menstruation leave.

Paternity rights

An employer must grant at least five days of paternity leave at the employee's request. At least three days of the leave must be paid. Paternity leave requests must be made within 30 days of childbirth.

Surrogacy rights

There are no specific surrogacy rights.

Adoption rights

There are no regulations governing adoption rights.

Parental rights

An employer, on request, must grant up to one year of childcare leave to an employee who has a child, including an adopted child, who is either:

  • Eight years old or younger.

  • Not past second grade in elementary school.

Since childcare leave is unpaid, the government compensates the employee through the Employment Insurance Funds at 40% of normal wage. The monthly payment amount should be between KRW500, 000 and KRW1million.

Employees eligible for parental leave may generally choose to work reduced hours instead of taking parental leave. Reduced working hours should be between 15 hours and 30 hours each week.

Carers' rights

Employers should provide family care leave from 30 to 90 days each year to employees who want to take care of family members including parents, spouse, children, and a spouse's parent if they are sick, injured or old.

 

Continuous periods of employment

14. Does a period of continuous employment create any statutory rights for employees? If an employee is transferred to a new entity, does that employee retain their period of continuous employment? If so, on what type of transfer?

Statutory rights created

The employer is obliged to make a severance payment to an employee who has worked for them for one year or more. The severance payment must be equivalent to at least 30 days' average wages for each year of continuous employment.

Severance payments are made on the termination of employment regardless of the reason for the termination.

The number of days of annual leave can increase depending on the number of years of continuous employment up to a maximum of 25 days per year.

Consequences of a transfer of employee

On a business transfer, the employment relationship transfers. The transferee assumes the employment of the transferring employees under the same terms and conditions as applied to the transferor.

 

Fixed term, part-time and agency workers

15. To what extent are temporary and agency workers entitled to the same rights and benefits as permanent employees? To what extent are part-time workers entitled to the same rights and benefits as full-time workers?

Temporary workers

The Fixed-term Employees Act prohibits employers from using fixed-term employees for more than two years. Where an employer uses a fixed-term employee for more than two years, the employee is deemed employed for an indefinite term. There are certain exceptions.

Agency workers

While there is no concept of agency workers, the Dispatched Workers Act regulates the use of employees of another company by way of "worker dispatch" from a temporary work agency.

Under the Dispatched Workers Act, a company is prohibited from engaging dispatched workers in direct production processes and can only engage dispatched workers in 32 specified business roles. These include computer expert services, travel guide services, and security services. Any employer who dispatches or uses a dispatched worker contrary to the Dispatched Workers Act may be subject to criminal sanctions.

Further, if a dispatched employee has worked for two years for the company, the dispatched employee may be deemed to be a company employee. There are certain exceptions.

The employment conditions for dispatched workers should conform to the employment rules that apply to the company's regular employees in the same or similar jobs. If the company does not have any regular employees with the same job, the company must provide the new employee at least the same working conditions as when he was a dispatched employee. Failure to comply may be punishable by criminal sanctions.

Part-time workers

The terms and conditions for part-time workers should be based on the proportion of their working hours compared with those of full-time workers engaged in the same kind of job (section 8, Fixed-term Employees Act).

 

Data protection

16. Are there any requirements protecting employee privacy or personal data? If so, what are an employer's obligations?

Employees' data protection rights

The Personal Information Protection Act (PIPA) addresses data protection. Under PIPA, an employee may inspect, ask for correction of and suspend the use of any of their personal information handled by the employer.

Employers' data protection obligations

Under PIPA, the employer must obtain the consent of the employee to collect, process, manage or transfer to a third party, any of the employee's personal information.

 

Discrimination and harassment

17. What protection do employees have from discrimination or harassment, and on what grounds?

Protection from discrimination

Employers must not engage in discriminatory treatment in relation to working conditions on grounds of nationality, religion or social status. Also:

  • Discrimination against fixed-term, part-time and dispatched workers, is prohibited (see Question 15).

  • Discrimination based on age is prohibited (Age Discrimination Prohibition in Employment and Aged Employment Promotion Act).

The Constitution as well as the Labour Standards Act (LSA) broadly prohibits discrimination against workers on the basis of gender. Also, the Equal Employment Opportunity and Work-Family Balance Assistance Act (Equal Employment Act):

  • Prohibits gender discrimination by employers in recruitment, employment, promotion, retirement or other aspects of employment.

