South Korea has always been attractive for companies looking to expand internationally. The country is known for significant market opportunities, especially in sectors like IT, telecommunications, electronics, manufacturing, and more. Its digital-savvy population promises both a favorable market and a well-equipped talent pool.
But success in South Korea can only truly be achieved with the right guidance, especially when it comes to its complex employment regulations and practices.
G-P spoke with the founder and CEO of Korea Expansion Agency (KEA), Byungjin Lee for his insights into the present employment climate of the country — and how global companies can navigate the inevitable complexities.
On ease of doing business
In 2019, South Korea was ranked 5th in terms of ease of doing business. This ranking was based on several factors including incorporation, registration, initial infrastructure, tax policy risk, and even quality of trade logistics.
However, while the positive outlook is promising, the expansion process still requires expertise and knowledge of the country’s local laws. According to Lee, who has over 20 years of experience with global corporate services and professional organizations, South Korea’s free market offers companies a lot of opportunity to thrive but, “when you actually enter the market, the admin side – the legal, accounting, tax, payroll (processes) – are where the complications happen.”
Lee shared the experience of an unnamed global company that had unintentionally paid their workers less than the country’s mandated annual minimum base wage of USD 19,328. The confusion stemmed from the fact that, while the business was paying its employees more than USD 50,000 annually, the majority of this pay was not remunerated as base pay but as other pay elements that are excluded from minimum wage calculation, thereby falling short of the required minimum and leading to issues. Lee’s story highlighted how a simple misunderstanding of the country’s labor laws can result in unexpected penalties.
He advised focusing on compliance with local labor laws and other key business elements to stay competitive, especially considering the heavy competition, including several South Korean brands that outcompete global names like Amazon (vs. Coupang) and Apple (vs. Samsung). He also emphasized the need for experienced and proven partners in South Korea, like G-P and KEA, to ensure compliance while hiring and operating in the country.
On available talent
While South Korea consistently ranks highly in education, there is a substantial lack in quality jobs, according to the country’s Finance Ministry. Lee also pointed out that the country has the highest density of robotics in the world when it comes to manufacturing, which also affects the ratios.
Against this backdrop, international companies looking to hire people in South Korea can potentially tap into a rich talent pool, especially for employers working within what Lee dubbed as “next generation industries.”
According to Lee, the South Korean government is planning to train 180,000 people in emerging industries like AI and big data by 2024. This will run parallel with the government’s planned subsidies for jobseekers, expected to be included in the 2023 budget, which will facilitate the smooth entry of young and unemployed South Koreans into the labor market.
For global companies hiring talent in the country, Lee highlighted the importance of offering a premium in the form of remuneration, better benefits, or even flexible work arrangements, especially when targeting employees with fluent English language proficiency, as companies may have to work harder to attract talent with this highly sought-after skill in South Korea.
On flexible work arrangements
In 2019, South Korea had the second highest number of working hours annually per employee within OECD members. Since then, the government introduced its 52-hour maximum workweek to encourage better work-life balance. This has been met with approval by nearly 80 percent of the workforce.
Now, flexible arrangements are becoming increasingly common within the country as well. According to Lee, work from home “is something that’s unavoidable these days.” He said remote work is a perk that most candidates expect when considering employment.
Lee reiterated that aside from remote work, employees based in South Korea also welcome flexible schedules and reduced working hours. In his company, Lee said they follow a 35-hour workweek where employees are able to clock out after only seven working hours every day.
“Companies need to embrace the fact that there is an unavoidable social shift requiring companies to provide better work and life balance, coupled with a flexible work environment,” Lee said.
However, he emphasized the importance of consulting with labor law experts for the most suitable and compliant work arrangements, and employee representatives to make sure that the workforce is on board before implementing a flexible work policy.
Expanding into South Korea
The promise of the South Korean market is real, and boundless success can be achieved by international companies with the required knowledge and expertise. Working with the right partners readily addresses common challenges and enables companies to focus solely on their market performance. That’s where we come in.
G-P helps companies hire anyone, anywhere within a matter of days, enabling you to establish a foothold in the market as soon as possible. Our marketing-leading Global Growth Platform™ is backed by our team of dedicated HR and legal experts to guide you through every step of your growth journey, so you can enter complex markets with confidence that you are always adhering to local laws and regulations.
Planning a South Korean expansion? Let us handle the costly and time-consuming processes that slow international growth, so you don’t have to. Connect with our experts on the ground to find out how we can help.