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: The World Bank - Doing Business, Latest data available.

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

Financial Information Directories

Dan & Bradstreet - South Korea business directory

Dun & Bradstreet - Worldwide directory with financial information on businesses

Kompass - South Korea Business Directory

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).

The Active Population in Figures

	2018	2019	2020
Labour Force	28,303,251	28,541,664	28,348,936

Source: International Labour Organization - ILOSTAT, Latest data available.

	2017	2018	2019
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, Latest data available.

For Further Statistics: Korea National Statistical Office
For Further Information About the Labour Market: National Labour Relations Commission (NLRC)
Human Resources Development Service of Korea

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.

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

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.
Regulation Bodies: Ministry of Labour

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