Korea is an important economy in Asia with significant business opportunities. Multinational companies engage workers in Korea in all industries – from manufacturing to technology to finance. It is important to realize, however, that while Korea provides ample opportunities for revenue growth and expansion, it also has a significantly employee-friendly legal scheme governing employment. In fact, in our view, Korea ranks as one of the most challenging locations in Asia for both legal compliance and potential employment disputes. When entering this market, it is important to understand at least these 10 aspects of Korean employment law.

Mandatory Application of Korean Labor Law

1. Korean labor law provides legal minimums. Any employment policies, practices, or agreements (including collective bargaining agreements) containing entitlements lower than those in the law will have them automatically replaced with the more generous statutory entitlements.
2. Even if the parties agree that the law of a foreign jurisdiction governs the worker’s contract of employment, such a provision will not prevent the application of Korean employment law to a worker who lives and works in Korea. In many situations, more employee-friendly Korean labor protections will be applied notwithstanding the contractual choice of law provision.

Employee Headcount Thresholds

3. As in many locations, an employer’s obligations to its employees can change depending on the size of the workforce. Employers that do not manage to these thresholds can inadvertently find themselves in violation of the law and subject to penalties or fines. For example, if there are five or more employees, the Labor Standards Act (LSA) applies, and the exceptionally high standard for termination by “just cause” comes into play. Under this standard, employers cannot terminate employment due merely to redundancy or inadequate performance. Rather, dismissal is justified only, for example, if a reason for which the employee bears responsibility is so significant that the employment relationship cannot be continued in light of ordinary social norms. Or, the business reason for the change must arise out of an imminent and urgent necessity rather than mere profit-making or efficiency. As a result, employers are often required to negotiate exits by way of mutual consent or risk reinstatement if the worker challenges the unilateral dismissal.
4. Another important threshold is crossed when a company reaches 10 employees. At this level, Rules of Employment (ROE) must be drafted and submitted to Korean labor authorities. Before filing, employers must follow an adoption process under which a majority of employees must review the ROE, and consent to any significantly detrimental change. Once the ROE is submitted to the government authorities, employers are expected to monitor and periodically update it. For example, on February 23, 2025, the Korean legislature updated certain maternity and other family leave protections. Employers that have an ROE providing for prior lesser entitlements will need to update their ROE and re-submit it.
5. A final important threshold (though not the last, by any means) occurs where an employer’s headcount reaches 30 employees. At this stage, the company is obliged to establish a Labor Management Council (LMC) with the same number of employer and employee representatives. Once the LMC is established, the company must submit its bylaws to the relevant labor authorities. The LMC’s primary purpose is to promote the welfare of employees and ensure the sound development of the company through the participation and cooperation of both employees and employers. It is required to hold meetings every three months and keep official minutes. Failure to adhere to this requirement can lead to possible sanctions.

Inflexibility of Termination of Employment Relationship

6. As suggested earlier, Korea does not recognize at-will employment. Even when there is an urgent business necessity to dismiss employees, various legal requirements must be satisfied before workers can be dismissed. These include establishing appropriate selection criteria and consulting with employee representatives. Merely notifying employees of a business decision to terminate based on organizational needs without following the relevant processes or having sufficient evidence to demonstrate the business necessity would likely be deemed invalid, if challenged, with the workers reinstated.
7. Terminations for misconduct must also meet a high standard for both the justification and the process. Among other things, employees must be notified in writing, the reasons for termination must be specified, and the effective date of termination must be stated, or the discharge may be invalidated for failure to follow the applicable procedure.

Special Discrimination Issues

8. Many countries, including Korea, have laws that prohibit discrimination on the basis of race, gender, or disability. Korea is one of a few countries in Asia that also prohibits discrimination between regular workers (full-time permanent workers) and irregular workers (fixed-term employees and dispatched or contingent workers). The scope of what can constitute illegal discrimination includes wages, performance-based compensation, and overall employee benefits. An employee claiming discrimination may reach out to the relevant labor relations commission, which in turn would conduct an investigation. The parties may appeal internally to the commission and later to the administrative courts. Failure of the company to comply with a confirmed corrective order can result in administrative fines of up to KRW 100 million.

Mandatory Statutory Severance (Pension) Pay

9. The concept of statutory severance at the time of termination is widely used around the world. Such severance is often limited to termination by the company for business reasons rather than termination based on misconduct. In Korea, however, severance payments are more closely related to a pension concept. The right to payment at termination accrues with each year of employment and the entitlement must be paid at termination, regardless of the reason (i.e., resignation, for cause, or for business necessity). Thus, all employers are expected to establish a retirement allowance system for employees that amounts to equivalent average wages earned for 30 days for each year of continuous service. This system excludes employees whose continuous service period is less than one year, and those with average weekly working hours over a four-week period of less than 15 hours. This statutory severance must be paid within 14 days of the employee’s departure from the company along with other unpaid wages. Failure to comply with these conditions may result in imprisonment of up to three years and/or a fine of up to KRW 30 million.

Strong Labor Unions and Unfair Labor Practices

10. Korea is well known for having strong labor unions, which mostly fall under two umbrella unions: The Korean Confederation of Trade Unions (KCTU) and the Federation of Korean Trade Unions (FKTU). The KCTU is known for its hard-core, ideology-oriented approach in collective bargaining. Distinguishing Korea from many other jurisdictions, Korean law imposes not just civil but criminal liability for unfair labor practices, with a violation potentially resulting in up to two years of imprisonment and/or a fine up to KRW 20 million. It is highly recommended that employers conduct ongoing compliance checks and training on labor law compliance and avoidance of unfair labor practices.