  • Obliges employers to prevent sexual harassment in the workplace.

  • Provides safe and peaceful working conditions.

Failure to comply with the Equal Employment Act can lead to criminal and civil penalties.

Employers must not discriminate against fixed-term employees, part-time workers and dispatched workers in terms of pay or other working conditions compared with those of other workers engaged in the same kind of job (Fixed-term Employees Act and Dispatched Workers Act).

Fixed-term employees, part-time workers and dispatched workers who suffer discriminatory treatment have the right to file a claim for corrective measures to the Labour Relations Commission (LRC) within six months after the alleged treatment.

When a claim is filed, the LRC must investigate the case and may order an adjustment or corrective measure, improve wages or other working conditions, or award appropriate monetary damages.

Protection from harassment

There is no specific legislation generally regulating harassment.

The Equal Employment Act prohibits sexual harassment in the workplace. Sexual harassment is defined as when an employer, superior or employee uses their position or in relation to work either:

  • Provokes in another a sense of sexual humiliation or sense of insult by any sexual language or act.

  • Imposes unfavourable conditions of employment as a result of the victim's refusal to accept the sexual advances.

An employer must provide education to prevent sexual harassment at work at least once a year, taking into account the size and circumstances of the business.

The Equal Employment Act also prohibits an employer from taking retaliatory measures against the victim for lodging a complaint.

 

Whistleblowers

18. Do whistleblowers have any protection?

The Act on the Protection of Public Interest Whistleblowers (Whistleblower Act) has provisions to protect whistleblowers who report certain public interest issues including matters relating to public health, safety, environmental protection, consumer protection and fair competition. The Act contains provisions to protect the whistleblower from any retaliation by their employer.

 

Termination of employment

19. What rights do employees have when their employment contract is terminated?

Notice periods

An employer must give 30 days advance notice of termination, or 30 days' pay in lieu of notice. However, notice may not be required if:

  • It is impossible to maintain the business due to a natural disaster or other unavoidable reason.

  • The employee commits any intentional wrongful act or omission that has a serious adverse effect on the company's business or operations.

  • The employee is serving a probationary period of three months or less.

  • The employee is paid monthly and has worked for less than six consecutive months.

  • Other similar situations apply.

Severance payments

Under the Employee Retirement Benefit Security Act (Retirement Benefit Act), employers must either:

  • Pay severance at the end of the employment relationship.

  • With the employees' consent, set up a retirement pension system.

The severance amount for each employee who has worked for at least one year is the equivalent of 30 days' average wages for each year of continuous employment. Average wages are calculated by using wages for the three months preceding termination.

Severance payments apply to voluntary retirement as well as termination for cause.

Interim payment of the severance accrued to date is allowed only in specific situations prescribed by the Retirement Benefit Act.

As an alternative to the retirement pension system, an employer may adopt either:

  • A fixed contribution system, where the employer contributes fixed amounts for the retirement pension.

  • A fixed payment system, where the amount to be paid at retirement is pre-determined.

To adopt either retirement system, the employer must:

  • Obtain the consent of the labour union, if there is one that represents the majority of the employees and if not, the consent of a majority of the employees.

  • File by-laws detailing the system with the Ministry of Employment and Labour.

Procedural requirements for dismissal

Where employment rules provide for a particular process for dismissal such as a disciplinary committee hearing, a dismissal that does not follow that process may be invalid.

The termination notice should be in writing and include the reasons for the termination.

 
20. What protection do employees have against dismissal? Are there any specific categories of protected employees?

Protection against dismissal

An employer cannot dismiss an employee without just cause. The courts have interpreted just cause to mean grounds as would, in the eyes of an ordinary person, constitute reasonable grounds for termination. The just cause must be some factor so significant that continuing the employment would be unduly burdensome for the employer.

The employer has the burden of proof to show just cause. In practice, it is a difficult standard to meet. The overall circumstances must be examined, including the severity and frequency of the alleged misconduct or poor performance. Generally, a single instance of negligence or incompetence for relatively minor aspects of work is unlikely to constitute just cause. Gross and repetitive misconduct will constitute just cause. Internal company disciplinary standards are open to scrutiny and not determinative.

