2026 South Korea Minimum Wage Increase Impact Analysis: Complete Guide for Workers and Business Owners
2026년 최저임금 인상 영향 분석: 근로자와 사업주 모두를 위한 완벽 가이드
With the 2026 minimum wage confirmed at 10,030 won per hour, it has various impacts on both workers and business owners. This article provides an in-depth analysis from the background of the minimum wage increase to practical impacts and response strategies for each stakeholder.
Overview of the 2026 Minimum Wage
Minimum Wage Trend
The 2026 minimum wage determined by the Minimum Wage Commission represents an approximately 1.7% increase from the previous year. Let's examine the changes over the past 5 years.
| Year | Hourly Wage | Increase Rate | Monthly Equivalent (209 hours) |
|---|---|---|---|
| 2022 | 9,160 won | 5.05% | 1,914,440 won |
| 2023 | 9,620 won | 5.0% | 2,010,580 won |
| 2024 | 9,860 won | 2.5% | 2,060,740 won |
| 2025 | 9,860 won | 0% | 2,060,740 won |
| 2026 | 10,030 won | 1.7% | 2,096,270 won |
Monthly Salary Calculation Method
The minimum wage monthly salary is calculated as follows:
Monthly Salary = Hourly Wage x Weekly Scheduled Hours x (365 days / 7 days / 12 months)
= 10,030 won x 40 hours x 4.345 weeks
= Approximately 1,743,212 won (excluding weekly holiday allowance)
Monthly Salary Including Weekly Holiday Allowance
= 10,030 won x 209 hours
= 2,096,270 won
Meaning of 209 hours: 40 hours per week + 8 hours weekly holiday = 48 hours x 4.345 weeks ≈ 209 hours
Impact on Workers
1. Changes in Take-Home Pay
Calculating the change in take-home pay due to the minimum wage increase:
| Item | 2025 | 2026 | Difference |
|---|---|---|---|
| Monthly Base Pay (209 hours) | 2,060,740 won | 2,096,270 won | +35,530 won |
| National Pension (4.5%) | -92,733 won | -94,332 won | -1,599 won |
| Health Insurance (3.545%) | -73,053 won | -74,313 won | -1,260 won |
| Long-term Care (12.95%) | -9,460 won | -9,624 won | -164 won |
| Employment Insurance (0.9%) | -18,547 won | -18,866 won | -319 won |
| Income Tax (Simplified) | -Approx. 20,000 won | -Approx. 21,000 won | -Approx. 1,000 won |
| Take-Home Pay | Approx. 1,846,947 won | Approx. 1,878,135 won | +Approx. 31,188 won |
2. Impact on Part-Time Workers
Part-time workers who work 15 hours or more per week are eligible for weekly holiday allowance.
[Example: Working 20 hours per week]
Base Pay: 10,030 won x 20 hours x 4.345 weeks = 871,606 won/month
Weekly Holiday Allowance: 10,030 won x (20/40 x 8 hours) x 4.345 weeks = 174,321 won/month
Total: 1,045,927 won/month
3. Strengthened Worker Rights
- Report wage arrears: Ministry of Employment and Labor (1350) or online reporting
- Minimum wage violations: Up to 3 years imprisonment or fine up to 20 million won
- Employment contract: Must clearly state hourly wage and working hours
Impact on Business Owners
1. Increased Labor Cost Burden
Analysis of annual labor cost changes per employee:
| Item | 2025 | 2026 | Increase |
|---|---|---|---|
| Annual Salary (12 months) | 24,728,880 won | 25,155,240 won | +426,360 won |
| National Pension (4.5%) | 1,112,800 won | 1,131,986 won | +19,186 won |
| Health Insurance (3.545%) | 876,639 won | 891,753 won | +15,114 won |
| Long-term Care (12.95%) | 113,525 won | 115,482 won | +1,957 won |
| Employment Insurance (1.15%) | 284,382 won | 289,285 won | +4,903 won |
| Industrial Accident Insurance (avg. 1.47%) | 363,515 won | 369,782 won | +6,267 won |
| Severance Pay (8.33%) | 2,059,916 won | 2,095,432 won | +35,516 won |
| Total Labor Cost | Approx. 29,539,657 won | Approx. 30,048,960 won | +Approx. 509,303 won |
2. Impact by Industry
| Industry | Impact Level | Remarks |
|---|---|---|
| Food Service | High | Labor costs 30-40% of expenses, price increase pressure |
| Retail | High | High dependence on part-time workers |
| Accommodation | Medium | Seasonal fluctuations, difficulty adjusting workforce |
| Manufacturing | Low | Most wages already above minimum |
| IT/Services | Very Low | High proportion of high-wage positions |
3. Support Policies for Small Business Owners
The government implements the following support measures to alleviate the burden on small business owners due to minimum wage increases:
- Job Stabilization Fund: Up to 110,000 won per month support (2026 standard)
- Duru Nuri Social Insurance Premium Support: 80% for new subscribers, 50% for existing subscribers
- Employment Promotion Subsidy: 600,000 won per month for hiring vulnerable groups
- Youth Additional Employment Subsidy: Up to 9 million won annually for hiring youth as regular employees
Economic Ripple Effects
1. Positive Effects
- Stimulated consumption: Increased disposable income for low-income households leads to domestic demand activation
- Reduced income inequality: Improved purchasing power for lowest income groups
- Increased productivity: Enhanced work motivation, reduced turnover rates
- Stabilized social insurance finances: Increased premium revenue
2. Concerns
- Employment reduction concerns: Potential workforce reduction in some industries
- Price increase pressure: Passing on labor cost increases to prices
- Increased self-employed business closures: Closures due to deteriorating profitability
- Accelerated automation: Increased adoption of kiosks and automated equipment
3. International Comparison
| Country | Hourly Minimum Wage | Won Equivalent (Approx.) | Notes |
|---|---|---|---|
| South Korea | 10,030 won | 10,030 won | 2026 standard |
| Japan | 1,004 yen | Approx. 9,500 won | 2024 standard, varies by region |
| USA (Federal) | $7.25 | Approx. 9,400 won | Varies by state |
| Germany | 12.41 euros | Approx. 18,000 won | 2024 standard |
| Australia | A$23.23 | Approx. 20,000 won | 2024 standard |
Complete Understanding of Weekly Holiday Allowance
Weekly Holiday Allowance Calculation
Workers who work 15 hours or more per week and have perfect attendance during scheduled work days receive paid weekly holidays.
