South Korea Labour Law Updates 2026
A comprehensive overview of South Korea labour law updates 2026, with practical guidance for employers operating in or expanding into South Korea.
South Korea’s employment law has shifted significantly at the start of 2026. Three major changes which took effect simultaneously on 1 January are a minimum wage increase, a National Pension contribution rate increase, and a National Health Insurance premium rise.
What this means is that every employer’s payroll cost base changed from the first working day of the year.
On 10 March 2026, the Yellow Envelope Act came into force, fundamentally expanding the definition of ’employer’ for collective bargaining purposes and exposing principal companies to direct union demands from subcontractor workforces.
Looking ahead, the retirement age debate has moved from discussion to active legislation, in March 2026 the government accepted a recommendation to raise the statutory retirement age from 60 to 65 in a phased approach, and the Employment Insurance Act amendment, which would shift unemployment benefit eligibility from an hours-based to an income-based standard, is advancing through the National Assembly.
For employers managing South-Korean operations as part of a global workforce, 2026 is a year that requires active compliance review across payroll, industrial relations, and HR policy.
This article sets out every significant change, those already in force, those taking effect during 2026, and those confirmed or expected before year-end, with practical steps for employers to take now.
Minimum Wage Increased To KRW 10,320 Per Hour From 1 January 2026
South Korea operates a single national minimum wage with no regional variations. The rate applies uniformly to all employees regardless of employment type. Full-time, part-time, temporary, daily, and foreign workers, and regardless of industry or location. Employers cannot pay below the minimum wage rate for any hour worked.
Exceptions and probationary period rules
The Minimum Wage Act allows one specific exception: employees under a contract of one year or more may be paid at 90% of the minimum wage, KRW 9,288 per hour in 2026, during their first three months of employment, provided the work is not classified as simple labour. This exception does not apply to part-time workers, daily workers, or employees on contracts of less than one year.
Interns and trainees in formal vocational training programmes have a separate framework. Platform and gig workers, including delivery riders, were not brought within minimum wage coverage for 2026 following a Minimum Wage Commission decision in June 2025, which determined that current research was insufficient to proceed. The MOEL has been directed to conduct further study; gig worker minimum wage coverage remains a live policy debate that employers in platform-adjacent sectors should monitor.
Minimum wage and the retirement benefit calculation
South Korea’s statutory retirement benefit, the severance pay entitlement that accrues at one month’s average wage per year of service for employees who have worked continuously for one year or more, is calculated on average wages, not on the minimum wage directly. However, for minimum-wage employees, the minimum wage floor affects the base from which retirement benefits are calculated. Employers with employees at or near the minimum wage should recalculate their accrued retirement benefit obligations following the 2026 increase.
| Key Action For Employers: |
|---|
| Update payroll for all employees earning at or near the minimum wage from 1 January 2026. Review probationary pay arrangements to confirm any reduced rate applied during probation does not fall below KRW 9,288 per hour for qualifying contracts. Recalculate accrued retirement benefit obligations for minimum-wage employees. Confirm your internal salary scale has been updated, the MOEL inspects salary scales during labour audits, and a scale that does not reflect the current minimum wage is a separate compliance failure. |
Social Insurance Costs Rose Simultaneously From 1 January 2026
For the first time in recent memory, three of South Korea’s four major social insurance premiums increased simultaneously on 1 January 2026. The combined effect means that employers and employees alike face higher payroll costs even where nominal salaries have not changed, a point widely reported in the Korean media at the start of the year.
National Pension: first increase in the eight-year reform schedule
The reform is driven by the long-term sustainability challenge facing the National Pension Fund, projections suggest the fund could be depleted by the mid-2050s at current contribution rates given South Korea’s rapidly ageing population and declining birth rate. The phased increase locks in annual payroll cost rises for the foreseeable future. Employers should model the full 2026–2033 contribution schedule into their employment cost forecasting for Korean operations.
National Pension contributions are capped at a monthly salary of KRW 6,590,000. Employees earning above this ceiling contribute the maximum regardless of actual salary. The ceiling is reviewed annually in July.
National Health Insurance: rate rises to 7.19%
The NHI premium is capped at a monthly contribution ceiling that is adjusted annually.
Employment Insurance and Workers' Compensation: unchanged in 2026
Employment Insurance (UI) contribution rates remain at 1.8% of monthly salary in 2026 (employer and employee each contributing 0.9%). Workers’ Compensation Insurance (WCI) rates are employer-only and vary by industry, ranging from 0.6% to 18.5% of monthly wages depending on occupational risk classification. Both remain unchanged from 2025.
