Understanding Employer Tax Obligations in South Korea

For international companies expanding into South Korea, navigating the mandatory employee benefits system is crucial for compliance. Employers must contribute to four key social security programs, with total contributions ranging from 10.214% to 28.814% of employee wages.

Mandatory Employer Contributions Breakdown

National Pension: 4.5%
National Health Insurance: 4.004%
Employment Insurance: 1.15% - 1.75%
Workers' Compensation Insurance: 0.56% - 18.56%

National Pension Scheme (NPS)

The National Pension Scheme covers employers and employees aged 18 to 59 working in organizations with one or more employees. Both employers and employees contribute 4.5% of monthly wages, creating a total contribution rate of 9%. For the period July 2024 to June 2025, the monthly contribution ceiling is 6,170,000 KRW, with a minimum threshold of 390,000 KRW.

Consider the case of a foreign technology company establishing operations in Seoul. They must register all eligible employees within their first month of operation and ensure timely contributions by the 10th of each following month to avoid penalties.

National Health Insurance (NHI)

The comprehensive health insurance system requires a total contribution of approximately 8.008% of monthly wages, split equally between employer and employee at 4.004% each. The system includes long-term care insurance and features various premium reduction programs for specific circumstances.

For example, expatriate employees with family dependents in Korea may qualify for a 50% premium reduction, while those on parental leave can benefit from reduced contributions based on minimum wage levels.

Employment Insurance (EI)

This social security program stabilizes employment through vocational training and unemployment benefits. Contribution requirements vary by visa type, with D-7, D-8, and D-9 visa holders typically required to participate. Employers should verify exemption eligibility through social security totalization agreements.

Since July 2022, employer contribution rates range from 1.15% to 1.75%, depending on company size and industry classification.

Workers' Compensation Insurance (WCI)

Mandatory for all workplaces with one or more full-time employees, WCI provides compensation for work-related injuries and illnesses. Employers bear the full contribution responsibility, with rates varying from 0.56% to 18.56% based on industry risk factors.

Additional Voluntary Benefits

While not legally required, many competitive employers offer supplementary benefits such as health and wellness programs, transportation allowances, meal subsidies, housing support, and flexible work arrangements to attract top talent.

Employee Tax Responsibilities in South Korea

Employees in Korea share responsibility for social security contributions while bearing additional tax burdens. Total deductions typically range from 15.404% to 54.404% of gross salary.

Employee Contribution Breakdown

National Pension: 4.5%
National Health Insurance: 4.004%
Employment Insurance: 0.90%
Personal Income Tax: 6% - 45%
Local Income Tax: 10% of PIT amount

National Pension Benefits

Employees contributing to NPS become eligible for various benefits including old-age pensions, disability benefits, survivor pensions, and lump-sum refunds. The system requires minimum 10 years of contributions for old-age pension eligibility, with flexible payment options available from age 55.

National Health Insurance Coverage

From 2025, employees contribute 4.004% toward comprehensive healthcare coverage including medical treatments, health screenings, pregnancy and childbirth support, and disability assistance. The system features copayment limits and special support programs for vulnerable groups.

Employment Insurance Protection

The 0.90% employee contribution provides unemployment benefits and vocational training opportunities. Foreign employees should verify their coverage status based on visa type and home country agreements.

Personal Income Tax Structure

South Korea employs a progressive tax system with seven brackets ranging from 6% to 45%. The 2025 tax rates are as follows:

Income Bracket (KRW)	Tax Rate	Progressive Deduction
Up to 14 million	6%	-
14-50 million	15%	1,260,000
50-88 million	24%	5,760,000
88-150 million	35%	15,440,000
150-300 million	38%	19,940,000
300-500 million	40%	25,940,000
500 million-1 billion	42%	35,940,000
Over 1 billion	45%	65,940,000

Local Income Tax

Employees pay an additional local income tax equivalent to 10% of their national income tax liability, payable to their city or provincial government.

Navigating Compliance Challenges

International companies often face challenges with Korea's complex tax system. SailGlobal provides specialized support for foreign businesses, offering customized tax solutions and compliance guidance to ensure smooth operations in the Korean market.

South Korea Employer and Employee Tax Guide 2025: Compliance & Rates