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In South Korea, the standard employment contract that’s offered in professional settings are indefinite contracts. As such, employees generally work for the one company until retirement.
Indefinite contracts are also referred to as ‘open-ended’, ‘unlimited’ or ‘permanent’ contracts.
The majority of matters relating to contracts of employment are governed by the Labor Standards Act (1997). The minimum standards set out in the Labor Standards Act prevail over any provision within an employment contract that is less favorable to the employee.
Fixed contracts are increasingly used across industries in South Korea. Also known as ‘limited’ or ‘temporary’ contracts, fixed contracts are only valid for a specified period, generally no more than 2 years.
Employees on fixed term contracts benefit from additional protections under the Act on the Protection of Fixed-term and Part-time Employees (2006) and the Act On The Protection Of Temporary Agency Workers (1998).
Note that, where an employee has been employed on a fixed contract for more than two years, that employee will usually be automatically considered to be employed for an indefinite term.
South Korean labor law recognizes a third category of workers, commonly referred to as ‘dispatched workers’.
Dispatched workers are employed by dispatching companies, also known as temporary work agencies, but are subject to the direct supervision and control of the end-employer.
Your business can easily hire employees in South Korea without opening a local entity. We handle local employment law, complex tax regulations, and international payroll in 180+ countries worldwide. All you need to do is focus on your business.
The main difference between Indefinite and Fixed contracts is ‘permanence’ i.e. the potential length of the period of employment. Indefinite contracts employ on a permanent basis, whereas fixed contracts employ for a specified period of time. This means that termination is needed to end an Indefinite contract, whereas Fixed contracts usually end on a predefined date or upon completion of a pre-specified event, such as the completion of a project.
Ultimately, deciding upon the right contract depends on the circumstances of your business and planned operations. For businesses establishing themselves in South Korea, best practice is to draft a clear, written contract of employment. All employment contracts should be drafted in the local language and include details on compensation, benefits, job responsibilities, and company policy on notice periods, disciplinary and dismissal procedures. Letters of offer and employment contracts should state compensation figures in South Korean Won (KRW), rather than any foreign currency.
Partner with our South Korea PEO and gain access to Horizons’ team of local experts who can provide assistance with drafting strong employment contracts that are compliant with local labor laws and regulations.