Combined SHUI contribution rates for 2026
| Insurance | Total Rate | Employer | Employee | Notes |
|---|---|---|---|---|
| National Pension (NPS) | 9.5% | 4.75% | 4.75% | Up from 9.0% total. First step in annual increases to 13.0% by 2033. Capped at KRW 6,370,000/month salary. (ceiling revised each July). |
| National Health Insurance (NHI) | 7.19% | 3.595% | 3.595% | Up from 7.09%. Long-Term Care Insurance adds 13.14% of NHI premium on top. |
| Long-Term Care Insurance (LTCI) | ~0.944%* | ~0.472% | ~0.472% | *13.14% of the 7.19% NHI rate. Included in NHI deduction. |
| Employment Insurance (UI) | 1.8% | 0.9% | 0.9% | Unchanged. Foreign employees on certain visa types may be exempt. |
| Workers' Compensation (WCI) | 0.6%–18.5% | 100% | 0% | Employer-only. Rate varies by industry risk classification. |
| Approximate total (excluding WCI) | ~19.45% | ~9.72% | ~9.72% | Both sides excluding WCI and trade union fund. |
| Key Action For Employers: |
|---|
| Update payroll systems immediately to reflect the new NPS rate of 4.75% per side and the new NHI rate of 3.595% per side. Run a payroll audit for January 2026 to confirm both changes were applied correctly from the first pay period. Model the full 2026-2033 NPS contribution schedule into your Korean employment cost projections, the pension rate will increase by 0.5% total (0.25% per side) every year through 2033. For employers with Korean expatriates or foreign employees, review NHI exemption eligibility and ensure documentation is filed. |
The Yellow Envelope Act
Expanded definition of 'employer' for collective bargaining
The most consequential change is the broadening of which entities have a duty to engage in collective bargaining. Under the previous framework, only the direct employer, the party to the employment contract, had an obligation to bargain with a union. Under the amended Act, a principal company (contractor) may now be deemed an ’employer’ for collective bargaining purposes even if it is not the direct party to the employment contract, provided it is recognised as having substantial and specific power to control or determine the working conditions of subcontractor employees.
In practice, this means that a company which sets the working hours, performance standards, supervision arrangements, or pay structures of subcontracted workers, even without directly employing them, may face direct union demands from those workers’ unions. This is the legislative embodiment of a principle that Korean courts had already been developing through case law, but the statutory definition gives unions a clearer pathway to demand direct bargaining with principal companies.
For multinational employers operating in Korea through complex supply chains, outsourcing arrangements, or subcontracting relationships, particularly in manufacturing, logistics, IT services, and retail, the practical question is whether any of their arrangements give them substantial and specific control over subcontractor working conditions. If the answer is yes, a union demand for direct bargaining may now be legally supportable.
Expanded scope of legitimate labour disputes
Previously, strikes were legally confined to disputes over the determination of working conditions, wages, hours, and similar matters. Under the amended Act, the scope of legitimate labour disputes is expanded to include managerial decisions that affect working conditions and clear violations of collective bargaining agreements. This means that restructuring, mergers and acquisitions, outsourcing decisions, and workplace relocations may now trigger legally protected industrial action where those decisions affect employees’ working conditions.
For employers planning organisational change, including business transfers, site consolidations, or workforce restructuring, this is a material change. Decisions that would previously have been viewed as management prerogative may now be subject to union consultation or dispute. Legal advice should be sought at the planning stage of any significant organisational change, before decisions are communicated.
Restrictions on employer damage claims against unions
The amended Act introduces explicit restrictions on the circumstances in which employers can seek damages from trade unions. Employers are now prohibited from exercising damage claims against unions for the purpose of threatening the union’s existence or obstructing union activities. Where a union has caused damage to an employer while resisting the employer’s own unlawful acts, the union is exempt from liability.
This change reverses what had become a pattern, particularly in the context of disputes in the logistics and delivery sectors, of employers pursuing large civil damage claims against unions following industrial action. The amendment narrows the circumstances in which such claims can be pursued and removes the chilling effect that large damage awards had created on union activity.
