Overtime Pay Tax in Korea: Complete Guide for Foreign Workers

Is Overtime Pay Taxed?

Overtime pay (연장근로수당, also called 야근수당) is, in principle, classified as earned income (근로소득), so income tax and local income tax are withheld at source. However, workers who meet certain conditions — such as production-sector employees — may qualify for a tax exemption (비과세 혜택). It is important to confirm which category applies to you.

Note for foreign workers: Your employment contract may specify overtime rates, but the statutory minimum and tax rules below apply regardless of contract terms.

Legal Basis for Overtime Pay

Under Article 56 of the Labor Standards Act (근로기준법 제56조), an employer must pay at least 50% above the ordinary wage (통상임금) for extended work (연장근로) — i.e., work exceeding 8 hours per day or 40 hours per week. This entire premium is classified as earned income. There is no separate "overtime tax rate"; instead, the overtime pay is added to the month's total salary and withheld according to the National Tax Service's simplified withholding tax table (근로소득 간이세액표).

In other words, the more overtime pay you receive, the higher your total monthly salary becomes, and the higher the applicable tax bracket may be.

Production-Sector Workers: Tax Exemption Available

Under Article 12 of the Income Tax Act (소득세법 제12조) and its Enforcement Decree, production-sector and related-occupation workers who satisfy all of the following conditions are entitled to a tax exemption of up to 2,400,000 won per year (연 240만 원 한도) on extended-work, night-work, and holiday-work allowances.

The exemption conditions are as follows:

Occupation requirement: Must be engaged in production-related work specified in the Enforcement Decree — such as factory or mine workers, fishery workers, and driving/transport workers.
Annual salary requirement: Total salary (총급여액) for the immediately preceding tax year must be 30,000,000 won or less.
Monthly fixed salary requirement: Monthly fixed salary (월정액 급여) for the relevant month must be 2,100,000 won or less.

All three conditions must be met simultaneously for the exemption to apply. If even one condition is not satisfied, the full amount is taxable. Office and managerial workers are not eligible for this exemption.

How Overtime Tax Is Calculated for General Employees

For general workers who do not qualify for the production-sector exemption, overtime pay is included in the total monthly salary — combined with base pay, meal allowances, etc. — and withheld according to the NTS simplified withholding tax table. For example, if a worker with a monthly base salary of 3,000,000 won receives an additional 300,000 won in overtime pay, the tax rate for the 3,300,000 won bracket applies.

At year-end tax settlement (연말정산), the final tax amount is reconciled based on total annual salary. In years with frequent overtime, you may receive a smaller refund or owe additional tax.

The 4 Major Insurance Premiums Also Increase

Overtime pay is not only subject to income tax — it is also included in the monthly remuneration base (보수월액) used to calculate National Pension (국민연금), National Health Insurance (건강보험), and Employment Insurance (고용보험) premiums. Therefore, increased overtime can also raise the insurance premium deductions from your paycheck. Note that Industrial Accident Compensation Insurance (산재보험) premiums are paid entirely by the employer and are not deducted from the worker's wages.

Want to Know Your Actual Take-Home Pay?

If you want to check in advance how much you will actually receive after taxes and 4 major insurance premiums are deducted from a salary that includes overtime pay, try the Bylaw (workbylaw.com) annual salary take-home pay calculator. Enter your monthly salary and number of dependents to automatically calculate withholding tax and insurance premiums and see your net pay instantly. You can also enter the amount with overtime pay added to compare the difference directly.

This article is for informational purposes only and does not constitute legal advice. For specific cases, consult a certified labor attorney (노무사) or lawyer.