How to run payroll in South Korea

In South Korea, most employers pay employees monthly, typically on the 25th of each month. Here's the complete payroll cycle.

Payment frequency and dates

South Korean labor law requires monthly salary payments, with wages due by the 25th of each month. Most companies process payroll between the 20th and 23rd to ensure timely payment.

For hourly workers, you can pay weekly or bi-weekly, but monthly remains the standard. If the 25th falls on a weekend or holiday, payment must be made on the preceding business day.

Late payment penalties are steep - you'll face 20% annual interest on overdue wages plus potential criminal liability for the responsible manager.

13th month payments

South Korea doesn't mandate 13th month payments, but many companies provide year-end bonuses as part of employment contracts or collective bargaining agreements.

When included in contracts, these bonuses become legally required. They're typically paid in December and subject to the same tax treatment as regular wages - meaning full income tax and social insurance contributions apply.

The calculation varies by company but often equals one month's base salary or a percentage of annual earnings.

Holiday and vacation pay

Vacation pay equals your employee's average daily wage multiplied by vacation days taken. Calculate the average using the three months preceding the vacation period.

You must pay vacation wages before the employee takes leave if they request it. Unused vacation days must be paid out at termination - there's no "use it or lose it" policy allowed.

Public holiday pay is mandatory when employees work on designated holidays, at 150% of regular wages.

Payment methods

Bank transfers are mandatory for all employees in South Korea. Cash payments are prohibited except in very limited circumstances with Labor Ministry approval.

You must deposit wages into a Korean bank account designated by the employee. International wire transfers to foreign accounts don't satisfy the legal payment requirement.

The payment must be in Korean won (₩). If you're paying expatriate employees, any currency conversion must happen before the KRW deposit to their Korean account.

Payslip requirements

Every payslip must include specific information in Korean:

Electronic payslips are acceptable if employees can access and print them. You must provide paper copies upon request.

Keep payslip records for three years - labor inspectors regularly audit payroll documentation during workplace investigations.

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Think you just withhold income tax? South Korea adds local income tax that catches many employers off guard.

South Korea operates a progressive income tax system with rates ranging from 6% to 45% for 2026, plus a mandatory 10% local income tax on top of national rates. This means your effective withholding rates actually run from 6.6% to 49.5%.

Income tax brackets

Annual Income (₩)	National Rate	Local Rate	Combined Rate
₩0 - ₩14,000,000	6%	0.6%	6.6%
₩14,000,001 - ₩50,000,000	15%	1.5%	16.5%
₩50,000,001 - ₩88,000,000	24%	2.4%	26.4%
₩88,000,001 - ₩300,000,000	35%	3.5%	38.5%
₩300,000,001+	45%	4.5%	49.5%

The basic deduction for 2026 is ₩2,000,000 annually, meaning employees earning up to ₩16,000,000 pay minimal tax after deductions.

Withholding requirements

You're responsible for withholding both national and local income tax from each paycheck. Register for Global Income Tax withholding through the National Tax Service (NTS) online portal within 20 days of hiring your first employee.

Monthly withholding returns are due by the 10th of the following month. File through the NTS Hometax system - paper filings aren't accepted for businesses with employees.

Annual tax reconciliation happens every February. You'll need to provide employees with their annual withholding statements by January 31st, then submit final reconciliation by March 10th.

Tax registration

New employers need three registrations before first payroll:

• Business registration with local district office
• Global Income Tax withholding registration via NTS
• Year-end tax settlement registration for annual reconciliation

Complete all registrations within 20 days of establishing your Korean entity. The NTS assigns your withholding tax number immediately upon online registration.

Special tax considerations

Non-resident employees face different rules. If they're in South Korea less than 183 days, you'll withhold 19% flat rate on employment income instead of progressive rates.

Tax treaties can reduce this rate - common reductions include 15% for US citizens and 10% for UK residents. Employees must file treaty benefit claims with supporting documentation.

