Korea

Country starter pack
Business practicalities in Korea
75
CASE STUDY
Indulge Co
Ross Gregory, Chairman
Knowing the rules and doing things by the book, no
matter how challenging, is vital for businesses setting
up in Korea. Differing business practicalities in Asian
markets can be a challenge to navigate but it shouldn’t
deter you. “Korea is a rules-driven place – it is a highly
regulated country particularly with taxes, import
regulations and employment law, thus it is crucial to
understand the regulations and do things by the book,”
says Australian Ross Gregory, Chairman of wine,
beer and spirit importing company Indulge Co, and
entrepreneurial investor in several businesses in Korea.
Having worked in Korea for more than 10 years,
including a decade at Australia’s Macquarie Bank,
Gregory highlights the importance of getting local
advice when setting up and running a business there.
“Having a Korean business partner is not necessary to
succeed in the market, but having a Korean accountant
or lawyer who understands the regulations and
having local Korean managers who you trust and who
thoroughly understand the market, is vital.
Understanding employment practices is also
important. “Korean labour laws have lots of quirks
that need to be understood and may seem a bit
confusing for Australians who are generally used
to less unionism and more balanced attitudes in
employment regulations,” explains Gregory. “There
are a lot of hidden costs Australian businesses
may not budget for. An example of this is the legal
requirement around providing employees severance
pay – once an employee has worked for a company
for 12 months, they are entitled to one month of
severance pay for each year of service.”
Other laws particular to Korea include those related to
entitlement to permanent employment. Contractual
employees working for the same company for more
than two years are then legally required to become
permanent employees – even if performance is
unsatisfactory. “It is incredibly difficult to dismiss a
permanent employee in Korea unless under certain
conditions such as criminal activity or company
bankruptcy,” highlights Gregory.
To address this challenge, Gregory recommends:
“Oversee your employees during the contract
period to determine their loyalty and if they are
hardworking, as unfortunately, the only way to
manage any problematic employees is ending their
contract prior to the anniversary. Favourably, a three
month probation period always applies.”
Hidden costs may include taxes that even your
Korean staff may not be aware of. “It took us a while
to realise that a recycling tax applied to importing
bottles. No one working for us had even heard of
this regulation.” Being across all information and
constantly monitoring regulation updates is critical as
not meeting requirements can accrue hefty fines.
Ensuring you complete all necessary government
forms is also vital for businesses operating in Korea.
“When building a new gym, one form in relation
to the minor adjustment of a dividing wall was not
lodged correctly with the local government office –
this caused our construction to be delayed for four
weeks,” says Gregory.
Australian businesses importing a product into Korea
should also pay attention to all regulations, including
“things that you wouldn’t assume would be an
issue”. Gregory gives tonic water as an example – a
drink whose quinine ingredient originates from the
Cinchona tree. “Due to the product being associated
with tree bark – wood – the Korean Food and Drug
Association (KFDA) will not permit it to be imported.
Therefore, only poor substitutes of tonic water are
currently available in Korea.”
Although Korean regulations are detailed, operating
under “rule of law” does have advantages. “As long as you
are aware of the regulations, you know where you stand,”
says Gregory. “Korea is a market full of potential and once
you’re up and running, operations tend to operate fairly
seamlessly and similar to Australia.”
www.indulgekorea.com