South Korea Takes On Workaholic Culture With New Labour Laws

South Korea's new labour laws have been implemented to improve the quality of life for employees while increasing compliance challenges for employers.

Jurisdiction

South Korea

What's new?

A new batch of labour laws covering income tax thresholds, social security rates, reduction of workweek hours and paternity leave policies came into effect on 1 January 2020.

The laws are wide-ranging, and employers must ensure their internal policies comply with the new changes.

The new South Korea labour laws are:

1. Reduction of retirement income tax threshold for executives

   To collect more taxes from high-income earners, the multiplier in the retirement income threshold calculation formula has been reduced (from three to two) for retirement income earned on or after Jan. 1, 2020. The increased income is now considered wage and salary income, subject to a higher tax rate than retirement income.

2. Due date extension for submission of Bi-annual Simplified Statement on Wage and Salary Income payment

   The Korean National Tax Service introduced the Bi-annual Simplified Statement on Wage & Salary Income Payment to allow the government to pay low- income families a wage subsidy twice a year rather than the previously annual payment. Payment to non-resident corporations has been excluded from submission forms.

3. Increase of tax exemption threshold

   The tax exemption threshold for Pro Rata Employee Local Resident Tax has been increased from KRW 135 million to KRW 150 million starting 1 January 2020.

   Wages paid to employees who are on childcare leave and have returned to the workplace from childcare leave of six months or longer are excluded from the tax base.

4. 52-hour workweek expanded

   Under the Labour Standards Act 2018, the maximum working hours per week, which included Saturday and Sunday, had been capped at 52 hours for a workplace with 300 or more permanent employees. It has now expanded to workplaces with 50-299 permanent employees.

5. Social security contribution rate changes

   Social Security type Applicable rate * Monthly taxable salary Notes (Based on monthly withholdings) Employee portion Employer portion Total rate until Jan. 2020 Total rate until Dec. 2019 National Pension

   4.50% 4.50% 9.00% 9.00% 2018.7: Max (KRW 210,600 x 2)

   2019.7: Max (KRW 218,700 x 2)

   2020.7: Max (KRW226,350 x 2)

   National Health Insurance

   3.335% 3.335% 6.67% 6.46% 2020: 6.67%

   2020 : Max (KRW 98,537,462 (*) X 3.335% X 2) (Effective from Jan. 1, 2020)

   (*) 2019 max. threshold...