Korea

Country starter pack
Business practicalities in Korea
73
While Korea’s unemployment rate has lately been among
the lowest in the OECD, the labour market duality
(including the high share of part-time/casual workers) and
underemployment in some segments of the population
(notably youth and women) are important challenges,
and factors contributing to lower potential growth. Policy
makers are therefore focused on:
• Boosting female labour force participation
• Policy revision
• Raising youth employment.
Human resources and employment law
When employing workers in Korea, laws affecting the
hiring, payment, and dismissal of workers must be
observed. The Labour Law of Korea has been designed
to provide workers with adequate protection, while
protecting the basic structure of business activities and
contributing to a solid and stable capitalist economy.
The Labour Law is divided into four basic parts:
individual labour relations, collective industrial relations,
cooperative industrial relations, and employment. The
laws set standards for labour contracts and relations
between employers and workers, enable autonomous
dispute resolution between labour and management by
guaranteeing workers’ right to organise a union, and aim
to ensure mutual benefits to labour and management
by promoting the participation and cooperation of both
employers and workers.
Minimum conditions for employees are set out in
the Labour Standards Act. Working hours, severance
pay, health and safety, compensation for industrial
accidents, and labour contracts are all covered by this
act. The Employment Insurance Act grants benefits
to jobless workers and aims to promote employment
through improving employee skills and employability.
Compensation and insurance coverage for industrial
accidents is guaranteed in the Industrial Accident
Compensation Insurance Act.
The Korean Gender Employment Equality Law prohibits
gender discrimination against any worker, requiring that
people doing the same work of equal value are to be paid
at the same wage scale. An employer violating these
provisions is subject to penalty.
Under Korea’s Minimum Wage Law, mandatory minimum
wage standards applicable to all firms in all industries
are set and reviewed annually by the Minister of Labour.
In 2014, the minimum wage was set at KRW 5210 per
hour (up 7.2 per cent from 2013), KRW 41,680 per
eight-hour day, and KRW 1,088,890 per month (based
on a 40-hour week). Salary ranges for executives and
professionals vary widely according to the industry, the
company, and the seniority or position of the individual.
There has been a continuing transition from seniority to
performance-based pay systems.
The average wage can also differ significantly across
industries. For example, wages increased at an average
annual rate of 4.6 per cent in the manufacturing industry
between 2009 and 2014, compared with 3.3 per cent in
financial services. The Government’s policies are broadly
aimed at creating more equality between services and
manufacturing, by increasing tax incentives for the former
to the same level as in manufacturing.
MINIMUM WAGE - Per hour
2009 2010 2011 2012 2013 2014
Minimum wage (KRW) 4,000 4,110 4,320 4,580 4,860 5,210
Increase Rate % (year-on-year) 6.1 2.75 5.1 6.0 6.1 7.2
Number of workers applied
(thousand persons)
15,882 16,103 16,479 17,048 17,510 17,734
Source: OECD