Expanded union membership to non-employees/ex-employees
The Yellow Envelope Act also expanded union membership eligibility to non-workers, including former employees, platform workers, and gig workers. The previous TULRAA disqualified unions from recognition if they admitted non-employees as members. The amendment removed this restriction. For employers managing platform or gig workforces, this is an operationally significant change.
| Key Action For Employers: |
|---|
| Urgently review all subcontracting and outsourcing arrangements to assess whether your company exercises substantial and specific control over subcontractor working conditions. If it does, prepare for the possibility of direct union demands and ensure your labour relations team has a clear strategy for how to respond. Review planned restructuring, M&A, or outsourcing decisions with employment counsel before finalising. Decisions that affect working conditions may now trigger legally protected industrial action. Reinforce direct communication channels with your own workforce through labour-management councils to reduce the risk of disputes escalating to formal union action. |
Paternity Leave Doubled To 20 Days In Force From February 2025, Fully Operational in 2026
Amendments to the Labour Standards Act and the Act on Equal Employment and Support for Work-Family Reconciliation effective from 23 February 2025 significantly expanded paternity and family leave entitlements. These changes are now fully operational and should be embedded in all employers’ leave policies for 2026.
Paternity leave doubles to 20 days
Paternity leave (spousal maternity leave) was increased from 10 days to 20 days. The leave must be used within 120 days of the birth of the child and can now be divided into multiple periods of use, a change from the previous requirement for continuous leave. Government subsidies to support employers providing this leave have been extended accordingly, with support available for a full 20 days for smaller companies eligible for ‘priority support’ designation.
Childcare leave extended to 18 months for qualifying families
Standard childcare leave remains at 12 months per parent. From February 2025, the entitlement is extended to 18 months for three qualifying categories: single parents, parents of children with a severe disability, and parents where both parents each take at least three months of childcare leave. The total childcare leave period can now be divided into four separate periods of use, increased from the previous limit of three.
Reduced working hours for childcare: extended to children under 12
Reduced working hours for childcare purposes can now be applied for children up to 12 years old, extended from the previous age limit of 8. This is a meaningful expansion of work-life balance support that affects a larger segment of the working parent population and requires corresponding adjustments to working hours policy and scheduling.
Maternity leave: expanded for premature births from February 2025
From 23 February 2025, maternity leave has been extended to 100 days for premature births requiring hospitalisation of the baby in a neonatal intensive care unit. The standard 90-day maternity leave entitlement (120 days for multiple births) remains unchanged for full-term births.
| Key Action For Employers: |
|---|
| Ensure your leave policy reflects 20 days of paternity leave, updated childcare leave provisions including the 18-month entitlement for qualifying families, and the extended reduced working hours for children up to age 12. Update HR systems to handle the four-period split for childcare leave. For employers with a significant share of working parents, train line managers on the updated entitlements. Confusion about paternity leave duration and the qualifying conditions for extended childcare leave are among the most common HR compliance questions Korean MOEL inspectors raise. |
Proposed Mandatory Retirement Age May Become Active Legislation In 2026
South Korea’s statutory mandatory retirement age of 60, which has been in place for all workplaces since 2017, is now the subject of active legislative reform. What was a policy discussion in 2025 has become a government commitment in 2026.
The political and demographic context is significant. South Korea has the highest old-age poverty rate among OECD (Organisation for Economic Co-operation and Development) nations. Pension payouts currently begin at 63 for those born between 1961 and 1964, rising to 65 by 2033, leaving many workers with a three-to-five-year income gap between mandatory retirement and pension eligibility. The National Human Rights Commission’s February 2025 recommendation cited this gap as a human rights concern.
What the reform would look like
Several competing bills are under review in the National Assembly. The most widely discussed proposal is a phased extension aligned to the pension eligibility age increase: the continued employment age would rise to 62 in 2028–2029, 63 in 2030–2031, and increase annually from 2032, reaching 65 by 2033. A two-year grace period through 2026 is proposed before the new system takes effect, assuming legislation is enacted within the year.
