Labor Law Q&A details

Chapter 10 Foreign Workers

Insurances Exclusive to Foreign Workers

I hired a new foreign worker. As this is the first time, I have no idea what kinds of insurance I need. Are there any insurances exclusive to foreign workers to which I need subscribe?
There are four types of insurances
1. Departure Maturity Insurance
Departure Maturity Insurance replaces severance pay but accumulates at the same rate. It is payable when the foreign worker leaves the country (Article 13 of the Foreign Employment Act, or “FEA”). The employer must pay a monthly premium of 8.3% of a worker’s monthly ordinary wage (50% covered by the employee, 50% by the employer) as stated in the employment permit system (EPS). This is to prevent late payment of severance pay and is limited to non-professional employment (E-9) and visiting overseas Korean workers (H-2) in the EPS. Departure Maturity Insurance is in lieu of the retirement allowance under the Retirement Benefit Security Act (RBSA), with the benefits paid to foreign workers when their employment relations end and only if they have worked for at least one year at the same workplace. This second stipulation means that the Departure Maturity Insurance is paid on the premise that the foreign worker is leaving Korea. The Constitutional Court has ruled that payment of severance pay when leaving Korea is in line with the purpose of the Foreign Employment Act, even if retirement benefits are paid on the basis of departure, rather than on the premise of terminated employment relations.
If a foreign worker has worked for less than one year after the Departure Maturity Insurance is purchased, he/she is not eligible for the benefit, which shall go to the employer instead. Since departure maturity insurance is paid in lieu of retirement allowance, it must be paid within 14 days after employment relations end in accordance with Article 36 of the Labor Standards Act.
2. Guaranty Insurance for unpaid wages
The employer is obliged to purchase Guaranty Insurance against late payment of wages for their foreign workers (Article 23). Since this Guaranty Insurance is paid to the foreign workers in lieu of any unpaid wages, the insurance company pays the unpaid wages first, then charges the company for the amount equivalent to the paid arrears. Foreign workers whose wages have been unpaid must first report the fact to the Labor Office of the Ministry of Employment and Labor. However, there is a maximum payout of KRW 4 million. The amount of wages outstanding will be billed directly to the employer or processed in the same way as for Koreans who have not been paid their wages.
3. Return Expense Insurance
Return Expense Insurance is mandatory to reduce illegal stays by foreign workers by encouraging them to leave the country when their period of stay expires and help them have the money necessary to return home (Article 15 of the Foreign Employment Act). Insurance premiums must be paid within 3 months of the date of entry (E-9 Non-professional Foreigners) or the beginning of the labor contract (H-2 Visiting Overseas Korean Workers). The benefit shall not be paid for temporary departures, but only if the foreign worker leaves the country due to expiration of the employment contract or expiration of his/her status of residence.
4. Accident Insurance
Foreign workers (E-9, H-2 visas) must be registered for Accident Insurance within 15 days of the effective date of the labor contract in preparation for death, disability or illness unrelated to work (Article 23). Accident insurance premiums vary by gender and age. As insurance premiums are low, insurance benefits are limited. A maximum of KRW 30 million is paid if a foreign worker dies or acquires a disability, and KRW 15 million for illness. In other words, if an employee is hospitalized for a personal illness and has surgery or needs long-term care, the benefits are insufficient.


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

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