Labor Law Q&A details

Chapter 2 Wages

Paying Wages with Foreign Currency

We are a company that opened a branch office in Seoul. We would like to pay the salaries of domestic employees working for us in U.S. dollars (USD). Is there any provision in the Labor Standards Act or other domestic law that domestic workers cannot be paid in foreign currency?
Within the international legal order, a territorial principle applies, which means the laws and regulations of each country are applicable to all persons within that country and are generally not applicable or enforced within the territory of other countries. So, unless there are special regulations for domestic foreign businesses in specific laws or treaties, Korea’s Labor Standards Act applies in accordance with the territorial principle.
Under Article 43 of the Labor Standards Act, payment of wages must be made in full and directly to workers in currency, and if otherwise prescribed by statutes or by a collective agreement, some wages may be deducted or paid by means other than currency. Here, the principle of direct payment in cash means to be paid in legal tender (Article 48 of the Bank of Korea Act) with compulsory current legal recognition in Korea. In the modern financial system, it is believed that the payment of wages by certified check guaranteed by the banks does not violate the principle of direct payment in cash.
If the employer and workers agree that workers’ wages will be paid in US dollars, this will likely be seen as a violation of the principle of direct payment in cash under the Labor Standards Act since US dollars are not exactly legal tender in Korea as they must be exchanged for local currency through banks, etc.
On the other hand, if the wage is based on the US dollar and is paid in Korean currency at the applicable exchange rate at the time of payment, this is not a violation of the Labor Standards Act. However, at the time wages are paid, the amount of local currency exchanged for the US dollars will differ due to exchange rate fluctuations, which may result in changes in monthly wage, which is unlikely to be desirable.

For further questions, please
call (+82) 2-539-0098 or email bongsoo@k-labor.com

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