Korean Employment Law for Foreign Employers: The Five Things That Surprise You

Foreign companies rarely get into trouble in Korea over the rules they researched. They get into trouble over the assumptions they carried in — most of which come from employment systems that work very differently.

1. There is no employment at will, and the written notice rule is absolute

Dismissal in Korea requires justifiable cause. Poor performance is not, by itself, justifiable cause. Restructuring is not, by itself, justifiable cause. The employer must show a reason serious enough that the employment relationship cannot reasonably be continued, and must normally show that it gave the employee an opportunity to improve.

Separately and independently, dismissal must be notified in writing, stating the reasons and the effective date. This is not a formality. A dismissal communicated verbally, by message, or in writing without adequate reasons is invalid regardless of how well-founded the underlying cause was. Foreign employers lose cases on this point that they would otherwise have won. A statutory 30-day advance notice or payment in lieu applies in addition.

Redundancy — dismissal for managerial reasons — has its own cumulative requirements: urgent business necessity, genuine efforts to avoid dismissal, fair and reasonable selection criteria applied without discrimination, and consultation with the employee representative body at least 50 days in advance. All four must be satisfied.

2. The remedy is reinstatement, and there is no cap

An employee may file for relief from unfair dismissal with the Labour Relations Commission within three months. The process is faster and cheaper than litigation, and employees use it routinely.

If the dismissal is found unfair, the standard remedy is reinstatement with full back pay for the entire period from dismissal to reinstatement — including the time taken by the proceedings themselves, and by any appeal the employer brings. There is no statutory cap and no equivalent of a compensatory maximum. An employer that litigates a weak dismissal through the Commission and then the courts can accumulate two or three years of back pay before losing.

This is why the normal exit route in Korea is a negotiated termination with a severance payment and a release, not a dismissal. Foreign employers often resist this as paying for something they believe they are entitled to do for free. They are usually paying less than the alternative.

3. Statutory severance pay is separate from any severance package

Any employee with at least one year of service is entitled on departure to retirement pay of at least 30 days' average wages per year of service — regardless of whether they resigned, were dismissed, or agreed to leave. It is a statutory entitlement, not a negotiated benefit, and it must be funded through a defined benefit or defined contribution retirement pension scheme.

A negotiated severance package sits on top of this. Budgeting for an exit without separating the two is one of the most common costing errors we see.

4. Ordinary wage has been redefined, and it changed your payroll costs

In two en banc decisions on 19 December 2024, the Supreme Court abandoned the "fixedness" requirement that had governed the definition of ordinary wage since 2013. Ordinary wage is now determined by three criteria — consideration for contractual work, regularity, and uniformity — without any additional requirement that entitlement be certain in advance.

The direct consequence is that regular bonuses conditioned on being in employment on the payment date, or on working a minimum number of days, now count as ordinary wage. Since ordinary wage is the base for calculating overtime, night work and holiday work premiums, annual leave allowances and statutory notice pay, any company whose Korean pay structure includes conditional periodic bonuses has seen its legally required premium payments rise.

The Court held that the new rule applies prospectively as a matter of principle, with retroactive effect for the cases before it and parallel cases pending at the time. That limits the historical exposure, but it does not remove the forward-looking cost — and a Korean subsidiary that has not reviewed its pay structure since December 2024 may be underpaying statutory premiums now.

5. Working time is a criminal matter, not a payroll matter

The statutory ceiling is 40 hours a week, extendable by agreement to a maximum of 52 hours in total. Exceeding it is a criminal offence for which the representative director can be prosecuted — paying overtime does not cure the breach.

The available flexibility mechanisms — flexible working hour systems, selective (flexitime) systems, and discretionary work systems for qualifying roles — each require specific procedural steps, usually including a written agreement with the employee representative body. Companies that operate an informal "we pay for the extra hours" arrangement, standard in many jurisdictions, are simply non-compliant here.

Two further traps worth knowing

Rules of employment cannot be changed to employees' disadvantage without consent. An employer with ten or more employees must maintain rules of employment. Amending them unfavourably requires the consent of a majority of the workforce — not consultation. A unilaterally imposed change to a bonus scheme, evaluation system or benefit is void as to existing employees.

Fixed-term and dispatched workers convert. A fixed-term employee engaged for more than two years is deemed to be on an open-ended contract. Worker dispatch is permitted only for designated occupations and durations; unlawful dispatch triggers an obligation on the user company to hire the worker directly. Structuring a long-term role as a series of contracts, or through a service provider, frequently produces the permanent employee it was designed to avoid.

A note on how to use this

None of the above makes Korea a difficult place to employ people. It makes Korea a place where employment decisions have to be structured before they are executed rather than after. The cost differential between planning an exit and defending one is usually an order of magnitude.

How we work on these matters. We advise foreign employers and Korean subsidiaries of foreign groups on the employment issues that arise at the points of highest risk — terminations and exits, restructuring, pay structure review following the 2024 ordinary wage decisions, working time arrangements, and rules of employment. We work directly with headquarters HR and legal teams in English and with Korean management in Korean, without a translation layer in between.

For groups that have not reviewed their Korean employment documents in some years, the practical starting point is a short audit of the employment contract, the rules of employment and the pay structure. Those three documents determine most outcomes before any dispute arises.