Hiring Your First Employee in Korea

The day you hire your first employee, the legal character of your business changes. A one-person company becomes an employer, and with that come duties on contracts, social insurance, withholding, working hours, holidays and severance.

Budget the fifth hire before you make the fourth. That is where the rules change.

Being a foreign owner changes none of this. A sole proprietorship or company you set up in Korea, employing someone in Korea, is inside Korean labour law.

Hiring a foreign employee adds one step in front of everything else: before the working conditions matter, you have to confirm that the person’s residence status permits the job you are hiring them for.

So the first hire is not a decision about salary. It is the moment you build a system — contract, four insurances, payroll register, withholding, attendance records, severance — and each part has to agree with the others.

The contract, even for one person

A recurring belief is that the Labor Standards Act does not reach workplaces with fewer than five employees. It mostly does. Written statement of conditions, wage payment, rest breaks, the paid weekly holiday and advance notice of dismissal all apply below five.

Article 17 requires the employer to state the working conditions when concluding the contract, and to hand the employee a written document setting out the components of pay, how it is calculated and how it is paid, along with working hours, holidays and annual leave. Electronic documents count.

At minimum the contract should make these unambiguous:

• Contract term
• Place of work and duties
• Contractual working days and hours
• Rest breaks
• The components of pay
• How pay is calculated and the payment date
• Weekly holiday and other holidays
• Annual paid leave and other conditions

Writing it is not the whole duty. You must actually give the employee a copy. Failing to state and deliver the conditions in writing carries a fine of up to ₩5,000,000. A single part-time employee working a few hours a day is not an exception.

The four insurances, and what they really cost

Hiring triggers registration of the workplace and the employee for National Pension, health insurance, employment insurance and industrial accident insurance. The four can be reported together, and the ordinary deadline for reporting an employee’s acquisition of coverage is the 15th of the month following the month the event occurred — so a 10 August start is reportable by 15 September. In practice, file immediately: payroll and premium calculations depend on it.

The 2026 rates, and who pays:

So a ₩3,000,000 salary does not cost ₩3,000,000.

The industrial accident rate is the one that moves most. It is set across 28 industry classes plus a commuting-accident component, so office work sits well below the 1.47% average and construction or manufacturing well above it. Look up your own class rather than budgeting on the average.

Short hours do not switch the insurances off

Employees working under 15 hours a week are treated differently for some coverages and for severance. That is not the same as “no insurance at all.”

National Pension and health insurance each have their own exclusion tests based on monthly hours, days worked and the nature of the employment relationship. Employment insurance has its own exceptions based on contractual hours and continuous service. And industrial accident insurance is not generally excluded merely because the hours are short.

For a foreign employee there is an additional layer: National Pension coverage can turn on nationality, any bilateral social security agreement, and reciprocity. Design the salary the same way you would for a Korean employee, then check pension applicability and residence status separately.

Minimum wage 2026: ₩10,320 an hour

The 2026 minimum wage is ₩10,320 per hour, up 2.9% from ₩10,030.

The minimum wage calculator works a given contract back to that monthly floor.

The 209-hour figure is 40 contractual hours a week plus the 8 paid weekly-holiday hours, annualised. It applies to every workplace including those under five employees, and an employee cannot agree to less. Paying below it exposes the employer to up to three years’ imprisonment or a fine of up to ₩20,000,000.

Paying a monthly salary does not exempt you from the check. You divide the pay that counts toward the minimum wage by the monthly reference hours and compare the resulting hourly figure. Which is why a contract that says only “₩2,500,000 per month” is weaker than one that separates base pay from each allowance and states what each is for.

Probation is not a free 10% discount

The 90% probation rate is real but narrow. Three conditions must hold together:

The weekly holiday allowance follows hours, not headcount

Weekly holiday pay is not a five-or-more rule either. It applies below five.

An employee whose contractual hours average 15 or more a week over four weeks, and who works all their scheduled days in a given week, earns paid weekly holiday. For a 40-hour employee that is normally 8 hours. For part-timers it is proportional:

20 hours ÷ 40 hours × 8 hours = 4 hours 4 × ₩10,320 = ₩41,280 for that week

Whether the entitlement arises, and the exact formula, depend on the work pattern, the scheduled days and whether the employment relationship continues — so do not compute it from clock-in totals alone.

“All-inclusive pay” does not delete statutory allowances

Small employers often write a contract folding overtime and other allowances into the base salary. A line saying “inclusive of all allowances” does not extinguish the obligations.

For such an arrangement to hold up, the base pay and the allowances have to be distinguishable, the expected overtime hours identifiable, and actual hours verifiable. Where the amount paid falls short of the statutory allowances actually earned, the difference remains payable.

This matters more once you pass five employees, because the premium rates for overtime, night and holiday work start to apply. If growth is plausible, separate attendance records and pay components from the first hire rather than untangling them later.

Severance starts at one year

An employee with one year or more of continuous service whose contractual hours average 15 or more a week over four weeks is entitled to severance under the Employee Retirement Benefit Security Act. The conventional severance scheme pays at least 30 days of average wages per year of service — which is why the payroll model above accrues roughly one twelfth of annual pay each month. The severance calculator runs the statutory basis, which is not the same as one twelfth.

Two things employers get wrong here. Splitting severance into monthly salary and labelling it as such does not discharge the obligation — the statutory requirements of a retirement benefit scheme have to be met. And severance can be run as a defined benefit or defined contribution retirement pension rather than the lump-sum scheme; the choice is structural and worth making before the first anniversary, not after.

On separation, wages and severance are settled within 14 days of the event, extendable by agreement in particular circumstances.

What changes at five employees

Headcount is not “who showed up today.” It is calculated under the Labor Standards Act from the aggregate number of workers used over a period against the number of operating days.

Going from four employees to five is not an incremental hire. It is the point at which overtime becomes a priced obligation, leave becomes a statutory entitlement, and dismissal acquires a forum for challenge. Budget the fifth hire with that in mind.

Foreign employees: status before contract

Before drafting the contract, confirm that the candidate’s residence status permits the intended work.

E-7 is tied to an approved occupation and workplace; where the actual job or the employer differs, an immigration step may have to come first. F-series statuses do not all carry the same scope — F-4 in particular restricts certain simple-labour occupations, so “it’s an F visa” is not a finding. And your own business registration being in order does not authorise you to employ someone whose status does not cover the work.

If you are still deciding how to structure the business itself, the liability and tax comparison is in sole proprietor versus corporation. Where the person you are hiring is currently invoicing you as a contractor, read freelancing in Korea legally first — misclassification is decided on how the work is actually directed, not on what the agreement is called.

Paying salary starts a tax process too

Paying wages makes you a withholding agent. Income tax and local income tax are withheld and remitted on schedule, and the employee’s share of the insurances is deducted while yours is added.

Why the records matter more than the number

With one or two employees it is tempting to run everything from a spreadsheet and bank transfers. The cost of that appears at separation or in a dispute.

If the contract, the clock-in records, the payslips, the transfer history, the overtime log, the leave record and the insurance filings do not agree with each other, the exercise becomes recalculating several years of wages from whichever record is most credible — and the employer holding the weaker paper trail loses that argument.

There is no lighter labour-law regime for foreign owners. The moment you hire one person you are an employer, managing contract, wages, social insurance, tax and severance simultaneously.

Which makes the important question at the first hire not how much. It is what that pay is made of, which hours it covers, and whether you can prove both on the same basis every month.