How does the Korean payroll cycle work?
Korean employers pay monthly on a fixed date set in the contract or work rules, such as the 25th. By law, wages must be paid in money, directly to the employee, in full, and at least once a month on a set date.
Each month runs the same way:
- Calculate gross pay: base salary, fixed allowances, and overtime, night and holiday premiums (at least 50%, or 100% for holiday work beyond 8 hours).
- Deduct: the employee's share of the four insurances, income tax and local income tax.
- Pay on the fixed date and issue a wage statement (임금명세서, imgeum myeongseseo) itemizing pay components, calculations and deductions, on paper or electronically. This has been mandatory since 2021.
- By the 10th of the following month: remit the withheld income tax and pay both the employee and employer insurance premiums.
- Report joiners and leavers to the insurance agencies; see our 30-day onboarding plan for the deadlines.
Baseline rules that shape every payslip:
- Minimum wage: KRW 10,320 per hour in 2026 (KRW 2,156,880 a month for 209 hours), rising to KRW 10,700 (KRW 2,236,300 a month) on 1 January 2027.
- Working time: 40 hours a week, capped at 52 including up to 12 hours of overtime.
- Tax-free meal allowance: up to KRW 200,000 a month is exempt from income tax when the employer does not provide meals, a common line on Korean payslips.
- Accruals: annual leave (1 day per month in the first year, then 15 days after a year with at least 80% attendance, up to 25) and severance pay (퇴직금, toejikgeum) of at least 30 days' average wage per year of service.
How bonuses and fixed overtime allowances are structured affects the base for premium pay; our employment contracts guide covers the 2024 Supreme Court ruling on ordinary wages and MOEL's 2026 guidelines on fixed overtime pay.
Income tax withholding
Employers withhold income tax each month using the National Tax Service (NTS) simplified withholding table (근로소득 간이세액표, geullo sodeuk gani seaekpyo), add a 10% local income tax on the tax amount, and remit both by the 10th of the following month. Small employers can apply to their tax office for semi-annual remittance.
The table estimates tax against the 2026 national rates on annual taxable income:
| Annual taxable income (KRW) | National rate |
|---|---|
| Up to 14 million | 6% |
| 14–50 million | 15% |
| 50–88 million | 24% |
| 88–150 million | 35% |
| 150–300 million | 38% |
| 300–500 million | 40% |
| 500 million–1 billion | 42% |
| Over 1 billion | 45% |
With local income tax, the top effective rate is 49.5%. Two points often surprise foreign employers:
- Foreign employees can elect a flat rate. Eligible foreign employees may choose a flat 19% (plus local tax) on employment income instead of the progressive rates. The election is time-limited: under current rules it is open to foreign workers who start work in Korea by 31 December 2026, for up to 20 years from their first day of work.
- Freelancers are different. Payments to individual independent contractors are generally subject to 3% income tax withholding plus 0.3% local tax (3.3% in total) rather than the wage table. Treating someone who works like an employee as a freelancer is a misclassification risk, not a payroll shortcut.
The four insurances (4대보험, sadae boheom)
The employer withholds the employee's share of each premium from pay and remits it together with the employer's share by the 10th of the following month. The 2026 rates:
| Insurance | Total rate | Employee | Employer |
|---|---|---|---|
| National Pension | 9.5% | 4.75% | 4.75% |
| Health insurance | 7.19% | 3.595% | 3.595% |
| Long-term care | 13.14% of the health premium (about 0.945% of wages) | Half | Half |
| Employment insurance | 1.8% plus 0.25–0.85% employer-only | 0.9% | 1.15–1.75% |
| Industrial accident | 1.47% on average; varies by industry | 0% | 100% |
National Pension is calculated on monthly earnings between KRW 410,000 and KRW 6,590,000 from July 2026, so contributions stop rising above that ceiling. The rate is mid-reform: it climbs 0.5 points a year until it reaches 13% in 2033, and two 2027 changes are already decided, with National Pension rising to 10% (5% each) and health insurance staying at 7.19%. The employer-only employment insurance charge depends on company size.
Altogether, the employer's share adds roughly 10.5–11.5% on top of gross salary for office roles. Our tax and social insurance guide breaks down each scheme, and the compensation guide shows how to build a total-cost estimate.
Year-end settlement (연말정산, yeonmal jeongsan)
Monthly withholding is an estimate, so the employer reconciles each employee's actual annual tax once a year. The settlement runs through February pay, and the employer must file the withholding records by 10 March.
- January: employees gather deduction evidence, such as insurance premiums, medical and education costs, card spending and dependents. The NTS simplified service on Hometax pre-fills most of it.
- February pay: the employer recalculates the annual tax and compares it with the amount withheld. Over-withholding is refunded through pay; under-withholding is collected.
