Hire Contractors in South Korea

South Korea has a highly educated workforce, which has been the driving force behind the country's huge economic prosperity. 

In fact, according to the latest report, as many as 70% of the country's youth aged between 25 and 34 have completed tertiary education or higher education, such as university. 

This has proved beneficial for businesses seeking to hire contractors or workers from South Korea. 

A highly educated workforce means individuals will be more adept at handling the latest technology and can easily navigate through complicated projects, thanks to their expertise and knowledge in specialized fields. 

In this article, we will provide a detailed overview of how to hire contractors in South Korea (whether through an EOR or direct hiring), its associated challenges, and potential solutions.

How to Hire Contractors in South Korea

You can hire a contractor in South Korea using the following methods. 

• Direct Hiring: Deemed to be one of the most commonly followed techniques for hiring contractors.
  • This approach is generally suited for short-scale projects. 
  • One of the primary reasons behind this is that directly hiring contractors usually involves many crucial tasks, such as:some text
    • Selecting candidates based on the project's requirements
    • Drafting proper contracts in accordance with the Korean Civil Code
    • Onboarding contractors
    • Paying them on time
    • Fulfilling all the tax obligations. 

• Hiring with contractor management software/AOR: An alternative to directly hiring contractors is to hire them through contractor management software/AOR.
  • An agency of record usually handles most administrative responsibilities, including compliance with laws and payment processing. 
  • This reduces the burden on employers and helps them guarantee a smooth journey in a foreign land.

Hiring Contractors through Skuad AOR

• Skuad’s AOR solutions have enabled multiple businesses worldwide to ensure a streamlined and simplified international contractor hiring process. 
• From drafting legally compliant agreements to managing all expenses and making timely and accurate payments, you can achieve it all with this unified platform. 
• Skuad’s built-in IP protection system and bullet-proof data privacy safeguard your company’s IP under the relevant laws of South Korea and guarantee a smooth journey without any legal hiccups or penalties. 

How to Pay Contractors in South Korea

The traditional way of paying an independent contractor in South Korea is through direct bank transfers, checks, or international platforms such as Wise and PayPal. 

However, the process can be extremely complicated and expensive, especially if you are unaware of the country's local tax laws or currency exchange rates. 

Therefore, most companies choose contractor management software or an AOR, such as Skuad, to process the payments of contractors in South Korea. 

Skuad runs payroll in over 100 currencies, meaning you no longer have to juggle multiple banks simultaneously to guarantee accurate payments to your workers. 

Additionally, it boasts numerous other capabilities, such as,

• Automated invoicing
• Customizable reports and
• Real-time expense tracking.

Hiring Contractors Directly vs Hiring Contractors via Skuad

Let’s look at this detailed comparison table, which cites the major differences between the two main ways of hiring contractors in South Korea. 

Cost of Hiring Contractors in South Korea

The total cost of hiring contractors in South Korea depends on numerous factors, including the kind of work you demand, the industry you operate in, or even the experience level of the contractors.

For example, the current rate of a contractor in South Korea offering financial assistance is ₩42,413 per hour. On the other hand, a South Korean contractor specializing in Information Technology can charge you approximately ₩23,100 per hour. 

How to Convert a Contractor into an Employee in South Korea

While converting a contractor to an employee or switching from Form 1099 to W2 is relatively straightforward, it can get extremely complicated, especially if you are unaware of the steps involved. 

A detailed account of the same is mentioned below.

• Research the critical employment laws in South Korea and their respective provisions. For example, employees in this country typically have a workweek consisting of 40 hours.
• Offer your contractor the top salaries and benefits packages, and draft a proper employment contract in writing that will outline all the working conditions, such as working hours, roles and responsibilities, and other necessary details.
• Once the contract is signed, begin with the onboarding process. This includes collecting the relevant personal documents and conducting extensive background checks.
• Once you have checked all these boxes, add the converted employees to the company payroll and set up proper withholdings and contributions.

Challenges of Hiring Contractors in South Korea

Now that we have discussed the two main ways of hiring contractors in South Korea, let’s take a look at a few common challenges you are likely to encounter during this employment process.