Expatriate tax equalization is common but complex. Many employers gross-up salaries to cover South Korea's high tax rates, especially for senior positions.

Common tax mistakes

Forgetting local income tax is the biggest error. It's not optional - you must withhold and remit the 10% local surcharge on all national income tax.

Missing the March 10th reconciliation deadline triggers automatic penalties of 0.03% per day on any additional tax due, plus 20% of the shortfall amount.

Incorrect non-resident treatment happens frequently. Employees who stay beyond 183 days must switch to progressive rates, requiring amended returns and potential penalties of ₩200,000 per affected employee.

Employer contributions in South Korea add 9.09% to every salary. Budget for it.

South Korea's employer contribution system covers four main areas: National Pension, Health Insurance, Employment Insurance, and Workers' Compensation Insurance. These contributions are mandatory for all employees and calculated monthly based on gross salary.

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Contribution breakdown

Contribution Type	Employer Rate	Employee Rate	Monthly Cap
National Pension	4.5%	4.5%	₩243,000
Health Insurance	3.545%	3.545%	None
Long-term Care	0.4318%	0.4318%	None
Employment Insurance	1.05%	0.9%	None
Workers' Compensation	0.59%*	0%	None

*Workers' Compensation rates vary by industry risk level, ranging from 0.7% to 34%

Total employer cost calculation

For a ₩6,000,000 monthly salary:

• Base salary: ₩6,000,000
• National Pension: ₩243,000 (capped)
• Health Insurance: ₩212,700
• Long-term Care: ₩25,908
• Employment Insurance: ₩63,000
• Workers' Compensation: ₩35,400
• Total employer cost: ₩6,580,008
• Cost multiplier: 1.097 (employer pays 9.7% more than base salary)

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Contribution caps and ceilings

The National Pension has a monthly contribution cap of ₩243,000 (based on maximum insurable income of ₩5,400,000). Once an employee's salary exceeds this threshold, your pension contributions remain fixed at the maximum amount.

Health Insurance and Long-term Care Insurance have no caps. These contributions continue to increase proportionally with salary, making them significant costs for high earners.

Employment Insurance and Workers' Compensation Insurance also have no contribution limits.

Registration requirements

You must register with four separate agencies within 14 days of hiring your first employee:

National Pension Service (NPS) - Register for pension and employment insurance National Health Insurance Service (NHIS) - Register for health and long-term care insurance
Korea Workers' Compensation & Welfare Service - Register for workers' compensation Local tax office - Register as an employer for tax withholding

Payment deadlines and penalties

All contributions are due by the 10th of the following month. For example, January contributions must be paid by February 10th.

Late payment penalties are severe: 3% of the unpaid amount plus 1.2% monthly interest. The government actively enforces these deadlines and can freeze business bank accounts for non-payment.

Most employers use the integrated online system (4대보험 정보연계센터) to calculate and pay all contributions simultaneously, reducing administrative burden and payment errors.

South Korea has 15 public holidays in 2026. Work on these days? Pay double.

Annual leave

Employees get 15 days minimum vacation after one year of service. That jumps to 16 days after three years, then adds one day each two years up to 25 days maximum.

Vacation pay calculation is straightforward - pay the regular daily wage for each vacation day. Calculate this as monthly salary divided by the number of working days in that month.

Employees can carry over unused vacation days for one year only. After that, they expire. No exceptions.

Termination payouts are mandatory. You must pay cash for all unused vacation days when an employee leaves. Use the average daily wage from the last three months before termination.

Vacation day accrual

New employees earn vacation days monthly during their first year. They get 1.25 days per month (15 days ÷ 12 months). They can use these as they accrue - no waiting period required.

Sick leave

South Korea doesn't mandate paid sick leave, but you'll still handle sick pay through the Employment Insurance system for longer illnesses.

Employees can take unpaid sick leave, but most companies provide 3-10 paid sick days annually. This varies by company policy, not law.