- By 10 March: the employer files the payment records with the tax authorities.
Employees who leave during the year are settled in the pay for their final month. Foreign employees go through the same process, including those on the flat 19% rate. A smooth year-end settlement is one of the most visible signs to Korean staff that payroll is handled professionally.
Late wages: tougher rules from 2025 and 2026
Paying late has become much more expensive. The 20% annual delay interest that used to apply only to departing employees now also applies to current employees whose wages are paid late. Courts can award up to three times the unpaid amount for willful or long-running arrears, and employers designated as habitual offenders lose access to government employment subsidies.
Criminal penalties have also risen. From 8 October 2026, the maximum penalty for unpaid wages goes from 3 years' imprisonment or a KRW 30 million fine to 5 years or KRW 50 million; the same increase has applied to unpaid severance since 18 September 2026. Build payroll checks so that pay goes out on the fixed date, and settle final pay and severance within 14 days of an employee leaving.
In-house, payroll provider or EOR?
The biggest strategic choice is how you run all of this. A handful of hires or a market test usually favors an Employer of Record (EOR); a larger, permanent team usually favors your own entity with a local payroll provider.
- Your own entity, payroll in-house. A subsidiary (주식회사, jusik hoesa, or 유한회사, yuhan hoesa) or branch can hire and pay staff directly; a liaison office cannot earn revenue. Setup usually takes 4–8 weeks, and foreign direct investment registration typically needs at least KRW 100 million, which is also the threshold for a D-8 investor visa. The entity pays corporate income tax at 10% up to KRW 200 million, 20% up to KRW 20 billion, 22% up to KRW 300 billion and 25% above, each 1 point higher than in 2025, plus a 10% local surtax.
- Your own entity, outsourced payroll. Many companies keep employment in their own name but outsource withholding, insurance filings, payslips and year-end settlement to a Korean payroll bureau or accounting firm.
- Employer of Record. If you have no Korean entity, an EOR becomes the legal employer and handles contracts, the four insurances, filings, payroll and severance. Fees typically run around USD 400–1,000 or more per employee per month depending on the provider, and onboarding takes days to about two weeks.
Whichever route you choose, the underlying obligations do not change. Our comparison of EOR vs. your own entity and the HR compliance guide cover the decision in more depth. Treat your payroll setup as something to review every January, when the minimum wage and pension rates change.
Hire From Korea is a recruiter-led hiring partner: we shortlist 3–5 vetted Korean candidates, coordinate bilingual (English–Korean) interviews, and can arrange payroll and tax support, contract review, or an EOR setup on a custom quote. Request a consultation to map the right structure for your team.
Frequently asked questions
When are Korean payroll taxes and insurance premiums due?
Withheld income tax and local income tax are due by the 10th of the month after payment, and the four social insurance premiums, both employee and employer shares, are also due by the 10th of the following month. Small employers can apply for semi-annual income tax remittance; insurance premiums stay monthly.
Do I have to give Korean employees a payslip?
Yes. Every payday, the employer must issue a wage statement showing the pay components, how each is calculated and every deduction. It can be delivered on paper or electronically, for example by email or app, and the rule applies to all employers regardless of size.
How is a foreign employee taxed on a Korean payroll?
The same withholding, insurance and year-end settlement rules apply as for Korean staff. Eligible foreign employees may elect a flat 19% rate (plus local tax) on employment income instead of progressive rates, currently for those who start work in Korea by 31 December 2026, for up to 20 years. National Pension may not apply where a social security agreement with the home country exempts them.
Can an Employer of Record run payroll without a Korean entity?
Yes. An EOR employs the person through its own Korean entity and runs withholding, insurance, payslips, year-end settlement and severance on your behalf, for a monthly fee. It is usually the fastest compliant option for a first hire, with onboarding in days to about two weeks.
Sources
- KOTRA — 2025 Labor Laws in Korea (PDF) — wage payment principles (money, direct, in full, at least monthly) and mandatory wage statements
- National Health Insurance Service — Contribution rate — 7.19% health insurance rate, equal split, premiums due by the 10th of the following month
- Korea Ministry of Government Legislation — Income Tax Act, Article 128 (Korean) — withheld tax due by the 10th of the following month; semi-annual option
- PwC Worldwide Tax Summaries — Korea, Individual income determination — 3% business income withholding, flat 19% election terms, KRW 200,000 tax-free meal allowance
- National Tax Service — Year-End Tax Settlement Manual for Foreigners — settlement through February pay; payment records due by 10 March
- Maeil Shinmun — Wage arrears penalties up to 5 years from 8 October (Korean) — tougher wage and severance arrears penalties, 20% delay interest for current employees, treble damages
This article is general information, not legal or tax advice. Rules change — confirm specifics with a licensed Korean labor attorney (노무사) or tax accountant.