Payroll in South Korea: A Comprehensive Guide for 2026

Introduction

Payroll in South Korea requires registering employees with the National Tax Service, calculating contributions to four mandatory social insurance programs administered by the National Pension Service and National Health Insurance Service, and following the Labor Standards Act's rules on wages, working hours, and severance pay.

Employers also withhold progressive income tax, ranging from 6 percent to 45 percent, and pay wages on a fixed monthly payday set in the employment contract.

South Korea's labor market draws a hard line between regular and non-regular workers, and misclassifying that distinction changes contribution obligations, severance liability, and termination protections for the same role. Foreign employers without a local entity carry this risk directly, and National Pension contributions are rising every year through 2033, so budgets set a year ago may already be out of date.

In this guide, we cover the payroll process, social insurance rates, income tax withholding, compliance penalties, and how a payroll provider can manage this on a foreign company's behalf.

What is the payroll process in South Korea?

In South Korea, the payroll process is not much different than in many other jurisdictions. That is, basic procedures are fairly standard. The main phases of payroll are:

(i) Pre-payroll

(ii) Payroll calculation

(iii) Post-payroll

These can be broken down as follows:

Pre-payroll Phase

Here is where you set up your business and lay the essential groundwork required by local regulatory authorities to operate as a business in any given jurisdiction.

You cannot handle any payroll processes, let alone pay employees, unless you're a registered and licensed legal entity.

To do so, you need to follow some important steps including:  

Business Profile

As an employer, you need a registered number or code for your business, not only for basic regulatory requirements but also for future tax compliance and communication purposes.

Work Location

Equally essential, your business must have an official and formal business address (or addresses, in case you've several subsidiaries or locations) for regulatory and compliance purposes.

Leave Policy

In any business, a leave policy is not a matter of unessential formalities.

Instead, any business must have a leave policy not only to monitor employee performance but also to calculate payroll for future compliance and reporting purposes.

Attendance Policy

Similar to leave policy and just as important, an attendance policy is developed both to monitor employee performance and for later compliance and reporting requirements.

Statutory Components

The payroll process involves, among many things, basic statutory components every employer must comply with as a legal business operating in any given jurisdiction.

That means that you as an international employer must thoroughly understand and abide by any laws, regulations, or policies existing in your jurisdiction.

In South Korea, for example, you must fully understand labor standards laws to be compliant.  

Salary Components

Beyond basic statutory compensation mandated by law, you as an international employer need to develop a unique compensation structure that encompasses your internal business policies and also attracts additional skilled workers.

That means salary components should be flexible enough to accommodate both mandatory salary components (such as minimum wage and benefits) and additional components you could introduce to project a more favorable brand image of you as an international employer.

Pay Schedule

This is the single most important component that employees and independent contractors emphasize, more so under uncertain or hard economic conditions.

Beyond a fixed payment day, which is an established practice, you could introduce more flexible payment schedules to accommodate employee needs..  

Flexible payment schedules have, moreover, an additional benefit of attracting and retaining talent who, above so many employment criteria, appreciate flexibility most.

Employee Information

Managing payroll is a data-intensive process. Included in data collection activities during the pre-payroll phase is collecting employee information.

Beyond internal management control purposes (such as managing employee attendance, leaves, performance, etc.), employee information is crucial for later regulatory and compliance purposes.

Payroll Calculation Phase

Calculating payroll includes (but is not limited to) salaries or wages, social insurance contributions, withholdings, deductibles, etc.

The purpose of payroll calculation is not only to pay employees but also to perform different several accounting, auditing, compliance, and reporting activities in a later phase.  

Payroll calculation can be performed internally or, budget permitting, by using payroll services in South Korea.

Post-payroll Phase

Here is where you combine science and art to close out the payroll process by performing additional, final but crucial steps including:  

Salary Payments

As an initial step to finalizing the payroll process, employees must be paid according to stated in-country laws and regulations and based on mutual contractual agreements.

Companies globally pay employees and independent contractors on a monthly, weekly, or hourly basis.

Moreover, a corporate bank account is usually used to make salary or wage deposits, a standard and conventional practice, or a company might automate salary or wage payments using a payroll provider in South Korea.

Payroll Accounting

Here is where you move on closer to regulatory and compliance matters by ensuring your payroll records are ready for later form-filling and reporting activities as mandated in law.

Here you must include all payroll components — such as salaries or wages, social insurance, benefits, deductibles, etc. — plus any additional payroll expenses spent managing the payroll process.  

Payroll Reporting and Compliance

The payroll process is concluded by filling in all required tax forms and making sure you report all required corporate earnings by announced deadlines and to relevant regulatory bodies

As previously noted, the three-phase payroll process discussed above is performed almost universally.