1. Understanding the Korean Civil Code

The Korean Civil Code is the primary regulation that lays down guidelines for hiring South Korean contractors. 

As an employer, you need to maintain strict adherence to all the provisions laid down by this law, which can often turn out to be a major hurdle since it encompasses various complicated obligations and responsibilities. 

For example, under this legislation, to hire an independent contractor in South Korea, you need to draft a ‘contract for work.’ It becomes effective when one of the parties (the contractor) has agreed to perform a certain job, and the other party (the employer) agrees to pay remuneration in return. 

However, this is just the basic provision. 

Several other strict regulations of the Korean Civil Code that businesses should follow include the contractor’s liability for warranty. 

If any defect has been detected in the completed work or a certain part of the work, then you need to provide a reasonable period of time for the contractor to rectify the mistake. 

However, this regulation is not applicable if the defect is not material or if the rectification involves excessive expense.

Complying with these regulations is extremely important when hiring contractors in South Korea. 

Additionally, if you consider changing your contractor to an employee, you must maintain accurate classification to avoid potential legal penalties. 

2. Tax Requirements for Contractors in South Korea

While hiring a contractor in South Korea undoubtedly offers various benefits in terms of flexibility, it has quite an intricate system of tax and insurance obligations that must be fulfilled. 

Contractors in South Korea are required to pay a personal income tax, which can range from 6%-45%, depending on their income. In addition to this, a local income tax, ranging from 0.6%-4.5%, is levied based on the city or province. 

But wait, this is not all. Contractors in South Korea are required to file and pay a total premium for social security contributions, which typically consist of 9% of their income. 

Adherence to all these obligations is a must for every employer. 

However, managing such payroll expenses can often get difficult, especially when hiring multiple contractors at the same time. 

Therefore, most businesses seek the services of contractor management software or an AOR to handle these responsibilities and ensure compliance, thereby avoiding the risk of legal pitfalls.

Hire in South Korea with Skuad

With as many as 600+ clients worldwide, Skuad has been the leading global hiring solution for multiple enterprises. 

This all-inclusive platform features amazing capabilities that guarantee streamlined operations and hassle-free international expansion.

Skuad enables you to manage all crucial aspects of global contractor onboarding, from drafting locally compliant contracts, automated invoicing and payments, bullet-proof data privacy and security, a built-in IP protection system, and more. 

Additionally, with Skuad AOR, you can hire talent in South Korea without facing any legal setbacks since it guarantees 100% compliance with all the labor and tax laws of the country. 

Contact us today and manage every legal requirement of your global workforce only with Skuad!

FAQs

Q1: Can I hire an independent contractor in South Korea?

Ans: Yes, you can hire contractors in South Korea either directly or via contractor management software/AOR. In fact, this is one of the most commonly applied techniques by most companies to expand their business globally.

Q2: How do I pay an independent contractor in South Korea?

Ans: You can pay an independent contractor in South Korea either directly through bank and wire transfer or by partnering with contractor management software/AOR. Depending on the business needs and your budget, you can choose any one of these options accordingly. 

Q3: How does Skuad help hire, pay, and manage independent contractors in South Korea?

Ans: Skuad is a comprehensive platform that facilitates streamlined international contractor hiring. It enables you to draft proper legal agreements, manage different hiring process expenses, and pay your contractors accurately and on time, all from a single space. 

Q4: What is the difference between an employee and an independent contractor in South Korea?

Ans: One of the primary differences between an employee and a contractor is the level of control exercised by the employer. Individuals who fall under the former category are usually bound by the employment agreements set by the employer, which include the necessary working hours or the environment. An independent contractor, on the other hand, is free to choose the location or the working hours as long as the specified work is performed within the given deadline.

Q5: How do I convert an independent contractor in South Korea into an employee?

Ans: To ensure a successful conversion of an independent contractor in South Korea to an employee, you need to follow some crucial steps. These include researching the relevant labor laws, understanding and maintaining the tax requirements, and drafting employment agreements that conform to the necessary regulations, among others.