South Korea’s Labour Standards Act (LSA) sets statutory minimums for leave, working conditions, and termination. On top of that, the Employee Retirement Benefit Security Act (ERBSA) governs how employers fund retirement benefits. If you’re hiring in South Korea, you need to understand both frameworks before your first employee starts work.
How benefits work in south korea
Employment in South Korea is governed primarily by the LSA, which applies to most employers with five or more workers. It sets floors for annual leave, maternity and paternity leave, and working hours. Retirement benefits sit under ERBSA, which requires employers to maintain a funded plan rather than simply booking a liability on the balance sheet. Employment Insurance, operated by the government, covers a portion of parental leave costs, which reduces your direct payroll exposure during those periods.
Leave entitlements at a glance
The LSA mandates several categories of leave. The rules for each differ in how they accrue, who funds them, and what triggers eligibility.
Annual leave
Annual leave in South Korea accrues differently in the first year of employment than it does after that, so it’s worth understanding the two phases separately.
First year of employment
In the first year, an employee earns 1 day of leave for each full calendar month worked, up to a maximum of 11 days. They can take those days as they accrue rather than waiting until the year is complete.
From year two onwards
Once an employee completes one year of continuous service and has attended work at least 80% of that time, they’re entitled to 15 days of annual leave for the following year. From year three onwards, 1 additional day is added for every 2 further years of service. The total entitlement is capped at 25 days.
| Years of service | Annual leave entitlement |
|---|---|
| First year (per full month worked) | 1 day (max 11 days) |
| 1 year (with 80%+ attendance) | 15 days |
| 3 years | 16 days |
| 5 years | 17 days |
| 7 years | 18 days |
| … | … |
| 21+ years | 25 days (maximum) |
Unused annual leave that the employee hasn’t been given the opportunity to take must be compensated in cash. Employers can set up a “leave encouragement plan” to avoid this obligation by actively promoting leave use.
Public holidays
Under the LSA, Labour Day on 1 May is the only mandatory public holiday that applies by statute. In practice, however, most employers grant paid time off on all of South Korea’s national public holidays through their employment rules or collective agreements. There are approximately 15 to 16 public holidays on the Korean calendar, including Seollal (Lunar New Year), Chuseok (Korean Thanksgiving), and National Foundation Day, among others.
When you’re setting up employment terms, you’ll want to specify which holidays your employees observe. Most professional employers in South Korea follow the full national calendar to remain competitive in the local labour market.
Sick leave
South Korea doesn’t mandate paid non-occupational sick leave under the LSA. If an employee is ill and not at work, they generally aren’t entitled to paid leave unless you’ve committed to it in the employment contract or company rules.
Work-related illness and injury are handled differently. Employees covered by the Industrial Accident Compensation Insurance Act are entitled to paid compensation for work-related conditions through Workers’ Compensation Insurance. Employers pay into this scheme as part of their social insurance obligations.
If you want to offer paid sick leave for non-occupational illness, you can do so contractually. Many employers at the professional level include some provision in their employment terms, but it’s a commercial decision rather than a legal requirement.
Maternity and paternity leave
Maternity leave
Employees are entitled to 90 days of maternity leave (120 days for multiple births), which must include at least 45 days after the birth. The funding splits between the employer and the government.
You’re required to pay at least the first 60 days of maternity leave at the employee’s ordinary wage. The Employment Insurance fund covers the remainder, up to a statutory cap. For large employers, only the first 60 days are covered by the government; the split may differ for smaller businesses. You’ll need to verify your company’s size category when calculating your actual cost.
Paternity leave
Fathers are entitled to 10 days of paternity leave, which must be taken within 90 days of the child’s birth. The first 5 days are paid by you as the employer. The remaining 5 days are covered by the Employment Insurance fund. The leave can be taken in two separate periods if needed.
Child care leave
Employees with a child aged 8 or under are entitled to up to 1 year of child care leave (육아휴직) per child. Both parents can take it, either consecutively or, with agreement, at the same time. You aren’t required to pay the employee’s salary during this period. The government’s Employment Insurance fund pays a benefit directly to the employee for the duration of the leave.
