Conducting business in South Korea is different from the U.S. in many respects. Chief among those is that the government is far more involved in the economy, and labor regulations are far more protective of the employee. However, despite weaker corporate performance numbers in recent years, there are exciting opportunities for U.S. businesses in South Korea, and with the proper legal and cultural understanding, international companies can flourish.
South Koreans have an extremely strong work ethic and a willingness to face obstacles with an innovative spirit toward change. As with many Asian countries, personal relationships and trust are key to getting things done. South Korea has a highly structured and hierarchical society so it’s important to be aware of status and titles when setting up meetings and sending invitations to events.
Given the disparate cultures, there are some significant differences between U.S. and Korean labor laws that U.S. employers looking to expand there should be aware of:
- Criminal liability. While many protections exist for U.S. company directors, the Korean Labor Standards Act and the Trade Union and Labor Relations Adjustment Act both allow for company directors and representatives who engage in unfair labor practices to be penalized monetarily and to be held criminally liable. Jail time is not out of the realm of possibility for the more egregious offenses.
- At-will employment. Like most countries, Korea does not have at-will employment. Employers may only terminate employees with just cause and the burden of proof is substantial. Terminating an employee requires a meticulously detailed, documented record of poor performance. In addition, the employee’s manager must show proof of multiple warnings and sufficient opportunity given for the employee to improve.
- Severance pay. Korean employees are entitled to an end of service benefit. Under Korean law, full-time employees are entitled to receive severance pay equal to one month’s salary for each year of employment, if they have worked for at least one year and have worked more than 15 hours per week or more than 60 hours per month. Severance pay is to be paid within two weeks of termination. This applies regardless of company size. Anticipating this payout for all employees on the payroll is a significant financial consideration in terms of future liability in South Korea.
- Employee benefits. South Korean employees receive more vacation time than their U.S. colleagues. After one year of employment, Korean employees are entitled to 15 days of paid annual leave, that increases by an additional day every two years, up to 25 days in total. Many South Korean companies also provide additional leave and monetary bonuses for major life events including marriage, marriage of a sibling, birth of a child, and death of an immediate relative.
What does this mean for your expansion plans in South Korea?
If you’re considering exploring the South Korean market, Globalization Partners can help you get started. Using our Global PEO or Global Employer of Record services to onboard employees allows you to test the market without you taking on the risk and cost of entity setup. We’ll add your candidates to our payroll in days instead of months, craft legally compliant employment contracts and ensure employee benefits and social taxes comply with country mandates. We take the worry out of expanding internationally, and give you the peace of mind to execute your global employment strategy no matter where in the world it takes you.
Do you have questions about expanding in South Korea? Get in touch. There’s no easier way to get started than with Globalization Partners’ international employment solutions.