Korea
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74<br />
Country starter pack<br />
Business practicalities in <strong>Korea</strong><br />
More employers have begun to introduce performancebased<br />
pay and profit-sharing schemes in recent<br />
years. Individual contracts for annual salaries linked to<br />
performance are increasingly common. Share options<br />
are also growing in popularity. Workers in <strong>Korea</strong> are<br />
compensated with direct cash payments, as well as a<br />
variety of subsidised services, allowances and bonuses.<br />
Benefits typically include housing, health and life<br />
insurance, cars and transport, recreation, children’s<br />
education, meals and holidays. As part of labour reform,<br />
both local and multinational firms are making progress in<br />
consolidating the many itemised benefits into single cash<br />
payments added to base pay.<br />
Social insurance programs covering pension funds,<br />
medical costs, workplace accident compensation, and<br />
employment insurance must be contributed to by<br />
employers. Employers must also set aside severance pay<br />
for employees, which is equal to one month’s salary for<br />
every year worked. Employees who have worked for at<br />
least one year are entitled to severance pay.<br />
Social insurance charges<br />
(of total amount of wages and<br />
salaries, April 2012)<br />
Social<br />
Insurance<br />
Employer’s<br />
charges<br />
Employee’s<br />
charges<br />
Unemployment 0.55% 0.55%<br />
National<br />
4.5% 4.5%<br />
pension<br />
Health 3.09% 3.09%<br />
Workers’<br />
accident<br />
compensation<br />
0.005% N/A<br />
The two most important welfare schemes are<br />
employment insurance and national pensions. As set out<br />
in the National Pension Act, employers and employees<br />
each contribute 4.5 per cent of the employee’s monthly<br />
salary to the national pension fund. Employment<br />
insurance provides 50 per cent of previous wages for<br />
up to eight months for unemployed workers up to the<br />
age of 64, provided they had been employed for six<br />
months or more. Irregular workers, such as part-timers<br />
and day labourers, are covered as long as they have<br />
been employed for at least six months in the year before<br />
unemployment.<br />
On holidays/annual leave, the <strong>Korea</strong>n Standards Labour<br />
Act states:<br />
• An employer should grant 15 days paid leave to a<br />
worker who has registered more than 80 per cent of<br />
attendance during one year. After the first year of<br />
service, an employer should grant one day paid leave<br />
for each two years of consecutive service in addition<br />
to the leave for the first year.<br />
• An employer should grant one day paid leave per<br />
month to a worker whose consecutive service period<br />
is shorter than one year, if the worker has offered<br />
work without absence throughout a month.<br />
Australia-<strong>Korea</strong> social security agreement<br />
Australians who are working or have worked in <strong>Korea</strong><br />
are able to receive a lump-sum refund of their social<br />
security contributions or have access to a <strong>Korea</strong>n oldage<br />
pension. The agreement, which took effect in 2008,<br />
mirrors Australia’s refunding of superannuation guarantee<br />
contributions for non-residents who have worked<br />
temporarily in Australia. The refunds benefit those who<br />
have worked in <strong>Korea</strong> for just a few years, such as many<br />
English language teachers, and who would not be eligible<br />
for a <strong>Korea</strong>n old-age pension. Lump-sum refunds will be<br />
retrospective for those who worked in <strong>Korea</strong> before the<br />
agreement took effect. The agreement also helps former<br />
Australian residents of pension-age living in <strong>Korea</strong>, who<br />
can claim a pension without having to return to Australia.<br />
In addition, people who are sent to work temporarily in<br />
Australia or <strong>Korea</strong> don’t have to contribute to two social<br />
security systems.<br />
Termination of employment<br />
It is possible to dismiss an employee for a legitimate<br />
reason and with 30 days advance written notice<br />
or payment of a month’s wage. However, a Labour<br />
Dispute Mediation Committee exists for the purpose<br />
of conciliation, mediation and arbitration of labour<br />
grievances. The Labour Committee is empowered to<br />
examine whether an employee has been dismissed for<br />
just cause and may also order that an unjustly dismissed<br />
employee be reinstated. Foreign investors should<br />
consult with a qualified legal counsel for more detailed<br />
explanations of dismissal procedures and legalities.<br />
If a worker continuously employed for one year or<br />
more is terminated for any reason, severance pay of at<br />
least one month, or pay equivalent to an average of 30<br />
days, must be paid for every year of employment. For<br />
this purpose, the average pay is computed on the basis<br />
of compensation for the three months immediately<br />
preceding the termination. For mass dismissals (often<br />
referred to in Australia as redundancies) due to justifiable<br />
managerial reasons (such as suspension of production,<br />
closure of partial operation, or corporate restructuring<br />
forced by financial distress), employers must deliver 50<br />
days advance notice to a labour union or any individual<br />
representing more than 50 per cent of the total number<br />
of employees affected. They must also file notice of<br />
the intended layoff with the Ministry of Employment<br />
and Labour at least 30 days ahead of the intended plan.<br />
The advance notification requirement applies to the<br />
dismissal of 10 or more employees in a business place with<br />
fewer than 100 employees, or 10 per cent of the total<br />
employment in a business place with between 100 and<br />
1,000 employees.