Medical certificates are required for sick leave longer than three consecutive days. Employees must provide these from licensed medical facilities.

For work-related injuries, workers' compensation insurance covers 70% of average wages. This is separate from your payroll - the insurance carrier pays directly.

Parental leave

Maternity leave is 90 days total - 45 days before birth and 45 days after. The first 60 days are paid at 100% by Employment Insurance, capped at ₩1.35 million per month in 2026. You pay nothing during this period.

Paternity leave gives fathers 10 days of paid leave. Employment Insurance covers this at 100% of wages, with the same ₩1.35 million monthly cap.

Parental leave extends up to one year for either parent. The first three months pay ₩1.35 million monthly, then ₩675,000 for the remaining months. Employment Insurance handles all payments.

Payroll impact

During all parental leave periods, you continue social insurance contributions on the employee's behalf. Deduct these from any company-paid portions, but Employment Insurance covers most costs.

Public holidays 2026

Date	Holiday	Notes
January 1	New Year's Day
January 28-30	Lunar New Year	3-day holiday
March 1	Independence Movement Day
May 5	Children's Day
May 15	Buddha's Birthday
June 6	Memorial Day
August 15	Liberation Day
September 16-18	Chuseok	3-day holiday
October 3	National Foundation Day
October 9	Hangeul Day
December 25	Christmas Day

Substitute holidays apply when public holidays fall on weekends. If a holiday falls on Saturday or Sunday, the following Monday becomes a paid holiday.

Holiday pay equals regular daily wages. If employees work on holidays, pay double time - their regular wage plus 50% premium pay.

Mandatory benefits affecting payroll

Severance pay requires monthly accruals. Set aside 8.33% of each employee's monthly salary (equivalent to one month's pay per year of service). This affects your monthly payroll calculations even though you pay it only at termination.

Meal and transport allowances are common and affect payroll taxes. Up to ₩135,000 monthly for meals and ₩200,000 for transportation are tax-free. Amounts above these limits become taxable income.

Annual bonuses are standard practice, typically 200-400% of monthly salary paid during Lunar New Year and Chuseok. These are fully taxable and subject to all social insurance contributions.

Optional benefits

Many companies provide private health insurance and life insurance as employee benefits. Premiums are typically shared 50/50 between employer and employee, with employee portions deducted from payroll.

Stock options and retirement savings plans beyond the mandatory severance pay are becoming more common, especially in tech companies. These require careful payroll tax calculations based on vesting schedules and contribution limits.

Employment contracts in South Korea must include specific mandatory clauses or they're legally invalid. Missing elements like probation periods, working hours, or termination procedures can trigger penalties starting at ₩500,000 per violation.

What monthly filings do you need to submit?

National pension and health insurance returns

Submit monthly contributions through the 4-in-1 insurance system by the 10th of the following month. This covers national pension, health insurance, employment insurance, and industrial accident compensation.

File through the Ministry of Employment and Labor's online portal (www.ei.go.kr). Late submissions incur a 3% monthly penalty on unpaid contributions.

Income tax withholding reports

Monthly income tax withholding reports are due by the 10th of the following month via the National Tax Service's Hometax system (www.hometax.go.kr).

The penalty for late filing is 0.025% of withheld tax per day, capped at 25% of the total amount.

What annual reporting is required?

Year-end tax settlement

Complete year-end tax settlement for all employees by January 31, 2027. This reconciles actual tax liability against monthly withholdings.

Provide employees with their settlement statements by February 28, 2027. Employees can claim additional deductions during this process.

Annual reporting deadlines

Submit the Annual Report on Employment Insurance by January 15, 2027. This details all employees covered under employment insurance during 2026.

File Industrial Accident Compensation Insurance annual reports by March 31, 2027, including payroll totals and premium calculations.

The National Pension Service requires annual salary reports by January 31, 2027, for contribution base adjustments.

What employee documentation must you maintain?