The Supreme Court has decided that dismissal without just cause is null and void. The employee is entitled to seek reinstatement by filing with the Labour Relations Commission (LRC) or a court. The employee is entitled to back wages from the time of dismissal until reinstatement.

An employer who does not follow the remedy order rendered by the LRC may be subject to administrative penalties in an amount not to exceed KRW80 million over two years.

An employer who does not comply with a final decision of reinstatement once they have exhausted all avenues of appeal may be subject to criminal sanctions of imprisonment for not more than one year or by a fine not exceeding KRW10 million.

Protected employees

An employer cannot dismiss an employee during, or within 30 days following, a maternity leave or any period of leave for medical treatment for an industrial injury or disease.

 

Redundancy/layoff

21. How are redundancies/layoffs defined, and what rules apply on redundancies/layoffs? Are there special rules relating to collective redundancies?

Definition of redundancy/layoff

A collective dismissal, layoff or downsizing generally corresponds to what is known as a dismissal for reasons of managerial necessity. To determine whether managerial necessity exists, the courts take into account the overall circumstances of a company.

According to some court decisions, a collective dismissal for managerial reasons under the Labour Standards Act (LSA) may be valid provided the dismissal can be persuasively shown to be necessary to prevent a business crisis. The dismissal may be valid even if the company does not face imminent insolvency. The validity of a proposed collective dismissal should be determined on a case-by-case basis, taking into account factors including:

  • The company's financial condition.

  • Market conditions.

  • Competitiveness.

A business transfer or a merger and acquisition is generally regarded as an urgent managerial necessity.

Procedural requirements

For a layoff, the following conditions should be satisfied:

  • There is an urgent managerial necessity and the employer is able to demonstrate this.

  • The employer must exert its best efforts to avoid or minimise dismissals. Court decisions have clarified the meaning of best efforts in this context. Efforts by the employer include:

    • reducing labour costs by reducing or freezing wages or limiting overtime;

    • avoiding new hires;

    • using temporary leaves of absence in order to reduce labour costs;

    • offering voluntary retirement plans;

    • discontinuing employment agreements with temporary or part-time employees;

    • restructuring the work force in an efficient way; and

    • reducing other costs and expenses.

  • The employer must apply fair and reasonable criteria in designating the employees to be dismissed.

  • The employer must consult in good faith and 50 days in advance of dismissal with a representative of the majority of employees, or the labour union representing a majority of the employees if there is one.

  • If the number of employees to be dismissed exceeds the applicable threshold, the employer must file a report with the Ministry of Employment and Labour. The filing must take place 30 days in advance, of the dismissal and state matters that include: the reasons for dismissal, the number of employees to be dismissed, and the timeline for the dismissals. The applicable threshold is as follows:

    • Ten employees for a company with fewer than 100 employees;

    • 10% of the employees for a company of 100 to 999 employees; and

    • 100 employees for a company of 1000 employees or more.

Collective dismissal that does not comply with the conditions in the bullets above is invalid. As in the case of other dismissals without just cause, the employer may be compelled to reinstate employees and pay back wages from the date of dismissal to reinstatement.

An employer may be obliged to rehire the employees if it decides to expand its workforce following a layoff. An employer must rehire previously dismissed employees within three years of their dismissal if the employer decides to hire new employees for positions similar to the ones previously held by the dismissed employees.

Redundancy/layoff pay

There is no legal requirement for benefits in addition to severance under the Retirement Benefit Act. However, as the conditions and procedures for collective dismissal involve uncertainty and complexities, employers often choose to offer extra compensation to induce employees to resign voluntarily.

Collective redundancies

There is no distinction between collective redundancies and a redundancy.

 

Employee representation and consultation

22. Are employees entitled to management representation (such as on the board of directors) or to be consulted about issues that affect them? Is employee consultation or consent required for major transactions (such as acquisitions, disposals or joint ventures)?

Management representation

In any workplace with 30 or more employees, the employer must establish a Labour Management Council (LMC) comprising:

  • Three to ten representatives of the employees.

  • An equal number of management representatives.

The LMC discuss issues regarding management and general conditions of employment (Promotion of Employee Participation and Co- operation Act) (PEPCA).