South Korea's complicated two-tiered labor regulations for regular and non-regular workers, make the payroll process an unfeasible feat for many international employers.

Foreign companies without a South Korean entity face the same pre-payroll and post-payroll obligations, but without in-house legal expertise or familiarity with local labor law. Many small-to-medium companies address this by working with a payroll provider rather than building the function internally.

What does payroll management involve in South Korea?

Managing payroll in South Korea is not only about maintaining payroll records for future compliance and reporting purposes.

Instead, as an international employer, you need to pay particular attention to country-specific payroll laws and considerations in South Korea including (but not limited to):

• Changes in corporate income tax
• Withholding taxes
• Tax administration
• Personal income tax
• Income determination
• Tax credits and incentives

What are the key payroll components in South Korea?

The Labor Standards Act 5309 of 1997 in South Korea defines labor law on matters of minimum employment standards in areas including but not limited to contracts, leaves, dismissal, working hours, and more.

For current purposes, here is what matters most for an international employer planning to hire and pay talent in South Korea:

Minimum compensation

Employees are entitled to a minimum compensation of KRW 2,156,880 per month or KRW 10,320 per hour, the rate the Minimum Wage Council set for 2026.

Standard working hours

• Set at 40 hours per week or eight hours per day
• Defined as night work if performed between 10:00 p.m. and 6:00 a.m.

Overtime

Under South Korea's Labor Standards Act, employees can work up to 12 more hours per week, upon agreement. in return for an additional 50% of base salary or wage.

Social security contributions

Social security contributions are shared between employers and employees as a percentage of monthly salary as follows:

Employer

• 50% of 9.5% for national pension insurance, effective January 1, 2026
• 50% of 7.19% for national health insurance
• 50% of 13.14% of the health insurance premium for long-term care insurance
• 0.6%-18.5% for industrial accident compensation assurance, industry-dependent
• 0.13%-0.1% for industrial accident compensation assurance on accidents during commuting
• 0.9% for unemployment insurance, matched by an equal 0.9% employee contribution
• 0.25%-0.85% for job security and vocational capability insurance

Employee

• 50% of 9.5% for national pension insurance
• 50% of 7.19% for national health insurance
• 50% of 13.14% of the health insurance premium for long-term care insurance

Sick leave

• Unpaid for any non-work-related reasons, as South Korea's Labor Standards Act creates no general statutory right to paid sick leave
• Paid, at 60% of average wages, for injuries or illness arising from work, and covered separately under Industrial Accident Compensation Insurance
• Many employers voluntarily provide paid sick leave as a company benefit, though this isn't a legal requirement

Parental leave

To overcome an aging population problem, South Korea has extended earlier parental leaves for working fathers and mothers under a series of laws and measures as follows:

Paternity leave

• 20 days for childcare, up from 10 days, following amendments effective February 23, 2025
• 90 days for childbirth
• 15 to 35 reduced working hours per week for up to one year, for childcare of children aged 12 years or younger

Maternity leave

• 90 days, 60 of which are paid, for pregnant women
• 45 days before childbirth and 45 days after childbirth

Among the most progressive parental benefits in the world, childcare leave in South Korea can extend up to 18 months in qualifying cases, such as when both parents each use three months or more, or for single parents and parents of children with severe disabilities, under the Act on Equal Employment Opportunity and Work-Family Balance Assistance.

This exceptional benefit — provided to boost fertility rates in South Korea, which has one of the lowest in the world — is a particularly flexible arrangement for working parents, more so for high-skilled workers who are always looking for the right balance between great work expectations and rewarding life experiences.

Public holidays

• January 1.  New Year's Day
• December 31 to January 2. Lunar New Year's Day ("Seollal")
• March 1. Independence Movement Day ("Sam Il Jul")
• May 5. Children's Day ("Uhrininal")
• April 8. Buddha's Birthday
• June 6. Memorial Day
• August 15. Independence Day ("Kwang Bok Jul")
• August 14 to August 16. Harvest Moon Festival ("Chuseok")
• October 3. National Foundation Day ("Kae Chun Jul")
• December 25. Christmas Day

*Dates of these holidays and observances may change based on religious calendars.

Income tax

These are levied progressively as a percentage of employment income and surtax as follows:

Source: PwC's Korea tax summary, last reviewed July 2, 2026.

What are the payroll compliance requirements in South Korea?

Taxes are usually a priority for many businesses, especially ones having international operations.

However, compliance in any jurisdiction is not limited to taxes but includes just as important compliance requirements for social security, statutory benefits, deductibles, and more.

Compliance is not, moreover, only about abiding by a country's tax and employment laws but is also a matter of reputation. That is, maintaining a good record with in-country regulatory authorities is apt not only to confirm your business as trustworthy but also to promote your brand among existing and prospective employees.