Weekly Holiday Allowance = (Weekly Scheduled Hours / 40 hours) x 8 hours x Hourly Wage
[Example 1: Working 40 hours per week]
Weekly Holiday Allowance = (40 / 40) x 8 x 10,030 = 80,240 won/week
Monthly Equivalent = 80,240 x 4.345 = 348,643 won/month
[Example 2: Working 25 hours per week]
Weekly Holiday Allowance = (25 / 40) x 8 x 10,030 = 50,150 won/week
Monthly Equivalent = 50,150 x 4.345 = 217,902 won/month
[Example 3: Working 15 hours per week]
Weekly Holiday Allowance = (15 / 40) x 8 x 10,030 = 30,090 won/week
Monthly Equivalent = 30,090 x 4.345 = 130,741 won/month
Weekly Holiday Allowance Eligibility Conditions
- Weekly scheduled working hours of 15 hours or more
- Perfect attendance during scheduled work days for one week
- Attendance on all contracted work days
Practical Checklists
Checklist for Workers
- [ ] Is the hourly wage stated as 10,030 won or more in your employment contract?
- [ ] Is weekly holiday allowance included if working 15+ hours per week?
- [ ] Is the 50% premium applied for overtime/night/holiday work?
- [ ] Are you enrolled in the four major social insurances?
- [ ] Do you receive a pay stub every month?
Checklist for Business Owners
- [ ] 2026 minimum wage of 10,030 won applied
- [ ] Hourly wage including weekly holiday allowance calculated (12,036 won)
- [ ] Employment contract rewritten or change notification sent
- [ ] Payroll and social insurance reporting amounts updated
- [ ] Applied for Job Stabilization Fund and other subsidies
- [ ] Plan for price/cost adjustment for labor cost increases
Precautions and FAQ
Frequently Asked Questions
Q1. Do I have to receive minimum wage during my probation period?
A: Yes. The minimum wage can only be reduced to 90% (9,027 won) if you have signed an employment contract for one year or longer and the probation period is 3 months or less. Reduction is not allowed for simple labor jobs.
Q2. Are meal and transportation allowances included in minimum wage calculations?
A: Regularly paid meal and transportation allowances are included in the minimum wage calculation scope. However, in-kind payments are excluded.
Q3. What are the penalties for minimum wage violations?
A: Violators may face up to 3 years in prison or a fine of up to 20 million won, and must pay at least twice the amount of unpaid wages.
Q4. Do teenage workers receive the same minimum wage?
A: Yes. The same minimum wage applies regardless of age. However, there are working hour restrictions (40 hours per week, up to 6 hours of overtime).
Suggested Response Strategies
Advice for Workers
- Re-check your employment contract: Verify hourly wage, working hours, and weekly holiday allowance provisions
- Verify your salary calculation: Use the formulas above to verify your pay
- Report unfair treatment: Use Ministry of Employment and Labor hotline 1350, online reporting
- Develop your skills: Self-improvement to create value above minimum wage
Advice for Business Owners
- Redesign labor cost structure: Efficient workforce allocation, improve business processes
- Utilize government subsidies: Actively apply for Job Stabilization Fund, Duru Nuri, etc.
- Review pricing policy: Appropriate price adjustments or cost reduction
- Invest in automation: Introduce productivity-enhancing equipment from a long-term perspective
- Develop employee skills: Invest in training to improve productivity
Conclusion
The 2026 minimum wage increase to 10,030 won presents challenges of balancing worker livelihood stability with business management burdens. The key is for both sides to actively respond to changes and maximize government support policies.
Workers should know and protect their rights, while business owners should overcome difficulties through efficient management and government support.