Consultation

50 days in advance of a proposed layoff or collective dismissal, the employer must consult in good faith with a representative of the majority of the employees or the labour union that encompasses the majority of the employees, if there is one. The employer must also consult on methods of mitigation and the criteria for dismissal.

The labour union representing a majority of the employees or the majority of the employees, if there is no union, must consent to:

  • Amendments to employment rules that disadvantage employees.

  • The adoption of a new retirement pension system.

Major transactions

A merger or acquisition does not require consultation with or consent of any employee representative unless the Collective Bargaining Agreement (CBA) or the Rules of Employment (ROE) provide otherwise. However, an employee must consent to being transferred to a new employing entity, including in the context of a business transfer.

 
23. What remedies are available if an employer fails to comply with its consultation duties? Can employees take action to prevent any proposals going ahead?

Remedies

The failure to consult or obtain consent, where required, may make any action null and void.

Employee action

Employees may apply for an injunction to stop the proposal.

 

Consequences of a business transfer

24. Is there any statutory protection of employees on a business transfer?

Automatic transfer of employees

There is no specific legislation to protect employees in the event of a business transfer. However, the courts have decided that the employment relationship is comprehensively and automatically transferred to the transferee of the business, unless the relevant employee personally objects.

Protection against dismissal

There is no protection against dismissal. On the contrary, an urgent business necessity required for the layoff of the employees is assumed on a business transfer.

Harmonisation of employment terms

Employers must obtain employees' consent to change the terms and conditions of employment contracts:

  • To change the terms and conditions in the Rules of Employment (ROE) in a manner disadvantageous to the employees, the employer must obtain the consent of the majority-representing labour union if there is one, or else the consent of a majority of the employees.

  • If the change is not disadvantageous to the employees, only consultation is required.

 

Employer and parent company liability

25. Are there any circumstances in which:
  • An employer can be liable for the acts of its employees?

  • A parent company can be liable for the acts of a subsidiary company's employees?

Employer liability

Under the Civil Code, an employer is vicariously liable to third parties for damages caused by the acts or omissions of employees committed during the performance of their work.

Under the Labour Standards Act (LSA), if an employee who acts on behalf of an employer commits a criminal offence in circumstances set out in sections 107, 109 and 110-114 of the Act, the employer as well as the employee, may be subject to criminal sanctions. The employer will not face criminal sanctions if they have previously taken appropriate measures to prevent the offence. If the employer is a legal entity, any criminal sanctions apply to the representative of the entity.

Parent company liability

Parent companies are unlikely to be liable for the act of the employee of a subsidiary.

 

Employer insolvency

26. What rights do employees have on the insolvency of their employer? Is there a state fund which guarantees repayment of certain employment debts?

Employee rights on insolvency

Employees have first priority claims on the employer's assets, ranking before secured creditors for:

  • Three months' wages.

  • Three years' severance payment.

  • Industrial accident claims.

For other wages and other claims, the employees' claims have a slightly lower priority and rank after secured creditors.

State guarantee fund

Generally, employers are required to pay premiums to support the government's statutory guarantee of wage claims in case of employer bankruptcy. The amount of the premium is determined individually for each employer by the Ministry of Labour. Premiums do not exceed 0.2% of total wages. In certain cases, employers may be exempt from paying premiums.

 

Health and safety obligations

27. What are an employer's obligations regarding the health and safety of its employees?

The Industrial Safety and Health Act (ISHA) covers all business and workplaces, except those exempt by presidential decree. Employers must:

  • Maintain and improve workers' occupational health and safety.

  • Take necessary measures to eliminate hazards in the workplace, regardless of whether or not machinery or instruments cause the hazards.

  • Be responsible for employees' health and safety education.

  • Be responsible for workplace inspections and the clear marking of hazardous substances.

  • Provide periodic health examinations for employees.

  • Appoint a health and safety manager to supervise matters of health and safety in the workplace.

 

Taxation of employment income

28. What is the basis of taxation of employment income for:
  • Foreign nationals working in your jurisdiction?

  • Nationals of your jurisdiction working abroad?

Foreign nationals

Income Tax regulations regard any foreign national who stays in Korea for 183 days or more as resident for tax purposes. Foreign nationals who are tax resident are subject to income tax on all worldwide income in the same way as Korean nationals.