Your obligation as the employer is to grant the leave when it’s requested and to reinstate the employee to the same or an equivalent position on their return. You can’t refuse the request on business grounds for employees who meet the eligibility criteria.
Retirement benefits
South Korea’s ERBSA requires every employer to maintain a funded retirement benefit plan for employees who have worked for at least one year. There are two main plan types.
Defined Contribution (DC): You contribute an amount equivalent to at least one-twelfth of the employee’s annual wage into an individual account each year. The employee directs the investments and bears the investment risk.
Defined Benefit (DB): The employer guarantees a benefit of at least 30 days’ average wage per year of service, funded through an external trust or insurance product.
Before ERBSA, the traditional approach was to pay a lump-sum severance of one month’s average wage per year of service at the end of employment. Existing employees could retain this arrangement under legacy rules, but new hires after ERBSA came into force must be enrolled in a funded DC or DB plan.
A tripartite reform agreement reached in 2026 is targeting legislation by end of 2026 to require all companies to move to funded plans. The direction of travel is clear: you should plan for funded plan enrollment when onboarding new employees in South Korea.
Discretionary benefits
South Korea has no statutory requirement for a 13th month payment or annual bonus. Performance-related bonuses are common in the market, particularly in technology and financial services, but they’re contractual arrangements rather than legal entitlements.
Other benefits that are commonly offered at the professional level include meal allowances, transportation subsidies, and private health or dental insurance top-ups. These aren’t mandated but are part of competitive packages in the South Korean market. If you include them in the employment contract, they can affect the average wage calculation used for retirement benefit contributions, so it’s worth taking advice before committing to their structure.
How an EOR manages benefits in south korea
If you don’t have a registered legal entity in South Korea, you can’t employ workers there directly. An Employer of Record (EOR) employs your workers on your behalf under a locally compliant employment contract, handles payroll, administers statutory leave entitlements, enrolls employees in the correct retirement benefit plan, and manages social insurance contributions including Employment Insurance and Workers’ Compensation.
This is particularly relevant in South Korea because retirement benefit compliance, leave administration, and Employment Insurance coordination all require in-country payroll infrastructure. An Employer of Record gives you that infrastructure without needing to incorporate a Korean subsidiary. When you’re comparing providers, check how they handle DC plan enrollment, whether their EOR services include payroll support for social insurance contributions, and how they manage the transition as the 2026 reform legislation progresses.
If you’re working with independent workers in South Korea rather than employees, understand that the LSA and ERBSA entitlements don’t apply to genuine contractors. However, worker misclassification is actively enforced by Korean labour authorities, so it’s important to get the classification right from the outset.
FAQs
How does annual leave work in the first year of employment? In year one, the employee earns 1 day of leave for each full month worked, up to a maximum of 11 days. They can take those days as they accrue. After completing one full year with at least 80% attendance, they’re entitled to 15 days for the following year.
Is sick leave paid in South Korea? Non-occupational sick leave is unpaid unless you’ve included paid sick leave in the employment contract or company rules. Work-related illness and injury are covered through Workers’ Compensation Insurance, which is funded through compulsory employer contributions.
How is maternity leave funded? You pay at least the first 60 days of maternity leave at the employee’s ordinary wage. The Employment Insurance fund covers the remaining days up to a statutory cap. For multiple births, total leave extends to 120 days.
Does the employer pay salary during child care leave? No. You’re required to grant up to 1 year of child care leave per child (for children aged 8 or under), but the Employment Insurance fund, not you, pays the benefit to the employee during that period. You must reinstate the employee to the same or an equivalent role on their return.
What are my obligations under ERBSA? You must maintain a funded DC or DB retirement plan for employees who have worked at least one year. The minimum DC contribution is one-twelfth of annual wage per year. A 2026 tripartite reform agreement is targeting legislation to mandate funded plans across all companies by end of 2026.
