Statutory Social Insurances and HR Tips

l Implementation of tax exemption for corporate childbirth support payments

A new tax exemption policy has been introduced for childbirth support payments provided by employers. Under this policy, any amount paid by a company to an employee (including officers) or their spouse in connection with childbirth may be treated as non-taxable income, provided certain conditions are met.

The exemption applies to the payments within two years from the date of the child’s birth and is limited to a maximum of two separate payments per childbirth. Furthermore, the benefit is applicable to payments made in 2024 or after, even if the child was born on or after January 2021.

To qualify for the non-taxable treatment, childbirth support payments must be provided under a general policy that is equally applicable to all employees. This policy should be established in advance through the company’s employment rules or internal policy. The policy must clearly state the eligibility criteria, payment conditions, timing, and amount.

Please ensure that the policy does not discriminate between regular employees and fixed-term or part-time workers. It is also important to note that employment rules or internal regulations typically apply only to employees as defined under the Labor Standards Act. Therefore, in the case of officers who are not covered by the Act, a separate board or shareholders’ resolution must be adopted to formalize the policy and ensure that payments to officers can also be treated as non-taxable income.

Additionally, childbirth support payments made to individuals with a special relationship with employers such as business owners or their family members are excluded from the non-taxable benefit, as this could lead to misuse for tax avoidance.

l Supreme court ruling on repayment obligation for overseas assignment costs

The Korean Supreme Court has ruled that an agreement requiring an employee to reimburse overseas assignment costs if they resign without completing a mandatory service period following the assignment is invalid.

The Court held that if the nature of the overseas assignment is not training or educational in nature, but rather constitutes a relocation for the purpose of performing regular job duties, then any payments or expenses provided beyond regular wages should be regarded as either compensation for the special nature of such overseas work or as essential business-related expenditures. As such, the Court determined that the repayment clauses based on failure to fulfill a post-assignment service obligation are not legally enforceable.

The Court explained that the intent of Article 20 of the Labor Standards Act is to prevent situations in which an employee is unfairly compelled to continue employment due to restrictions on the freedom to resign, to safeguard the employee’s freedom to choose their place of employment, and to protect the employee’s right to terminate unfavorable employment contracts.

The Court further stated that, “If the primary nature of the overseas assignment is the provision of labor, then any payments or expenses provided beyond regular wages shall be regarded as either compensation for the special nature of long-term overseas work or as necessary business-related expenses.” Accordingly, the Court concluded that “any agreement requiring repayment of such payments or expenses due to a violation of the mandatory service period shall also be deemed invalid.”

l Year-end settlement of national health insurance (NHI) premiums in April

During the year, National Health Insurance (NHI) premiums are withheld monthly from employees’ salaries. These withholdings are based on the gross salary base reported for the previous year, excluding any non-taxable allowances. This predetermined amount is applied from April of the current year through March of the following year, as assessed by the National Health Insurance Service (NHIS).

In April of the following year, NHIS conducts a year-end settlement of NHI contributions based on the actual gross salaries paid during the year. If there is any underpaid amount—covering both the employee and employer portions—the NHIS will assess the additional NHI premium accordingly. The employer is then required to withhold the employee’s portion of the underpaid premium through the April payroll and remit the total additional premium (both employee and employer portions) by the due date of May 10.

The year-end settlement of NHI for 2024 was conducted this April 2025 and the additional payment based on the result of such year-end settlement of NHI was due by May 10, 2025.

In addition, based on the gross salary information reported to the government agency for 2024, the NHIS recalculates and assesses a new monthly NHI withholding, which shall apply from April 2025 through March of 2026.

(*) The applicable NHI rate in 2025 has remained unchanged from 2024.

Pursuant to Article 39 of the Enforcement Decree of the National Health Insurance Act, the additional NHI premiums arising from the annual year-end settlement for the business-based subscribers are generally billed as a lump-sum payment. However, if the additional premiums due exceed the monthly NHI premiums, the NHIS may, upon the employer’s request, allow employees concerned to pay such additional NHI premiums in installments of up to 12 payments.

l Gradual increase in national pension contribution rate starting 2026

As part of the National Pension reform, the government has announced that the current national pension contribution rate of 9% will gradually be increased to 13% over the next eight-year period starting from 2026.

This phased increase aims to enhance the sustainability of the pension system in response to Korea’s aging population and shifting demographic trends. The rate will rise by 0.5% each year, but the pace of increase will vary depending on the age bracket.

Currently, the pension contribution is equally shared between the employer and the employee, with each party contributing 4.5%. Under the new policy, once the total rate reaches 13%, employers and employees will be required to contribute 6.5% each.