E-2 VISA holders are persons who are employed in the
E-2 VISA holders take a risk coming to a foreign country to be employed. All Foreign workers, regardless of VISA type or country of origin, are protected by the Korean Labor Standards Act. The Labor Standards Act is very favorable towards employees and very beneficial.
The following article reviews some of the risks and should give you a clear understanding on how to mange your risks.
If you have any questions after you review the article please post them on the E-2 FAQ, only registered members can post questions.
Some employers are not registering E-2 VISA holders as employee but as independent contractors with the National Tax Service (NTS). If the E-2 VISA holder is not registered as an employee with NTS, they are not entitled to Health Care or Pension.
Health Care is a critical issue. There have been instances in the past where foreign workers have suffered serious injuries and died. The body of the deceased was held by the hospital that rendered services until the medical bill was paid and the parents could not collect the remains for burial.
Under the Labor Standards Act, which applies to all employees in the
Pension contributions are required by the Korean Labor Standards Act. Pension benefits are also co-paid by the employer and employee with the contribution rate being 9% of the earned wage. Depending upon the Tax Treaty of the home country of the E-2 VISA holder, the pension can be given as a lump sum before they return to their country of origin or it can be transferred as a credit to their countries pension program.
Severance is an allowance that the employer must give the employee at the end of one year of service. The severance is equal to the average of the last three months of salary and 25% of all bonuses earned over the year divided by the total number of calendar days of the last three months of employment. On average it works out to be about one month of salary.
Persons who hold E-2 VISA’s but are not registered as Employees with NTS will often be informed by their employer that they are not entitled to Severance.
The Korean Labor Standards Act mandates that all workers earn one day of paid leave in addition to the one day of paid leave they earn per week. The system for “Holidays” in the
Paid Days of leave are accumulated at the rate of one day per month with a total of 10 days being accumulated in the first 364 days. At the beginning of the next cycle of the contract the employee is entitled to 15 days of Paid Leave to be applied in the second year of their contract if they have not used any Paid Leave days in the first year of their contract.
The total wage entitlement that will be lost by E-2 VISA holders if they are not registered as employees with NTS:
Health Care 2.4% (Insurance Premium)
Pension 4.5% (Cash)
Severance 8.3% (Cash)
Paid Leave 3.3% (Cash, Sick Leave or Vacations)
Total 18.5%
Total Cash 12.8%
If the contract is for a total of 30,000,000 KRW per year, (2,500,000 KRW per Month) the amount of unpaid wages will amount to 3,840,000 or 1 ½ months of wages.
Airfare is not considered to be part of the wage unless the specific value of the Airfare is stated in the contract at which time Airfare is considered an employment bonus. If the employer is requiring you to purchase your own ticket to come to
If the value of the Airfare is not stated then the legal issue that must be resolved first is “What is the definition of Airfare?” The next question that must be resolved is “What is the value of the defined Airfare?”
For example the employee can insist that Airfare is the transportation by private jet from the airfield outside their house to the airfield outside the employers business. The employer may state that Airfare is the transportation provided by a hot air balloon. If both parties agree that Airfare is the transportation via commercial carrier using an economy class ticket, the value is subjective. The ticket price will vary greatly if it is purchased during a peak season or a low travel season.
All contracts must state the minimum number of hours that the employee must complete per month or the minimum number of hours the employees services will be utilized per month. The time stated is accumulated from the time you enter into the building until you leave the building of the place of business. The general rule of thumb is that the employer can expect you to come into the place of work up to 30 minutes in advance to prepare for the work of the day.
An example from a contract this Labor Law Firm has reviewed
Period of Employment
The Institute will employ the Instructor during the following period.
03:00 PM to 09:00 PM MONDAY TO FRIDAY 6 hours per day/30hours per month
With the following schedule of teaching hours:
There will be 7 classes per day and each class will be 40 to 45 minutes (5 minute break time between each class)
3. Compensation
Salary is decided by both ability and experience of the Instructor.
A monthly salary of 2,300,000 Won will be paid for 120 actual teaching hours per month.
An hourly wage of 20,000 Won will be paid for each additional teaching hour.
The scheduled employee time is 6 hours per day, 5 days a week for a total of 30 hours a week. The salary of 2,300,000 Won KRW is not dependent upon if the employee has any classes scheduled at that time. A common sense approach to the misrepresentation is if the restaurant has no customers, the cook must still be paid.
Overtime is 1 ½ the average hourly wage. Overtime is paid for every hour worked in addition to the stated monthly hours of 30. If the total hours per month are not stated in the contract, overtime is paid in the event the total number of hours per week exceeds 40 with a maximum of 44 hours per week that the employee can work.
In the example above the employer has stated that the overtime rate would be 20,000 KRW per hour for every hour of teaching time that exceeds 30 hours per week. The overtime rate that follows the statutes of the Korean Labor Standards Act would be:
Hourly Wage Rate of Daily Wages= Salary/ (number of hours worked per month on average**)
** there are 4.3 weeks per month on average and that number is used in the calculation by the Korean Labor Standards Act when the Hourly Wage Rate is calculated.
In our example:
2,300,000 / (30 hours * 4.3 weeks per month on average)= 17,830 KRW / hour
The overtime rate is defined by the Labor Standards Act as:
The Hourly Wage Rate of Daily Wages + ½ the Hourly Wage Rate of Daily Wages
In our example:
The Overtime Wage=17,830 KRW / Hour * 1.5
The Overtime Wage=26,744 KRW / Hour
The contract had stated the Overtime Wage was 20,000 KRW per hour taught BUT the true Overtime Wage Rate is 26,744 KRW per Hour.
The clause in the contract is not valid and the Labor Standards Act would apply instead.
Few Korean Attorneys At Law will accept foreigners as clients, but some will.