What employers should do now
The retirement age reform is not yet law, but the direction of travel is now clear, the government has committed to it and the legislative process is underway. For employers operating in Korea, the practical implications of extending mandatory employment to 65 are significant: seniority-based pay systems, which are still in use at a meaningful share of Korean companies, produce higher labour costs for older workers. Employers who have not already begun transitioning to performance-based or role-based pay structures may face significantly higher personnel costs if retirement age is extended without compensation reform.
| Key Action For Employers: |
|---|
| Do not wait for legislation to be enacted before beginning workforce planning for an extended retirement age. Audit your current workforce age structure and model the cost implications of maintaining employees to age 62, 63, or 65 under your current compensation structure. If your company uses a seniority-based pay system, begin exploring transition to a performance or role-based framework, this is a multi-year organisational change that cannot be done quickly once legislation is confirmed. Monitor National Assembly proceedings closely; multiple bills are pending and legislation is expected to advance during 2026. |
Proposed Shift In Employment Insurance From Hours-Based To Income-Based Eligibility
Under the current law, employees who work fewer than 15 hours per week on average over a four-week period, known as ‘ultrashort-hour workers’, are excluded from Employment Insurance coverage. Their employment period does not count towards eligibility for unemployment benefits, even if they are otherwise regular employees with payslips, employment contracts, and employment tax contributions.
Under the proposed amendment, the hours-based threshold would be abolished. Employees would be eligible for Employment Insurance regardless of working hours, provided their wages exceed a threshold to be set by regulation. This change directly addresses the situation of part-time workers and ultrashort-hour workers who have historically been excluded from the social safety net despite being in genuine employment relationships.
The amendment has not been enacted as of this article’s publication date. Employers with significant part-time or ultrashort-hours workforces, particularly in retail, hospitality, food services, and care sectors, should monitor its progress. If enacted, it would expand the Employment Insurance contribution base and create new entitlements for a workforce segment that is currently uncovered.
| Key Action For Employers: |
|---|
| If you employ workers who work fewer than 15 hours per week on average, identify the size of that population and model the payroll cost implications of including them in Employment Insurance coverage under the proposed reform. Begin reviewing how your HR systems track working hours and wage thresholds, the transition to income-based eligibility will require payroll systems to flag a different parameter for EI enrolment. Monitor the National Assembly legislative calendar for progress on the amendment. |
Supreme Court Rulings
Five-Employee Threshold Applies Only to Employees Working in Korea
On 25 October 2024, the Korean Supreme Court issued a significant ruling clarifying the application of the five-employee threshold under the Labour Standards Act (LSA). The LSA applies to businesses or workplaces with five or more regularly employed workers. Below the threshold, several major employer obligations, including unfair dismissal protection and certain leave entitlements, do not apply.
The ruling confirmed that only employees actually working in Korea are to be counted towards the five-employee threshold. A foreign employer’s overseas employees are not counted, even where the Korean operation is directed from headquarters abroad. This reversed the lower court’s approach, which had counted a foreign employer’s overseas workforce towards the threshold, exposing small Korean branches of multinational companies to the full LSA framework.
The practical effect is that foreign companies with only a small Korean presence, fewer than five employees subject to Korean law, should review with Korean employment counsel whether they may qualify for the threshold exemption. An affiliated Korean entity, however, may still be aggregated with the Korean branch for headcount purposes.
| Key Action For Employers: |
|---|
| If your Korean operation employs fewer than five workers directly subject to Korean law, obtain Korean employment counsel advice on whether the October 2024 Supreme Court ruling changes your threshold calculation and, if so, which LSA obligations apply to your operation. Note that the ruling does not affect affiliations, a Korean subsidiary or affiliate's employees are still counted. Ensure employment contracts for Korean operations are reviewed in light of this clarification. |
Minority Union Representation in Disciplinary Proceedings
The Korean Supreme Court also ruled, in a case arising under collective bargaining arrangements, that disciplinary action against a member of a minority union was void where the disciplinary action committee did not include any representative from that minority union. Korean law permits multiple unions to represent employees at a single employer, but where a majority union is the unified bargaining representative, it had in some cases selected only its own members as labour representatives on disciplinary committees, even when the employee being disciplined was a member of a minority union.
The Supreme Court held that this constituted unjust discrimination against the minority union and breached the duty of fair representation. Where a company’s CBA requires labour representatives on a disciplinary committee and the disciplined employee is a minority union member, at least one of the labour representatives must belong to that minority union.
