South Korea's new labour laws have been implemented to improve the quality of life for employees while increasing compliance challenges for employers.
Jurisdiction
South Korea
What's new?
A new batch of labour laws covering income tax thresholds, social security rates, reduction of workweek hours and paternity leave policies came into effect on 1 January 2020.
The laws are wide-ranging, and employers must ensure their internal policies comply with the new changes.
The new South Korea labour laws are:
1. Reduction of retirement income tax threshold for executives
To collect more taxes from high-income earners, the multiplier in the retirement income threshold calculation formula has been reduced (from three to two) for retirement income earned on or after Jan. 1, 2020. The increased income is now considered wage and salary income, subject to a higher tax rate than retirement income.
2. Due date extension for submission of Bi-annual Simplified Statement on Wage and Salary Income payment
The Korean National Tax Service introduced the Bi-annual Simplified Statement on Wage & Salary Income Payment to allow the government to pay low- income families a wage subsidy twice a year rather than the previously annual payment. Payment to non-resident corporations has been excluded from submission forms.
3. Increase of tax exemption threshold
The tax exemption threshold for Pro Rata Employee Local Resident Tax has been increased from KRW 135 million to KRW 150 million starting 1 January 2020.
Wages paid to employees who are on childcare leave and have returned to the workplace from childcare leave of six months or longer are excluded from the tax base.
4. 52-hour workweek expanded
Under the Labour Standards Act 2018, the maximum working hours per week, which included Saturday and Sunday, had been capped at 52 hours for a workplace with 300 or more permanent employees. It has now expanded to workplaces with 50-299 permanent employees.
5. Social security contribution rate changes
| Social Security type |
Applicable rate * Monthly taxable salary |
Notes (Based on monthly withholdings) |
|||
| Employee portion |
Employer portion |
Total rate until Jan. 2020 |
Total rate until Dec. 2019 |
||
|
National Pension |
4.50% |
4.50% |
9.00% |
9.00% |
2018.7: Max (KRW 210,600 x 2) 2019.7: Max (KRW 218,700 x 2) 2020.7: Max (KRW226,350 x 2) |
|
National Health Insurance |
3.335% |
3.335% |
6.67% |
6.46% |
2020: 6.67% 2020 : Max (KRW 98,537,462 (*) X 3.335% X 2) (*) 2019 max. threshold amount. 2020 max threshold unavailable yet. |
|
Long-Term Care Insurance (NHI contribution * rate) |
10.25% |
3.335% |
6.67% |
6.46% |
2020 : 20.50% of National Health Insurance contribution |
|
Employment Insurance |
0.80% |
3.335% |
6.67% |
6.46% |
1.85% (Min. rate for businesses with less than 150 employees) 2.45% (Max. rate for businesses with 1,000 or more employees) |
|
Industrial Accident Compensation Insurance |
N/A |
Around 0.6~1.3% |
Around 0.6~1.3% |
Around 0.6~1.3% |
Normal office working business category-based rates |
6. Paternity leave increase and work hours reduction request for childcare
Paternity leave law has increased to 10 days of paid leave that must be used within 90 days from the child's date of birth. It can be used consecutively or in two instalments and no unfavourable action can be taken against an employee for discharging this benefit.
Employees are eligible to request reduced working hours from 15-35 hours per week for childcare, with a relevant salary adjustment.
When does it come into force?
All these regulations and laws came into force 1 Jan 2020 except for the paternity leave increase, in effect since October 2019.
What does it mean for business?
These laws benefit employees but can mean extra work for businesses. Employers must update policy documents, contracts and handbooks and make sure they are in full compliance with the law.
How TMF Group can help
TMF South Korea has a team of experts with in-depth knowledge of HR and payroll to help your company navigate these new labour laws. Employers operating in South Korea must ensure their policies are updated – and put them into practice.
Want to know more about our services? Talk to us.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
