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flag South Korea South Korea: Operating a business

In this page: Legal Forms of Companies | The Active Population in Figures | Working Conditions | The Cost of Labour | Management of Human Resources

 

Legal Forms of Companies

Yuhan Hoesa: Private Limited Company
Number of partners: Minimum one, maximum fifty partners.
Capital (max/min): No minimum capital.
Shareholders and liability: Liability is limited to the amount contributed.
Jusik Hoesa: Public Limited Company
Number of partners: One or more partners.
Capital (max/min): No minimum capital.
Shareholders and liability: Liability is limited to the amount contributed.
Hapja Hoeasa: Limited Partnership
Number of partners: Two or more partners.
Capital (max/min): No minimum capital.
Shareholders and liability: Liability of active partners is unlimited. Liability of sleeping partners is limited to the amount contributed when they do not take part in the company management.
Hapmyong Hoesa: General Partnership
Number of partners: Two or more partners.
Capital (max/min): No minimum capital.
Shareholders and liability: Liability is unlimited.
Yuhan Chegim Hoesa: Limited Liability Company
Number of partners: One or more partners.
Capital (max/min): No minimum capital.
Shareholders and liability: Each member’s liability limited to the amount of contributed capital
 

Business Setup Procedures

Setting Up a Company South Korea OECD
Procedures (number) 3.00 5.21
Time (days) 8.00 9.47

Source: Doing Business - Latest available data.

 
For Further Information
Doing Business: South Korea, to learn about procedures to start a business in South Korea
Korea Business Central
The Competent Organisation
The Supreme Court
 

Recovery Procedures

Principle
The insolvency of a company does not immediately lead to bankruptcy or liquidation. There is a reorganisation proceeding and a liquidation proceeding.

The reorganisation proceedings seek to maintain or rehabilitate a company under the supervision of a court; this is done by adjusting the claims and equities of those involved (for instance, creditors).

Minimum Debt-to-Capital Ratio Triggering Liquidation
None
Bankruptcy Laws
Reorganisation and Debtor Liquidation Act (also called Debtor Rehabilitation and Bankruptcy Act).
Reorganization and Rehabilitation Laws
Reorganization and Debtor Liquidation Act (also called Debtor Rehabilitation and Bankruptcy Act).

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The Active Population in Figures

201820192020
Labour Force 28,303,25128,541,66428,348,936

Source: International Labour Organization, ILOSTAT database

 
201720182019
Total activity rate 68.84%68.87%69.11%
Men activity rate 77.99%77.73%77.64%
Women activity rate 59.20%59.54%60.11%

Source: International Labour Organization, ILOSTAT database

 
Employed Persons, by Occupation (% of Total Labour Force) 2015
Manufacturing 17.3%
Wholesale and retail trade; repair of motor vehicles and motorcycles 14.6%
Accommodation and food service activities 8.4%
Construction 7.0%
Education 7.0%
Human health and social work activities 6.8%
Transportation and storage 5.4%
Agriculture, forestry and fishing 5.2%
Administrative and support service activities 4.8%
Professional, scientific and technical activities 4.0%
Public administration and defence; compulsory social security 3.6%
Financial and insurance activities 3.0%
Information and communication 3.0%
Real estate activities 2.1%
Arts, entertainment and recreation 1.6%
Electricity, gas, steam and air conditioning supply 0.4%
Water supply; sewerage, waste management and remediation activities 0.3%
Mining and quarrying 0.1%
 

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Working Conditions

Opening Hours
 
  • Legal Weekly Duration
40 or 44 hours per week.
  • Maximum Duration
12 hours per day or up to 52 hours per week.
  • Night Hours
10 pm until 6 am.
Working Rest Day
According to the labor standard law, employees should have one day off for every week of work, or alternatively, 4 days off for every 4 weeks of work.
Paid Annual Vacation
15~25 days.
15 days for 1-year consecutive service, with 2 additional days for each year of service.
1 day per month for those with a service period of shorter than 1 year
Retirement Age
The minimum normal retirement age is 60. Employees may choose to retire early if the work contract or collective agreement permits earlier retirement.
Child Labour and Minimum Age For Employment
15 years
Informal Labour Market
According to figures released by the Justice Ministry, there were about 453,900 eligible foreign workers - excluding foreign industrial trainees - in Korea as of November 2007. Approximately 222,900 of them were illegal.

