Tax & Social Fee in Korea
2025 Employer's Guide — Payroll, Insurance & Compliance
Understanding Korea's taxation and social fee system is essential for any global company hiring Korean talent. Korea maintains one of the most transparent and structured systems in Asia, with clear rules for income tax, payroll deductions, and four major social insurances.
Whether you hire directly, through a freelancer contract, or via our EOR/PEO service, compliance is straightforward when properly managed.
1. Overview of Korean Tax and Social Contributions
All Korean workers — full-time, part-time, or contract — are subject to taxation and social insurance contributions under Korean law. Employers are responsible for withholding income tax and paying their share of social insurance fees on behalf of employees.
The system is governed by multiple national agencies:
- National Tax Service (NTS) — Income tax administration
- Ministry of Employment and Labor (MOEL) — Labor policy oversight
- National Pension Service (NPS) — Retirement benefits
- National Health Insurance Service (NHIS) — Healthcare coverage
2. Income Tax (소득세)
Korea applies a progressive income tax system ranging from 6% to 45%, depending on annual income levels. Employers must withhold tax monthly and remit it to the National Tax Service.
2025 Income Tax Brackets
| Annual Income (KRW) | Tax Rate |
|---|---|
| 0 – 14,000,000 | 6% |
| 14,000,001 – 50,000,000 | 15% |
| 50,000,001 – 88,000,000 | 24% |
| 88,000,001 – 150,000,000 | 35% |
| 150,000,001 – 300,000,000 | 38% |
| 300,000,001 – 500,000,000 | 40% |
| 500,000,001 – 1,000,000,000 | 42% |
| Over 1,000,000,000 | 45% |
3. Payroll Withholding Process
Korean companies are required to:
- Calculate gross monthly salary
- Deduct income tax, local tax, and employee social insurance
- Contribute the employer's share of insurance
- Pay net salary to the employee and remit taxes to the authorities
Employers submit monthly withholding tax returns via the National Tax Service's online system (Hometax).
4. The Four Major Social Insurances (4대보험)
All employees working more than 60 hours per month are required to participate in the Four Major Insurances (4대보험):
| Program | Employer Share | Employee Share | Description |
|---|---|---|---|
| National Pension (국민연금) |
4.5% | 4.5% | Mandatory retirement program for ages 18–60 |
| National Health Insurance (건강보험) |
3.545% | 3.545% | Covers medical services and long-term care |
| Employment Insurance (고용보험) |
0.8–1.15% | 0.9% | Unemployment and training insurance |
| Industrial Accident (산재보험) |
0.7–3.6% | 0% | Covers work-related injuries and illnesses |
Estimated total cost: Employers contribute about 9–10%, while employees contribute 8–9% of their salary.
5. Taxation for Freelancers (Independent Contractors)
Freelancers are treated as self-employed professionals rather than employees. They must manage their own taxes and insurance, but clients are responsible for withholding a small portion.
Key Rules
- Apply 3.3% withholding tax (3% income + 0.3% local)
- No social insurance obligations
- Issue or receive tax invoices (세금계산서)
- Annual tax filing required by May 31
6. Foreign Employees and Tax Exemptions
Foreign employees in Korea may choose:
- Progressive tax rates, or
- A flat 19% rate (including local tax) for up to 20 years if eligible
Korea also has double taxation treaties with over 90 countries, ensuring that income is not taxed twice.
7. Severance, Bonuses, and Benefits
Under Korean law:
- Severance pay is mandatory after one year of service and taxed at a lower rate
- Bonuses are treated as regular wage income
- Non-cash benefits (e.g., housing, meal allowances) are taxable if they have monetary value
Employers must accurately classify payments to maintain compliance and avoid over-taxation.
8. Year-End Tax Settlement (연말정산)
At the end of each fiscal year, employers conduct a Year-End Settlement for employees. This reconciles total income, deductions, and taxes withheld throughout the year.
Steps
- Gather employee data (income, dependents, deductions)
- Calculate final tax liability
- Issue income certificates (원천징수영수증)
- File reports electronically to the NTS
9. How Hire From Korea Simplifies Everything
With Hire From Korea, all payroll and compliance responsibilities are handled by our team:
✅ Payroll & Tax
- Calculate salaries, deductions, and contributions
- File monthly tax and insurance reports
- Conduct year-end settlement automatically
✅ Social Insurance
- Register and maintain all four insurances
- Manage payments and documentation
✅ Freelancer Compliance
- Apply 3.3% withholding and issue tax-compliant invoices
✅ Expat Support
- Apply for 19% flat tax when applicable
- Handle double-tax treaty documentation
You manage your team — we handle the compliance.
10. Example: Employer Cost Calculation
For a monthly gross salary of ₩3,000,000 KRW, total costs typically look like this:
| Item | Employer | Employee | Total |
|---|---|---|---|
| National Pension | 135,000 | 135,000 | 270,000 |
| Health Insurance | 106,350 | 106,350 | 212,700 |
| Employment Insurance | 27,000 | 27,000 | 54,000 |
| Industrial Accident | 30,000 | – | 30,000 |
| Income Tax & Local Tax | – | 120,000 | 120,000 |
| Total | 298,350 | 388,350 | ≈ ₩3,388,000 KRW |
11. Final Insight
Korea's tax and social contribution system may seem complex, but it's remarkably predictable once properly structured.
With centralized filings and fixed contribution rates, it's easy to stay compliant.
Hire From Korea ensures full legal and tax compliance — without requiring you to open a local entity or manage payroll manually.
12. Official Sources
(Access root domains due to temporary service issues in government data centers)
https://www.nts.go.kr
https://www.nps.or.kr
https://www.nhis.or.kr
https://www.moel.go.kr
https://www.kcomwel.or.kr
Ready to Simplify Your Korean Payroll & Tax Compliance?
Let us handle all tax, social insurance, and payroll administration. Focus on growing your team — we'll ensure everything is compliant and accurate.
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