In South Korea, failing to comply with tax laws and regulations subjects you to penalties including (but not limited to):

How can a payroll provider company help with payroll in South Korea?

A payroll provider company takes on the day-to-day mechanics of paying employees correctly under South Korean law. This typically includes registering employees with the National Tax Service and the four social insurance agencies, calculating income tax withholding and statutory deductions each pay cycle, filing monthly and year-end tax returns, and keeping records current as rates and thresholds change.

For companies without an in-house payroll team familiar with South Korean regulations, working with a payroll provider reduces the risk of missed filings, incorrect withholding, or penalties tied to late or inaccurate reporting.

Skuad supports payroll processing for companies hiring in South Korea, so your team doesn't need to build this expertise internally.Here is what Skuad helps with:

• Supports payroll processing in 70+ currencies with accurate tax withholding and statutory deductions
• Facilitates statutory contribution workflows across supported markets, covering applicable social insurance obligations
• Supports employment contract generation across 160+ countries, aligned with local labor requirements
• Assists with termination and offboarding support aligned with local labor requirements across supported markets

Book a demo to see how Skuad supports payroll in South Korea.

Customer story: How OpenSolar expanded its team with Skuad

OpenSolar, a Sydney-based solar design and sales software company, was growing its remote team across multiple international markets. The company needed a compliant way to onboard employees without setting up a local entity in each new country. Skuad supported compliant onboarding and on-time, multi-currency payroll across all three markets. OpenSolar onboarded 40 team members through the platform, with employment practices aligned to each country's labor requirements.

"Skuad, a Payoneer company, has been a key partner in our international expansion. Their seamless onboarding process and compliance expertise have allowed us to focus on our core mission, which is to accelerate the world's transition from fossil fuels to solar energy."

Lavinia Davison, Global Head of Talent & Operations, OpenSolar

Read the full OpenSolar case study

What other labor laws apply in South Korea?

In addition to South Korea's flagship Labor Standards Act, there are several labor-related laws of which you must also be aware as an international employer. These include (but are not limited to):

• Occupational Safety and Health Act of 2011 (amended 2012)
• Equal Employment Opportunity and Work-Family Balance Assistance Act of 2007 (amended 2019)
• Employment Insurance Act of 2011 (amended 2019)

Run payroll in South Korea without the compliance risk

Running payroll in South Korea directly means owning tax withholding, four social insurance filings, and severance calculations, with no room for error. Skuad supports the operational complexity of paying employees in South Korea: income tax withholding, social insurance contributions, payroll in 70+ currencies, and statutory benefits, so your team can focus on the work, not the paperwork.

Companies across SaaS, technology, and professional services use Skuad to pay Korean and foreign talent without building local payroll infrastructure from scratch.

Book a demo to see how Skuad supports payroll operations in South Korea.

FAQs

1. What is payroll processing in South Korea?

Payroll processing in South Korea involves calculating monthly salaries, withholding progressive income tax under National Tax Service rules, and deducting contributions to four mandatory social insurance programs, then paying net wages on a fixed date set out in the employment contract, typically the last working day of the month.

2. Do employers have to pay severance when an employee leaves in South Korea?

Employers in South Korea generally owe severance pay to employees completing at least one year of continuous service, calculated as roughly one month's average wage per year worked. This applies regardless of whether the departure is a resignation, dismissal, or retirement, and waivers of this right are typically invalid.

3. Can a foreign company pay employees in South Korea without a local entity?

Foreign companies can typically pay employees in South Korea without registering a local entity by working with an Employer of Record, which becomes the legal employer on paper, issues compliant contracts, and manages National Tax Service withholding and social insurance filings on the company's behalf.

4. What happens if an employer pays wages late in South Korea?

Late or unpaid wages in South Korea generally carry serious consequences. Under an amendment to the Labor Standards Act that took effect in October 2025, employers who intentionally withhold wages for a cumulative total of three months or more within a year risk damages of up to three times the amount owed, on top of possible court action. Separate tax evasion penalties under Korean law can also reach three times the underpaid amount.

5. Is it better to run payroll in-house or use an EOR in South Korea?

This usually depends on how long a company plans to operate in South Korea. A local entity gives more control over payroll policy but takes months to set up, while an Employer of Record generally lets a company start paying staff faster without local registrations or in-house payroll expertise.

6. Is a 13th-month salary mandatory for employees in South Korea?

South Korean law does not require a mandatory 13th-month salary. However, many employers, particularly larger companies, customarily provide an annual bonus around major holidays such as Chuseok or Lunar New Year, and these payments are generally treated as taxable income under National Tax Service rules.