Non-resident foreign nationals are only taxed on Korean sourced income.

Nationals working abroad

Korean nationals working abroad are generally regarded as a resident of Korea as long as they are expected to return to Korea.

 
29. What is the rate of taxation on employment income? Are any social security contributions or similar taxes levied on employers and/or employees?

Rate of taxation on employment income

The following rates of taxation are charged on employment income:

  • Income of up to KRW12 million: 6%.

  • Income from KRW12 million and up to KRW46 million: 15% (plus KRW1.08 million).

  • Income from KRW46 million and up to KRW88 million: 24% (plus KRW5.22 million).

  • Income from KRW88 million and up to KRW150 million: 35% (plus KRW14.90 million).

  • Income of KRW150 million and above: 38% (plus KRW19.40 million).

Social security contributions

Social security contributions are as follows:

  • National pension: 9% of monthly salary up to KRW4.08 million. The contribution is shared equally by the employer and the employee.

  • National Health Insurance: 5.99% of monthly salary plus 6.55% for long-term care insurance. The employer and the employee share the contribution equally.

  • Industrial Accident Compensation Insurance: the employer contributes between 0.7% to 34.04% of monthly salary, depending on the industry.

  • Unemployment Insurance: 1.3% of monthly salary for unemployment insurance. The employer and the employee share the contribution equally. In addition, the employer contributes between 0.25% to 0.85% (depending on the size of the company) of monthly salary for job security and vocational capability insurance.

 

Bonuses

30. Is it common to reward employees through contractual or discretionary bonuses? Are there restrictions or guidelines on what bonuses can be awarded?

There is no restriction or guidelines on awards of bonuses.

 

Intellectual property (IP)

31. If employees create IP rights in the course of their employment, who owns the rights?

Employees must notify the employer if they invent anything in the course of their employment. The employer has the option to take ownership of the invention. If the employer opts to take ownership, then it must pay reasonable compensation to the relevant employee(s) (section 15, Inventions Promotion Act).

 

Restraint of trade

32. Is it possible to restrict an employee's activities during employment and after termination? If so, in what circumstances can this be done? Must an employer continue to pay the former employee while they are subject to post-employment restrictive covenants?

Restriction of activities

The usual restrictions are:

  • Not to compete.

  • Not to solicit customers or employees.

Post-employment restrictive covenants

The courts generally respect non-compete covenants. However, courts balance non-compete covenants against an employee's freedom of choice of work or business. Therefore, the courts review and determine the non-compete covenants on a case-by-case basis. The courts consider the following criteria:

  • The nature of the interest the employer wishes to protect under the non-competition provision. This should be a trade secret or other confidential information that is agreed not to be disclosed to third parties.

  • The level or position of the employee before termination.

  • The nature of the restriction including the length of the restriction period, geographical scope and the work scope of the restriction.

  • Any compensation to the employee in consideration for the covenant.

  • The reason for termination of employment.

  • The prevailing market practice in the relevant industry.

  • The public interest.

 

Proposals for reform

33. Are there any proposals to reform employment law in your jurisdiction?

There are currently no proposals for reform.

 

Online resources

Ministry of Employment and Labour

W www.moel.go.kr

Description. The website of the Ministry of Employment and Labour (English translations are available).

Korea Legislation Research Institute

W elaw.klri.re.kr

Description. A website containing South Korean statutes (in English).

Court Library

W library.scourt.go.kr

Description. A website containing Court decisions (in South Korean).

National Assembly Library

W www.nanet.go.kr

Description. Information regarding statutes in South Korean.

Central Economy

W www.e-labor.co.kr

Description. Legislation and case law regarding employment and labour law (in South Korean).



Contributor profiles

Jeong Han Lee, Partner

Bae, Kim & Lee, LLC

T +82 2 3404 0132
F +82 2 3404 0804
E jeonghan.lee@bkl.co.kr
W www.bkl.co.kr

Professional qualifications. Korea and Seoul, 1988; New York, 1999

Anthony Chang, Partner

Bae, Kim & Lee, LLC

T +82 2 3404 0243
F +82 2 3404 0803
E anthony.chang@bkl.co.kr
W www.bkl.co.kr

Professional qualifications. Missouri, 1994; New York, 1995; Massachusetts, 1998


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