The minimum wage for 2025 has been set at 10,030 KRW ($7.30) per hour, exceeding 10,000 KRW for the first time. This represents a 1.7% increase from the minimum wage of 9,860 KRW in 2024.
If you are an owner of the business it's not the happies news cause as minimum wage increased, the burden of salary and social insurance for employer's would be increased. when company hire an employee, company should conisder not only salary, but also social insurance and other things.
So, Today let's delve into what's the meaning of minimum wage and how much burden would arise when company hire an employees in new minimum wage in Korea.
1.What happens when a company doesn't follow the minimum wage?
The minimum wage must be adhered to regardless of the company's size (even very small companies with fewer than 5 employees must comply). Failure to comply can result in fines of up to 20,000,000 KRW and criminal charges carrying sentences of up to 3 years, as stipulated by Article 28 of the minimum wage law.
Therefore, employers paying employees at the minimum wage should verify compliance and update employment agreements accordingly.
2.What would the monthly salary be under the new minimum wage?
If employees work 8 hours a day, 5 days a week (totaling 40 hours per week), their monthly salary would amount to 2,096,270 KRW.
3.What would be the company's total burden for salary under the new minimum wage?
I've calculated how much the company should remit to the employee (Net payable), the tax office (Income tax and resident tax), and the social insurance organization (National pension, health insurance, employment insurance, and industrial accident insurance).
The company is responsible for paying half of the social insurance amounts, so when hiring employees, business owners should definitely check the social insurance amounts to accurately calculate the company's total burden. As indicated in the figure on the right, 11% of the gross salary represents the social insurance burden for the company.
The items highlighted in yellow represent the total burden, including social insurance amounts.
4.How can a company reduce social insurance costs?
There are non-taxable items that companies can apply, such as meal allowance, vehicle allowance, and child care allowance, under specific conditions. Please refer to the following post which explains each non-taxable item in detail.
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The goverment has announced a tax law revision set to be implemented from January 2024. Today, I bring good news for employees. If you have seen my previous post at Septemebr(refer to the post below), you'd be aware of the non-taxable items in an employee'
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