How Korean net salary is calculated: the four insurances and income tax

A salary offer in Korea is quoted as a gross annual figure (세전, "before tax") almost without exception. The number that lands in your bank account each month (실수령액, "actually received") is smaller — typically by somewhere in the high single digits to mid-teens as a percentage, depending on income level and dependents. The gap is the four national insurances plus income tax, withheld at source by your employer before the money ever reaches you. This post walks the structure of those deductions, who pays which share, and how the calculation flows from gross to net. Every rate below is approximate and revised annually by law — treat the structure as durable and the numbers as illustrative.

What comes out of gross pay

Two categories of deduction sit between gross and net:

• The four major insurances (4대 보험): National Pension, National Health Insurance (with a Long-Term Care surcharge), Employment Insurance, and Industrial Accident Insurance.
• Income tax (근로소득세) and its companion local income tax (지방소득세).

The insurances are split between you and your employer. Income tax is yours alone, withheld monthly and reconciled once a year. Your employer also pays its half of the insurances on top of your salary — that employer cost is real but invisible on your payslip, which shows only your share.

The four insurances

Each insurance has its own base and its own split. The rates here are rough orders of magnitude and change every year — check the current official figure or run a calculator before relying on a number.

Insurance	Korean	Base	Employee share (approx.)	Who else pays
National Pension	국민연금	Monthly salary, with a floor and ceiling	~4.5%	Employer matches ~4.5%
Health Insurance	건강보험	Monthly salary	~3.5%	Employer matches the same
Long-Term Care	장기요양	% of the health premium, not of salary	derived (see below)	Split like health
Employment Insurance	고용보험	Monthly salary	under ~1%	Employer pays more (incl. extra components)
Industrial Accident	산재보험	Payroll	0% — employer only	Employer pays in full

A few structural points that trip people up:

National Pension is capped. It applies to a monthly income that is clamped between a floor and a ceiling, both revised yearly. Earn above the ceiling and your pension contribution stops growing — it is a flat won amount, not a straight percentage of a high salary. This is why high earners see pension shrink as a percentage of their pay.

Long-Term Care is a surcharge on the health premium. It is computed as a percentage of your health insurance contribution, not of your salary. So it moves with the health premium, and on a payslip it is often folded into the health line. Small in absolute terms, but it is a separate statutory item.

Industrial Accident is employer-only. 산재보험 covers workplace injury and is paid entirely by the employer. It never appears as a deduction from your pay. It is listed here only so the "four insurances" label makes sense — you fund three of them, not four.

Employment Insurance funds unemployment benefits and job programs. Your share is a small fraction of a percent; the employer pays its own portion plus additional components scaled to company size.

Income tax: withheld monthly, settled yearly

Korean income tax is progressive — marginal rates rise across brackets, from single digits at the bottom to the high 40s percent at the very top. Brackets are defined in won and revised periodically; do not memorize the thresholds, because a stale bracket is worse than no bracket.

Critically, the tax taken from each paycheck is not computed by running your salary through the bracket formula. Instead, employers withhold using the 간이세액표 (the simplified withholding table) published by the National Tax Service. You look up two inputs:

• monthly salary (taxable portion), and
• number of dependents (부양가족), including the employee.

The table returns a won amount to withhold. More dependents → less withheld. This is an estimate designed to land close to your real annual liability without anyone doing per-person math every month.

On top of income tax sits local income tax (지방소득세), which is approximately 10% of the income tax itself — not 10% of salary. If income tax withheld is 100,000 won, local income tax is roughly 10,000 won.

The key idea: monthly withholding is a down payment, not the final bill.

Year-end reconciliation (연말정산)

Once a year — processed in the early months for the prior year — your real tax liability is computed against your actual deductions and credits: medical spending, education, credit-card usage, pension contributions, donations, dependents, and more. That true figure is compared against the sum of what was withheld monthly.

• Withheld more than you owe → refund (the famous "13th-month bonus" for some).
• Withheld less → you pay the difference.

This is why two people with identical gross salaries can take home different net amounts and see very different year-end outcomes: dependents and credits change the real tax, while monthly withholding only approximated it.

Non-taxable allowances shrink the base

Not all of gross pay is taxable. Certain 비과세 (non-taxable) allowances are excluded from the income subject to tax and, in some cases, from the insurance bases too. The common one is a meal allowance up to a monthly cap; vehicle allowances and childcare allowances can also qualify under specific rules.

The mechanism matters: a non-taxable allowance does not add to your pay so much as re-label part of it as exempt. If 200,000 won of a salary is structured as a qualifying meal allowance, that portion is removed from the taxable base before the withholding table and (per the rules) certain insurance calculations run. Two offers with the same gross can net differently purely because of how non-taxable components are structured.

A worked structure (illustrative numbers)

Round figures, illustrative rates — not current statutory values. The point is the flow, not the digits.

Gross monthly salary                       3,000,000
  - Non-taxable meal allowance     -200,000  (excluded from taxable base)
  = Taxable base                  2,800,000

Four insurances (your share):
  - National Pension   ~4.5%       -126,000
  - Health Insurance   ~3.5%        -98,000
  - Long-Term Care     (% of health) -12,000
  - Employment Ins.    <1%          -25,000
  = Insurance subtotal             -261,000

Income tax (from 간이세액표, by salary + dependents)
                                    -90,000
Local income tax  (~10% of income tax)
                                     -9,000
  = Tax subtotal                    -99,000

Net pay (실수령액)  =  3,000,000 - 261,000 - 99,000
                  ≈  2,640,000

Change the dependent count and the income-tax line moves. Cross the pension ceiling and that line flattens. Restructure the non-taxable allowance and the whole base shifts. The arithmetic is simple; the inputs are fiddly, and each one is revised on its own schedule.

Why use a calculator

Every component above has a moving part that changes annually: the pension floor and ceiling, each insurance rate, the income-tax brackets, the withholding table itself. Getting any one of them wrong throws off the whole chain, and the official figures are published as dense tables, not formulas you can keep in your head.

Plug your gross salary, dependents, and non-taxable allowances into our Korea net-salary calculator to see the full breakdown — each insurance, the withheld tax, and your estimated take-home — using current-year rates. Once you know your real monthly net, our compound-interest calculator is a useful next step for deciding what a fixed monthly amount of that take-home becomes if you save it consistently.