Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.
For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.
For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.
As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.
While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.
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A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.
Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in South Korea can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in South Korea, you have to:
If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for South Korea.
An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.
An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.
Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.
At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.
Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:
Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.
Paying employees in South Korea is not the same as paying workers in your own country. Employees have to be paid using South Korea's employment and payroll standards.
This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.
Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.
After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:
One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.
Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.
Outside of EORs acting as the full admin employer, many also provide remote payroll.
For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.
We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.
40 hours per week and 8 hours per day. The maximum number of working hours per week is 52.
Anything over 40 hours per week, 8 hours per day is considered overtime, and payment is 150% of a regular salary. Work done after 10 pm pays 200%. There is no limit for daily overtime for employees, but the weekly overtime cannot exceed 12 hours.
The payroll cycle is monthly. There is no statutory payment date. It can be any date set by the company. In practice, it is often on the 25th or last day of the month.
There is no 13th salary.
In the first year, employees are entitled to 11 days per year.
In the second and third years, employees are entitled to 15 days per year.
In the third year and onward, one day’s paid leave is added for every two years of employment, up to a total of 25 days.
There are 12 public holidays.
There is no paid leave for non-work-related illness or injury. However, if illness or injury is work-related the employer must provide paid leave until the time of recovery.
90 days maternity leave (120 days maternity leave in case of twins).
Small companies : The government supports allowance for 60 days (capped at 2 million won per 30 days) as maternity leave allowances, the company must pay the difference of salary from the allowance for 60 days (compulsory) and for the last 30 days, the difference payment is up to company’s decision.
Large companies: the company should pay the total salary for 60 days and the government only support allowance for the last 30 days (capped 2 million won per 30 days), the difference is up to the company’s discretion.
A male worker can take up to 10 days of paid paternity leave (5 days by company & 5 days by the government) and request paternity leave of up to 90 days from the day of the child’s birth.
Parents are entitled to parental leave of up to 1 year until the child reaches the age of 8. The allowance is covered by the government.
Mothers are entitled to a maximum of 1 year leave
1st-3rd month: Paid at 80% of the regular salary capped at 1.5 million KRW
4th-12th month: Paid at 50% of the regular salary capped at 1.2 million KRW
Fathers are entitled to a maximum of 1 year leave
1st-3rd month: Paid at 100% of the regular salary capped at 2.5 million KRW if the father takes the leave after the mother.
The allowance will be capped at 1.5 million KRW if the mother and the father take the leave at the same time.
4th-12th month: Paid at 50% of the regular salary capped at 1.2 million KRW.
Work-Related Injury Leave – Employees receive 70% of their wages for up to three months.
Employees under “contract” or “regular employees” may only be terminated for “justifiable reason attributable” to the employee or “urgent managerial necessity” after the completion of the employee’s probationary period.
Justifiable Reason for Dismissal of an Employee in Korea
The Korean Labor Standards Act places the burden on the employer to prove a “justifiable reason to terminate.” According to the Korean Supreme Court, the reason must be “directly attributable to the employee.” Stealing, missing an excessive number of days of work, and violating laws related to the job, have all been deemed enough to terminate. Prior to termination, an attorney should be contacted to allow the company not to terminate an employee in violation of law.
Managerial Reasons for Laying off an Employee in Korea
The Korean Labor Standards Act places the burden on the employer to prove that an “urgent managerial necessity exists” before an employee is laid off. The Supreme Court has interpreted this to mean that a company should prove that without the layoff, the company would have extreme difficulty in maintaining operations. The standard is interpreted strictly.
Employers in South Korea must provide a 30-day notice before dismissing an employee. In some circumstances, employees are informed about their dismissal a year in advance. However, notice may not be required in the following cases:
A full-time employee is entitled to receive severance pay equal to one month’s salary for each year of employment if they have worked for at least one year and they have worked for more than 15 hours per week or more than 60 hours per month.
Severance pay is to be paid within two weeks of termination regardless the reason of the termination.
Probation period can last a maximum of 3 months.
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