| Key Action For Employers: |
|---|
| Review disciplinary procedure provisions in your Collective Bargaining Agreement and Rules of Employment. If your procedures provide for a disciplinary action committee with labour representatives selected by a majority union, add a provision ensuring that where the employee being disciplined is a minority union member, the minority union is represented on the committee. Failure to include this provision, and to apply it in practice, creates grounds for any disciplinary outcome to be challenged and voided. |
At-a-Glance: South Korea Labour Law Updates 2026
| Effective Date | Change |
|---|---|
| 25 Oct 2024 (now operative in 2026) | Supreme Court Ruling: only employees working in Korea count toward the 5-employee LSA threshold. A foreign employer’s overseas employees excluded from headcount. |
| 23 Feb 2025 | Maternity leave extended to 100 days for premature births (requiring NICU hospitalisation). |
| 23 Feb 2025 (fully operational in 2026) | Paternity leave doubled to 20 days. Childcare leave extended to 18 months for qualifying families. Childcare reduced hours extended to children under 12. |
| 1 Jan 2026 | Minimum wage: KRW 10,320/hr (2.9% increase). Monthly equivalent: KRW 2,156,880. |
| 1 Jan 2026 | National Pension contribution rises to 9.5% total (4.75% each). First step of annual increases through 2033. |
| 1 Jan 2026 | National Health Insurance rises to 7.19%. Long-Term Care Insurance: 13.14% of NHI premium. Combined NHI+LTCI: ~8.135%. |
| 10 Mar 2026 | Yellow Envelope Act in force. Expanded 'employer' definition for collective bargaining. Broader scope for labour disputes. Restrictions on union damage claims. |
| Mar 2026 (proposed) | Government commits to phased retirement age increase from 60 to 65. Legislation to be introduced, not yet enacted. |
| Pending (National Assembly) | Employment Insurance Act amendment: shift from hours-based to income-based UI eligibility. Ultrashort-hour workers to be included above wage threshold. |
What Employers Should Be Doing Now
The simultaneous nature of South Korea’s 2026 changes, particularly the three social insurance increases which took effect on 1 January, makes this a year where payroll accuracy and policy documentation require close attention. Here is a practical priority list:
Immediate payroll actions
- Confirm minimum wage has been updated to KRW 10,320/hr from 1 January 2026 across all employees, including part-time and daily workers
- Confirm National Pension contribution rate updated to 4.75% per side (from 4.5%)
- Confirm National Health Insurance rate updated to 3.595% per side (from 3.545%) and Long-Term Care Insurance recalculated at 13.14% of the NHI premium
- Run a January 2026 payroll audit to verify all three changes were applied correctly in the first pay period
- Model the 2027–2033 NPS contribution increases into Korean employment cost budgets, rates will rise 0.5% total annually for seven more years
Industrial relations (urgent for companies with supply chains)
- Audit subcontracting and outsourcing arrangements for indicators of substantial and specific control over subcontractor working conditions
- Review planned restructuring, M&A, outsourcing, or workplace relocation decisions with Korean employment counsel before communicating to employees, these may now be subject to union dispute
- Review disciplinary procedure provisions in CBA and Rules of Employment for minority union representation compliance
- Reinforce labour-management council communication channels to reduce dispute escalation risk
HR policy and leave administration
- Confirm paternity leave policy reflects 20 days with flexible scheduling in up to multiple periods
- Update childcare leave policy for 18-month entitlement for qualifying families and four-period split allowance
- Update working hours policy for parental reduced hours to cover children up to age 12
- Update maternity leave policy for 100-day entitlement for premature births
Forward planning
- Begin workforce age structure analysis and cost modelling for retirement age extension scenarios
- Monitor National Assembly progress on the Employment Insurance Act amendment and identify the size of your ultrashort-hours worker population
- If your Korean operation has fewer than five Korean-law employees, obtain Korean counsel advice on the October 2024 Supreme Court ruling and LSA threshold application
South Korea’s employment law has historically been viewed as stable relative to some of its regional peers, but the 2026 changes, particularly the Yellow Envelope Act and the pension reform, signal a shift toward more active regulation of the employment relationship, including in supply chains. Employers who have managed Korean HR informally or through payroll-only arrangements should treat 2026 as the year to establish a more comprehensive compliance framework.
How Beyond Borders HR Supports Employers Stay Compliant
These 2026 employment legislation changes for South Korea can be challenging for employers to process independently. Beyond Borders HR, a global HR consulting firm, stands ready to assist businesses in understanding and implementing these changes effectively. With our extensive expertise in global HR practices, we ensure that your organisation stays compliant with the evolving regulatory landscape.
Reach out to Beyond Borders HR for tailored solutions, expert guidance, and seamless integration of these legislative updates into your HR policies and practices. Our team is dedicated to empowering your business with the knowledge and support needed to thrive in this dynamic regulatory environment.
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Article Authored By:
Raj Inda
