Country profiles

Business Environment

Doing Business

Traveling and Living

BLF internationally

Change country

Market information

Best trading countries Import-Export flows Market reports search Professional reviews Consumption Data Business alert

Home > Country profiles > Operating a Business

South Korea: Operating a Business

Legal Forms of Companies | The Active Population in Figures | Working Conditions | The Cost of Labor | Management of Human Resources

Legal Forms of Companies

Types of Companies and Capital (Max/Min)	Number of Partners/Shareholders and Liability
Yuhan Hoesa is a Private Limited Company. 10 million won	Minimum 2 partners. Maximum 50 partners. Liability is limited to the amount contributed.
Chusik hoesa is a Public Limited Company. 10 million won	Minimum 2 partners. Maximum 50 partners. Liability is limited to the amount contributed.
Hapcha Hoeasa is a limited partnership No minimum capital.	Two types of partners: the active partners and the sleeping partner Liability of active partners is unlimited. Liability of sleeping partners is limited to the amount contributed when they do not take part in the company management.
Hapmyung Hoesa is a general partnership. No minimum capital.	Maximum 2 partners. Liability is unlimited.

Enterprises Federation: The Federation of Korean Industries (FKI)
Small and Medium Business Administration (SMBA)

Business Setup Procedures

Setting Up a Company	South Korea	OECD
Procedures (number)	8.00	5.60
Time (days)	14.00	13.80

Source: Doing Business.

For Further Information: Consult Doing Business Website, to know about procedures to start a Business in South Korea.
Invest Korea
The Competent Organization: - The Supreme Court
- The Tax office having jurisdiction over the head office
- Invest Korea

Recovery Procedures

Principle: The insolvency of a company does not lead immediately to bankruptcy or liquidation. As there are the reorganization proceedings and the liquidation proceedings.

The reorganization proceedings is to seek maintenance and rehabilitation of business entities under the supervision of the court, by adjusting the claims and equities of the entities concerned, such as creditors and equity.
Minimum Debt-to-Capital Ratio Triggering Liquidation: None
Bankruptcy Laws: The Act on the Reorganization and Liquidation of a debtor (=Debtor rehabilitation and Bankruptcy Act).
Reorganization and Rehabilitation Laws: The Act on the Reorganization and Liquidation of a debtor (=Debtor rehabilitation and Bankruptcy Act).

The Active Population in Figures

	2010
Labor Force	24,620,000

Source: CIA - The world factbook

	2009	2010
Total activity rate	-	60.90%
Men activity rate	72.00%	-
Women activity rate	50.10%	-

Source: UN - United Nations

Employed Persons, by Occupation (% of Total Labor Force)	2007
Legislators, senior officials and managers	2.4%
Professionals	8.7%
Technicians & associate professionals	11.1%
Clerks	14.1%
Service workers	12.4%
Sales workers	11.3%
Skilled Agricultural, forestry & fishery workers	6.9%
Craft & related trades workers	10.3%
Plant, machine operators & assemblers	11.0%
Elementary occupations	11.6%

Source: KOSIS of Korea National Statistical Office

For Further Statistics: Korea National Statistical Office
For Further Information About the Labor Market: NLRC, National Labor Relations Commission
Human Resources Development Service of Korea

Working Conditions

Opening Hours
Legal Weekly Duration: 40 (or 44) hours per week.
Maximum Duration: 12 hours per day or up to 52 hours per week.
Night Hours: 10 pm until 6 am.

Working Rest Day: According to the labor standard law, employees should have one day off for every week of work, or alternatively, 4 days off for every 4 weeks of work.
Paid Annual Vacation: 15~25 days.
15 days for 1-year consecutive serrvice, with 2 additional days for each year of service.
1 day per month for those with a service period of shorter than 1 year
Retirement Age: No obligatory retirement age. In major companies, the retirement ages is 54 or 56,4. But in labor market, the Korean employees are working up to 67~68.
Child Labor and Minimum Age For Employment: 15 years
Informal Labor Market: According to figures released by the Justice Ministry, there were about 453900 eligible foreign workers - excluding foreign industrial trainees - in Korea as of November 2007, of whom approximately 222,900 were illegal.

The Cost of Labor

Pay

Minimum Wage: 3,770 won per hour and 30,160 won per day (8-hour day).
Average Wage: Average monthly gross earnings in South Korea is KRW 3,551,046 (2,800 USD).
Other Forms of Pay
Pay For Overtime: 50% more than regular wages, excepting that 25% remuneration rate applies to the first 4 hours of overtime, temporarily for the first 3 years.
Pay For Rest Days Worked: 50% more than regular wages.
Pay For Night Hours: 50% more than regular wages.
Pay For Overtime at Night: 50% more than regular wages.