Employment contract requirements

All contracts must be written in Korean and include 15 mandatory clauses. Key requirements include:

• Job title and duties specification
• Working hours and break times
• Base salary and payment method
• Workplace location details
• Probation period terms (maximum 6 months)

Payslip mandatory elements

Monthly payslips must detail:

• Basic salary breakdown
• Overtime and allowance calculations
• All deductions with legal basis
• Net pay amount
• Cumulative year-to-date figures

Record retention periods

Maintain payroll records for 5 years from the date of final payment. This includes:

• Employment contracts and amendments
• Payroll registers and payslips
• Time and attendance records
• Tax withholding documentation
• Insurance contribution records

What are the penalties for non-compliance?

Violation	Penalty Amount
Late monthly tax filing	0.025% per day (max 25%)
Missing contract clauses	₩500,000 per violation
Incorrect payslip elements	₩1,000,000 per occurrence
Late insurance contributions	3% monthly penalty
Missing employment records	₩2,000,000 fine
Unpaid overtime violations	150% of unpaid amount

Criminal penalties

Serious violations can result in criminal charges:

• Unpaid wages: Up to 3 years imprisonment or ₩30,000,000 fine
• Tax evasion: Up to 5 years imprisonment plus 300% penalty tax
• Insurance fraud: Up to 7 years imprisonment or ₩70,000,000 fine

Which regulatory bodies oversee payroll compliance?

Primary authorities

Ministry of Employment and Labor handles employment law compliance, working conditions, and labor insurance matters. Contact: +82-1350 or www.moel.go.kr.

National Tax Service manages income tax withholding and reporting requirements. Access services through Hometax at www.hometax.go.kr.

National Pension Service oversees pension contributions and reporting. Online services available at www.nps.or.kr.

Regional offices

Each region has local labor offices that conduct inspections and handle violations. Seoul Metropolitan Labor Office covers the capital region and handles the largest volume of cases.

Contact your regional office for specific guidance on local compliance requirements and inspection schedules.

2026 brought several significant payroll changes to South Korea. Here's what you need to update.

Minimum wage increase

National minimum wage - Effective January 1, 2026

South Korea's minimum wage increased 3.2% from ₩9,860 to ₩10,170 per hour. This translates to ₩2,117,520 monthly for full-time employees working 208 hours.

The increase affects overtime calculations too. Time-and-a-half now starts at ₩15,255 per hour, up from ₩14,790 in 2025.

Tax bracket adjustments

Income tax thresholds - Effective January 1, 2026

Tax brackets received modest inflation adjustments. The basic deduction increased from ₩1,500,000 to ₩1,540,000 annually.

Tax Rate	2025 Threshold	2026 Threshold	Change
6%	Up to ₩14,000,000	Up to ₩14,400,000	+₩400,000
15%	₩14,000,001-₩50,000,000	₩14,400,001-₩51,500,000	+₩1,500,000
24%	₩50,000,001-₩88,000,000	₩51,500,001-₩90,500,000	+₩2,500,000

Update your payroll system's withholding tables by January 31, 2026, or face penalties up to ₩500,000 per employee.

National pension contribution changes

Employee and employer rates - Effective July 1, 2026

Both employee and employer pension contributions will increase from 4.5% to 4.7% of salary. This affects the monthly contribution ceiling, which rises to ₩248,850 (from ₩243,000).

The change applies to salaries paid from July 1 onward. Don't apply the new rate to June salary paid in July.

Digital payslip mandate

Electronic payroll documentation - Effective March 1, 2026

All employers with 50+ employees must offer digital payslips through approved platforms. Employees can still request paper copies, but the digital option must be available.

Approved platforms include major Korean HR systems like Douzone, Workday Korea, and government-certified providers. Paper-only payslips for large employers now incur ₩50,000 monthly fines.

Upcoming changes

Parental leave extension - Effective January 1, 2027

Paid parental leave will extend from 12 to 15 months, with the additional three months split between parents. Start planning budget adjustments for employees expecting children in late 2026.