Expanding into Asia’s fourth-largest economy? South Korea offers global companies access to cutting-edge innovation, a highly educated workforce, and one of the fastest internet infrastructures in the world. However, entering the Korean market also means navigating strict labor laws, social security obligations, and local tax compliance.
This guide breaks down two core approaches for hiring in South Korea: setting up a legal entity or engaging an Employer of Record (EOR). Whether you’re piloting operations or building a permanent presence, this comparison will help you choose the right path forward.
Introduction to Remote Hiring in South Korea
South Korea is a tech-savvy, business-friendly nation with strong IP laws and a workforce known for high productivity. But for international businesses, hiring remote employees or expanding operations into Korea requires more than just recruitment—it demands deep compliance with local labor laws, tax regulations, and employment standards.
Setting up a legal entity can be time-consuming and complex. Alternatively, an EOR offers a faster, low-risk entry into the market. By acting as the legal employer, the EOR manages everything from contracts and payroll to benefits and taxes, allowing you to focus on operations while remaining fully compliant in South Korea.
EOR vs. Setting Up an Entity in South Korea
Choosing between forming a company or using an EOR depends on your hiring timeline, long-term business goals, and appetite for legal responsibility.
Creating a subsidiary or branch gives you complete control and long-term credibility in the Korean market. However, it requires a minimum investment, local directors, an office address, and ongoing regulatory filings.
On the other hand, EOR is the ideal choice for companies looking to hire quickly, run pilot teams, or manage a small remote workforce without the burden of local incorporation. It reduces time, cost, and compliance risks while offering operational flexibility.
Factors to Consider When Choosing EOR or Entity Establishment
- Speed of onboarding: EORs can onboard employees in under two weeks, whereas entity setup may take 1–3 months.
- Cost-effectiveness: EOR avoids setup and maintenance costs, offering a fixed monthly fee per employee.
- Legal liability: The EOR takes on the legal employer role, handling labor law risks and statutory filings.
- Strategic plans: If you plan large-scale expansion, establishing an entity might offer better long-term control and branding.
Why Time to Market Matters for Global Companies
Korea’s dynamic economy and rapid innovation cycles mean timing can be critical. Setting up a local entity involves registration with the Ministry of Justice, tax offices, the National Pension Service (NPS), and the National Health Insurance Service (NHIS)—each of which can delay hiring.
An EOR removes these barriers. It enables immediate hiring, onboarding, and salary disbursement while the EOR handles registration, compliance, and employee benefits on your behalf.
Cost Implications of Entity vs. EOR in South Korea
Setup and Maintenance Costs
Setting up a business in Korea involves:
- Company registration with the Korean government
- Office lease (a legal requirement for registration)
- Business registration with the tax authority
- Initial capital investment (in some cases)
- Hiring legal and tax consultants
EORs eliminate these setup costs. You only pay a monthly service fee, usually based on the employee’s gross salary, which includes all local taxes, contributions, and HR management.
Compliance Costs
Running an entity requires:
- Filing taxes with the National Tax Service
- Registering for and managing four mandatory insurances (National Pension, Health Insurance, Employment Insurance, and Industrial Accident Compensation)
- Compliance with Korea’s Labor Standards Act
- Generating compliant payslips and maintaining employment records
EORs manage all of the above on your behalf, saving time and reducing the risk of penalties.
Time Savings
EOR onboarding is fast—employees can be legally hired and onboarded in just 1–2 weeks. In contrast, entity registration, office setup, and compliance alignment can stretch over 2–3 months or more.
Compliance and Legal Exposure: Entity vs. EOR
South Korea enforces a comprehensive set of labor regulations through the Labor Standards Act. Key obligations include:
- Maximum working hours
- Paid annual leave
- Overtime compensation
- Severance pay requirements
- Mandatory contributions to social security schemes
Failure to comply can lead to government audits, legal action, or reputational damage. EORs assume full responsibility for employment contracts, statutory filings, and benefits, minimizing your company’s legal exposure.
Foreign Compliance: Setting Up a Legal Entity vs. Using EOR in South Korea
Setting Up a Legal Entity
To establish a legal business in South Korea, you must:
- Register your business with the Ministry of Justice
- Open a Korean bank account and obtain a business registration certificate
- Hire local staff or appoint a local agent
- Comply with labor and tax regulations
- Manage monthly and annual tax filings, payroll processing, and social insurance contributions
This is a long-term investment suited for companies with sizable growth plans in Korea.
Using an Employer of Record (EOR)
With an EOR:
- The provider hires employees on your behalf
- Employment contracts are compliant with Korean labor laws
- Payroll, insurance, severance, and taxes are managed end-to-end
- You manage day-to-day activities while the EOR manages compliance
This setup is perfect for fast, low-risk expansion.
Switching from EOR to Entity Establishment in South Korea
As your team grows or funding increases, switching from EOR to a legal entity may become beneficial. This process involves:
- Incorporating your own company
- Releasing employees from the EOR and rehiring them under your entity
- Transferring social security accounts and contracts
- Coordinating payroll and tax handovers
Reputable EORs like Asanify facilitate smooth transitions, ensuring employees experience zero disruption.
Why Choose Asanify as Your EOR Partner in South Korea
Asanify offers modern, AI-enabled EOR services designed for agility, compliance, and scalability in South Korea. When you partner with us, you get:
- Fast employee onboarding (within 7–10 business days)
- Labor law-compliant contracts and documentation
- Full management of payroll, taxes, and social contributions
- Local HR and legal support
- Transparent pricing with no hidden charges
- Easy migration from EOR to local entity when needed
We combine global technology with local expertise to help you expand into Korea confidently.
FAQs
1. What is an Employer of Record (EOR) in South Korea?
An EOR is a third-party provider that legally hires and manages employees on behalf of your company, ensuring local labor law compliance.
2. How does an EOR help with labor law compliance in South Korea?
EORs ensure compliance with the Labor Standards Act, social insurance schemes, payroll laws, and tax requirements.
3. What are the costs of using an EOR in South Korea?
Typically, EORs charge a monthly fee based on a percentage of the employee’s gross salary, covering all backend compliance and services.
4. What benefits do employees receive under an EOR model?
Employees receive full statutory benefits including health insurance, pension, severance pay, employment insurance, and paid leave.
5. Can EORs onboard independent contractors in South Korea?
Yes, though proper classification is critical. EORs can also manage contractor payments and tax filings if structured correctly.
6. Is a written employment contract mandatory in Korea?
Yes, employment contracts must include working conditions, wages, work hours, and benefits—preferably in Korean.
7. What social insurances are mandatory in South Korea?
National Pension, National Health Insurance, Employment Insurance, and Industrial Accident Compensation Insurance are all compulsory.
8. How long does it take to set up a company in Korea?
It typically takes 1–3 months, depending on the structure, approvals, and paperwork.
9. Can I operate in Korea without a local office using an EOR?
Yes, EOR allows full employee operations without a local office or registered entity.
10. Can I switch from EOR to my own entity later?
Yes, Asanify supports seamless migration from EOR to your own entity, including contract and payroll transitions.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.