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The Cost of Labour

Pay

Minimum Wage
Since January 2022, the legal minimum wage is KRW 9,160 (approximately USD 7) per hour (Minimum Wage Commission).
Average Wage
The average salary in South Korea in 2020 is approximately $41,960 a year, $3,500/month (OECD).
Other Forms of Pay
  • Pay For Overtime
50% more than regular wages. However, a 25% remuneration rate applies for the first four hours of overtime temporarily, for the first three years.
  • Pay For Rest Days Worked
50% more than regular wages.
  • Pay For Night Hours
50% more than regular wages.
  • Pay For Overtime at Night
50% more than regular wages.
 

Social Security Costs

The Areas Covered
Health insurance, national pension, employment insurance, industrial accident insurance.
Contributions
Contributions Paid By the Employer: •    National Pension: 4.5% (National pension contribution is capped at a monthly salary of KRW 5,240,000)
•    Health Insurance: 3.924% (currently capped at a monthly contribution of KRW 8,203,680 in total)
•    Employment Insurance: from 1.05% to 1.65% (1.15% to 1.75% starting from July 2022), depending on the number of employees and type of industry.
•    Worker’s Compensation Insurance: 0.73% to 18.63% depending on the industry
Contributions Paid By the Employee: •    National Pension: 4.5% (National pension contribution is capped at a monthly salary of KRW 5,240,000)
•    Health Insurance: 3.924% (currently capped at a monthly contribution of KRW 8,203,680 in total)
•    Employment Insurance: 0.80%
Competent Organization
Social Insurance Information System
Ministry of Labor

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Management of Human Resources

 

Recruitment

Method of Recruitment
The recruitment process takes place more and more via Internet. Selection is made on the basis of a job interview.
Recruitment Agencies
Public Employment Offices: HRD Korea (Human Resources Development Service of Korea),
Private Human Resources Firms: HR Korea, Adecco Korea, Korn/ Ferry International Korea , Incruit Corp.
Recruitment Websites
Human Resources Development Service of Korea
 

The Contract

Type of Contract
Employment contracts determine if the employee is part of the regular or non-regular staff. Permanent employees form the regular staff. Among the non-regular staff, there are different types of contract: part-time workers, temporary workers, dispatched workers, fixed-term contract workers and entrusted employees.

Breach of Contracts

  • Retirement
There are several forms: general retirement, pre-retirement, etc.
  • Dismissals
If an employer intends to dismiss his/her workers for managerial reasons, he/she is required to meet and follow strict conditions and procedures.

First, the employer should have urgent managerial reasons and make every effort to avoid the dismissal. The employer should also select the workers to be dismissed according to rational and fair criteria and notify the trade union or the workers' representative of the dismissal at least 50 days before the dismissal and consult with them in good faith.

Even in case there is a justifiable reason for dismissal, the employer should notify the worker of the dismissal at least 30 days in advance and if he/she fails to do so, should pay the worker at least 30 days of his/her ordinary wages.

  • Other Possible Methods
Collective dismissals (possible for economic reasons);
Disciplinary dismissals;
Resignation.
Labour Laws
Trade Union and Labor Relations Adjustment Act
Doing Business: South Korea, to obtain a summary of labour regulations that apply to local entreprises
 

Dispute Settlement

 

Conciliation Process

Cases of Dispute
Wage increase (12.6%), collective agreement (82.2%), others (5.2%).
  • Legal Framework
- Public mediation by Labor Relations Commission: organize a mediation committee composed of three members. In case the mediation fails to solve the dispute within the mediation period, the union can take industrial action. In case of arbitration: Industrial action is forbidden for fifteen days. The Labor Relations Commission should organize an arbitration committee with three public interest members. If a party considers the arbitration award made by the Regional Labor Relations Commission to be against the law or beyond the authority of the Commission, it may file for a review of the decision with the National Labor Relations Commission within ten days of the award being made. If the party is still dissatisfied with the arbitration award or decision made by the National Labor Relations Commission after review, it may file an administrative suit within fifteen days.

- Private mediation: by a person or a group other than the Labor Relations Commission, under agreement between both parties or collective agreements.

  • Procedure
Trade Union and Labor Relations Adjustment Act
 

Judicial Structures

  • Legal Framework
Trade Union and Labor Relations Adjustment Act
  • Competent Legal Body
One National Labor Relations Commission and 12 Regional Labor Relations Commissions in major cities and provinces.
Labor-management experts (labor tribunal lay members).
 

Social Partners

Social Dialogue and Involvement of Social Partners
Union negotiations in South Korea take place at the national level, the sector level or the company level.
Unionisation Rate
10.1% in 2012.
Unions
Korean Confederation of Trade Unions (KCTU). Represented about 1,770 affiliates in 2016
Regulation Bodies
Ministry of Labour
 
 

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Latest Update: June 2022