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HR & Korean Labor Compliance

"Freelancer" or Fixed-Term Employee?

SJC

— 3 min read
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"Freelancer" or Fixed-Term Employee?

Multinational companies operating in Korea increasingly engage workers on a project-by-project basis — designers, engineers, content producers. Many of these arrangements are labeled "freelance" and documented with service agreements (용역계약) or commission contracts (위탁계약) rather than employment contracts. The workers are invoiced at 3.3% withholding tax - while they may receive a higher monthly salary due to lower tax rate, there is no enrollment in the four major social insurances.

However, one thing must be taken into account: the label on the contract does not determine the legal relationship. If the substance looks like employment, it will be treated as employment, regardless of what the parties agreed to call it.

Korea's Labor Standards Act (근로기준법, LSA) defines a worker (근로자) as any person who provides labor to a business or workplace for the purpose of wages, regardless of the type of occupation. The Fixed-Term and Part-Time Workers Act applies to workers engaged under a fixed-term employment contract - that is, a contract with a defined end date.

These two categories occupy different legal territory:

A freelancer — in the legal sense — is an independent contractor (개인사업자) who provides services autonomously. The engagement usually considered as commission for work (도급) under the civil law. Freelancers are not entitled to the LSA's minimum wage protections, paid annual leave, or severance pay. They are not enrolled in the four major social insurances (health, pension, employment, industrial accident) through the hiring company.

A fixed-term employee (기간제 근로자) is a worker who has an employment relationship with the company but under a contract that specifies a defined period. Fixed-term employees are covered by the LSA and the FTA, including protections against discriminatory treatment relative to permanent employees and the conversion rule that compels indefinite-term status after two years of continuous engagement - this will be further analyzed in the upcoming posts.

How Korean Courts Determine Worker Status

How can we differentiate ‘freelancer’ and ‘fixed-term worker’ in substance?

To name a few factors: :

  • Whether the company exercised substantial direction and supervision over how the work was performed
  • Whether the company designated the time and place of work, and whether the individual was bound by those designations
  • Whether the individual owned the tools and equipment used, or whether they were provided by the company
  • Whether the relationship was continuous and exclusive to one company

These days, courts are increasingly attentive to economic and organizational dependence, not just the textbook markers of direct supervision. The focus is on whether the individual functioned as an independent business — bearing their own risk, developing their own client relationships, exercising genuine entrepreneurial discretion — or whether they were integrated into the hiring company's operations in a manner that made them functionally indistinguishable from an employee.

Practical Implications for HR and In-House Counsel

There are various negative consequences if the categorization is not properly done:

  • Back payment of severance pay (퇴직금) for any qualifying period of one year or more
  • Back payment of unused annual leave allowance (연차수당)
  • Employer contribution arrears for the four major social insurance programs
  • Potential liability for premium wages (overtime, holiday, night work supplements)
  • In appropriate cases, reinstatement rights if the termination of the arrangement constitutes unfair dismissal (부당해고)

A Compliance Checklist

Before engaging an individual under a freelance or service contract, companies should be able to answer affirmatively to the following:

  • Does the individual have genuine discretion over how the work is performed?
  • Is the individual free to work for other clients simultaneously?
  • Is the compensation tied to project milestones or deliverables, rather than time worked?
  • Does the individual use their own equipment, software, or tools?
  • Is there no effective supervision of attendance or working hours?
  • Does the individual bear genuine commercial risk — for example, responsibility for defective work, liability to end clients, or the ability to profit from efficiency?
  • Is the engagement non-exclusive and defined in scope?
  • Is there no expectation of ongoing, rolling renewal that functions as de facto continuous employment?

This article is provided for general informational purposes and does not constitute legal advice. For guidance specific to your circumstances, please consult qualified counsel. Also, please do feel free to contact us for any advice.

© 2026 SJ Chun. All rights reserved. This article may not be reproduced, copied, or republished, in whole or in part, without prior written permission from the author.

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