Social Security Costs

The Areas Covered: Health Insurance, National Pension, Employment Insurance, Industrial Accident Insurance.
Contributions: Contributions Paid By the Employer: - National Pension: 50% (of total sum based on 9% of the salary)
- Health Insurance: 50% (of total sum based on 0.58% of the salary)
- Employment Insurance: 50% (of unemployment burden 0.9% of the salary) or 100% of employment security business/ occupational ability development business, which are around 0.25~0.85% of the salary
- Industrial Accident Insurance: 100%
Contributions Paid By the Employee: - National Pension: 50% (of total sum based on 9% of the salary)
- Health Insurance: 50% (of total sum based on 0.58% of the salary)
- Employment Insurance: (1) 50% (of unemployment burden 0.9% of the salary). In other word, 0.45% of the salary (2) no other burden.
- Industrial Accident Insurance: 0%
Competent Organization: Social Insurance Information System
Ministry of Labor
National Pension Service
National Health Insurance Corporation (NHIC)

Management of Human Resources

Recruitment

Method of Recruitment: The recruitment process takes place more and more via Internet. Selection is made on the basis of a job interview.
Recruitment Agencies: Public Employment Offices: HRD Korea (Human Resources Development Service of Korea),
Private Human Resources Firms: HR Korea, Adecco Korea, Korn/ Ferry International Korea, Incruit Corp.
Recruitment Websites: Employment Permit System (EPS) of Ministry of Labor
WorkNet of Korea Employment Information Service (KEIS)
World Job of Human Resources Development Service of Korea
Human Resources Development Service of Korea

The Contract

Type of Contract: In Korea, the contract determines if the employee is part of the regular or non-regular staff. Permanent employees form the regular staff. Among the non-regular staff, there are different types of contract: part-time workers, temporary workers, dispatched workers, fixed-term contract workers, entrusted employees.

Breach of Contracts

Retirement

There are several forms: General retirement, Pre-retirement, etc.

Dismissals

If an employer intends to dismiss his/her workers for managerial reasons, he/she is required to meet and follow strict conditions and procedures.

First, the employer should have urgent managerial reasons and make every effort to avoid the dismissal. The employer should also select the workers to be dismissed according to rational and fair criteria and notify the trade union or the workers' representative of the dismissal at least 50 days before the dismissal and consult with them in good faith.

Even in case there is a justifiable reason for dismissal, the employer should notify the worker of the dismissal at least 30 days in advance and if he/she fails to do so, should pay the worker at least 30 days of his/her ordinary wages.

Other Possible Methods

Collective dismissals (possible for economic reasons);
Disciplinary dismissals;
Resignation.

Labor Laws

Labor Insurance Law
Trade Union and Labor Relations Adjustment Act

Dispute Settlement

Conciliation Process

Cases of Dispute

Wages Increase (12.6%), Collective agreement (82.2%), Others (5.2%).

Legal Framework

- Public mediation by Labor Relations Commission: organize a mediation committee composed of three members. In case the mediation fails to solve the dispute within the mediation period, the union can take industrial action. In case of arbitration: Industrial action is forbidden for fifteen days. The Labor Relations Commission should organize an arbitration committee with three public interest members. If a party considers the arbitration award made by the Regional Labor Relations Commission to be against the law or beyond the authority of the Commission, it may file for a review of the decision with the National Labor Relations Commission within ten days of the award being made. If the party is still dissatisfied with the arbitration award or decision made by the National Labor Relations Commission after review, it may file an administrative suit within fifteen days.

- Private mediation: by a person or a group other than the Labor Relations Commission, under agreement between both parties or collective agreements.

Procedure

Trade Union and Labor Relations Adjustment Act

Judicial Structures

Legal Framework: Trade Union and Labor Relations Adjustment Act
Competent Legal Body: One National Labor Relations Commission and 12 Regional Labor Relations Commissions in major cities and provinces.
Labor-management experts (labor tribunal lay members).

Social Partners

Social Dialogue and Involvement of Social Partners: The negociations in Korea are made up on the national level, or the level of industrial sectors or the company level.
Unionization Rate: 10,3% in 2006, 10,3% in 2005, 10,6% in 2004 and 11,0% in 2003.
Unions: Korean Confederation of Trade Unions (KCTU), which presents around 3429 unions in 2006
Federation of Korean Trade Unions (FKTU) which presents around 1,143 unions 2006
Regulation Bodies: Ministry of Labor

Any Comments About This Content? Report It to Us.

Learn more about Operating a Business in South Korea on Globaltrade.net, the Directory for International Trade Service Providers.

TERMS & CONDITIONS | SITEMAP | FAQ | VIDEOS | CONTACT