Running Payroll for Korean Employees as a Foreign Company

Hiring your first employee in Korea is exciting; running their payroll correctly is where many foreign companies stumble. Korean payroll layers monthly income-tax withholding, four mandatory insurances, and an annual year-end reconciliation on top of strict statutory pay rules. This guide walks through how the cycle actually works in 2026 and the practical options for getting it done compliantly.

The Korean payroll cycle at a glance

Most Korean employers pay salaries monthly, typically on a fixed date such as the 25th, covering the calendar month. Whatever date you choose, set it in the employment contract and apply it consistently.

A few baseline rules shape every paycheck:

• Minimum wage (2026): 10,320 KRW per hour, or 2,156,880 KRW per month at the standard 209 hours — up 2.9% from 2025's 10,030 KRW.
• Working time: 40 hours per week standard, capped at 52 hours (40 regular + 12 overtime). Overtime and night work are paid at a premium of at least +50%.
• Annual leave: 15 paid days after one year of service with 80%+ attendance, increasing by 1 day every 2 years up to a maximum of 25.
• Severance (퇴직금): roughly one month's average wage per year of service for staff employed 1+ year and working 15+ hours per week. Budget for this from day one, even though it is paid at separation.

Gross-to-net each month means subtracting income tax, the employee share of the four insurances, and any voluntary deductions to arrive at take-home pay.

Income tax withholding

Korea taxes employment income on a progressive scale of 6% to 45% across eight brackets, unchanged for 2026, plus a 10% local income tax surtax on the national tax amount. Employers withhold each month using the National Tax Service's Simplified Tax Withholding Table, then reconcile at year end.

Two points often surprise foreign employers:

• Withholding and remittance is due by the 10th of the following month. Tax withheld in June is filed and paid by July 10. Small employers may apply for semi-annual remittance, but monthly is the default.
• Freelancers and independent contractors are different. Payments to most freelancers are subject to a flat 3.3% withholding (3% income tax + 0.3% local surtax) rather than the employee table — useful when engaging non-employees, but misclassifying a true employee as a freelancer is a compliance risk.

You can dig deeper into rates and the employer/employee split in our Korea tax and social fees overview.

The four insurances (4대보험)

Korea's social safety net runs through four mandatory programs. Employers calculate, withhold, and remit both the employee and employer shares — generally by the 10th of the month. Here are the 2026 rates:

National Pension rose from 9.0% to 9.5% in 2026 under a legislated reform that gradually climbs toward 13% by 2033 — so plan for employer-cost increases in future budgets. Long-term care is calculated as a percentage of the health-insurance premium and is commonly expressed as roughly 0.47% of salary. On top of employment insurance, employers also pay an employer-only 0.25%-0.85% for employment-security and vocational-training programs, plus industrial accident insurance, whose rate varies by industry.

The employer share of these insurances is a real cost beyond gross salary, so factor it into every offer. See our Korea compensation guide for building total-cost-of-employment estimates.

Year-end settlement (연말정산)

Because monthly withholding is only an estimate, Korea reconciles each employee's actual tax liability once a year. This is the year-end settlement, and the employer runs it on the employee's behalf.

How it works in practice:

• Early in the year, employees gather deduction evidence — insurance premiums, medical and education expenses, credit-card spending, dependents, and more. The NTS Simplified Year-End Settlement service publishes consolidated data each year (for the 2025 tax year, around late February 2026).
• The employer recalculates the correct annual tax and compares it to what was withheld. Over-withholding produces a refund (usually paid out in the February payroll); under-withholding means the employee owes the balance.
• Employers must finalize the settlement and file the supporting documents with the tax authorities by March 10 of the following year.

For foreign employees, note that certain expatriates may elect a flat-tax option instead of progressive rates — a detail worth confirming case by case. Getting year-end settlement right is one of the most visible signs to your Korean staff that payroll is being handled professionally.

In-house vs. EOR or payroll provider

The biggest strategic choice is how you run all of this. Three common paths:

Run it in-house through your own Korean entity

If you register a Korean subsidiary or branch, you can hire directly and control payroll end to end. This gives maximum control but adds ongoing burden: corporate registration, a local bank account, tax registration, and continuous filings. Entity setup typically takes a few weeks plus capital and documentation, and you will need Korean-fluent payroll expertise (in-house or outsourced to a local accounting firm).

Use a local payroll provider with your entity

Many companies that have an entity still outsource the monthly mechanics — withholding tables, insurance filings, payslips, and year-end settlement — to a Korean payroll bureau, keeping employment in their own name while offloading the calculations.

Hire through an Employer of Record (EOR)

If you have no Korean entity, an EOR becomes the legal employer for your worker and handles contracts, the four insurances, statutory filings, payroll, and severance. Onboarding is fast (often one to two weeks) with no capital or registry requirement. The trade-off is a per-employee service fee and slightly less direct control. Many global firms test the Korean market via EOR, then transition to their own entity once headcount justifies it.

A simple rule of thumb: a handful of hires or a market test favors an EOR; a larger, permanent team usually favors an entity with a payroll provider. Either way, the underlying compliance — withholding deadlines, the four insurances, and year-end settlement — does not change. For a broader checklist of obligations, see our HR compliance guide for Korea.

Putting it together

Korean payroll rewards consistency: pay on a fixed monthly date, withhold and remit by the 10th, contribute the correct employer and employee insurance shares, and run the year-end settlement on schedule. The figures shift year to year — National Pension is mid-reform, and minimum wage rises annually — so treat your payroll setup as something to review each January.

Hire From Korea helps global companies hire Korean talent and stay compliant, whether you run payroll in-house, through a provider, or via an EOR. If you would like help mapping the right structure for your team, request a consultation and we will walk you through the options.