My online search was not successful due to lack of English contents on labor issues. However, in the course of doing the research, I came across an interesting report released . . . → Read More: Korea’s record in terms of enforcing contracts and employing workers]]> A colleague of mine asked me a few days ago to find a document showing Korea’s level of transparency in terms of legal procedures of unfair dismissal disputes. 

My online search was not successful due to lack of English contents on labor issues. However, in the course of doing the research, I came across an interesting report released by the World Bank named “Doing business in Korea”.

The report had several indicators related to the ease of doing business. What caught my attention was the indicator “Enforcing contracts”.  The indicator is about procedures, time and cost to resolve a commercial dispute.

Although the indicator is not 100% relevant to dismissal dispute procedures, I thought it might be something of slight reference.

The ranking of countries based on the “enforcing contracts” indicator as shown below was somewhat surprising to me.

Korea better than Singapore and Japan in terms of time and cost for commercial dispute resolution? Maybe what I read and heard from HR managers of foreign companies about slow and inefficient legal systems of Korea only applies to labor-related disputes.

What confirmed my guess was the indicator “employing workers”. The indicator turned out to be not only about hiring but also relates to difficulty of firing and firing cost. On this indicator, Korea ranked 152 among 181 countries.

If you’re interested in the above rankings and more, check here.

1. When do I have to subscribe to the insurances for Korean workers?

You should subscribe to the insurances when you hire . . . → Read More: On social insurances – for a start-up foreign company in Korea]]> Many foreign employers who newly start their business in Korea ask about social insurances scheme (employment insurance, industrial accident compensation insurance, national pension, and health insurance) in Korea. I provide here the most basic information on this subject.

1. When do I have to subscribe to the insurances for Korean workers?

You should subscribe to the insurances when you hire one or more full-time Korean employee. Each of the insurance is mandatory and managed by government agencies.

2. Are there certain categories of workers who are exempt from mandatory subscription to the insurances?

Yes.  For each insurance scheme, there are exempted workers as follows.

Employment Insurance & Industrial Accident Compensation Insurance

A part-time worker whose monthly working hours is less than 60 hours (including a part-time worker whose weekly working hours is less than 15 hours)

National Pension & Health Insurance

A part-time worker whose monthly working hours is less than 80 hours

3. Which agency do I contact for the insurances?

Here are links to English websites of each agency.

National Pension

Health Insurance

Employment Insurance & Industrial Accident Compensation Insurance (the agency has not much informaltion on employment insurance in the English website but it also manages the insurance)

Incidentally, these websites are only good as a simple information source. Don’t expect them to give foreign employers detailed procedures on taking care of insurances on their own.

4. How much do I pay as an insurance premium? 

According to the recent survey by the Mininstry of Labor for 3,339 companies with 10 or more employees, the insurance premium took up 6.7% of per capita labor cost in the year 2007. 

The folloiwng figures are based on the government notice for the year 2008.

Health Insurance

- 5.08% of monthly wage (premium is paid on a monthly basis)
- 2.54% borne by the employer, 2.54% borne by the worker

National Pension

- 9% of monthly wage (premium is paid on a monthly basis)
- 4.5% borne by the employer, 4.5% borne by the worker

Industrial Accident Compensation Insurance

The premium is paid once a year. The premium rate differs for each industry based on accident rates. It ranges from 553/1,000 of total wage in mining industry to 7/1000 in finance industry.

Employment Insurance

The premium is paid once a year.  It has two components, namely unemployment benefit and vocational ability development.

(unemployment benefit)

The premium for unemployment benefit is 0.9% of total wage (0.45% respectively borne by an employer and a worker)

(vocational ability development)

The premium for vocational ability development, to be paid by the employer alone, ranges from 0.25% (a company with less than 150 workers) to 0.85% (a company with 1,000 or more workers).