Social Insurance and Insurances Exclusive to Foreign Workers

I. Introduction

There are four major insurances: Industrial Accident Compensation Insurance, Employment Insurance, National Health Insurance, and the National Pension Plan. (i) Industrial Accident Compensation Insurance applies to foreigners as well, but the remaining social insurances vary in application. (ii) Regarding Employment Insurance, most foreign workers stay in Korea temporarily, so it is often optional. (iii) National Health Insurance is naturally applicable if a foreign worker is employed at a workplace. (iv) National Pension is naturally applied in principle, but the principle of reciprocity means it varies in accordance with relations with each foreign country.

Employers are obliged to subscribe to Departure Maturity Insurance, Guaranty Insurance for unpaid wages, Foreign Workers’ Care Insurance and Return-Expense Insurance.^[1] When an employer re-employs a foreign worker, he/she shall extend the existing insurance coverage period of the Departure Maturity Insurance and Guaranty Insurance for unpaid wages (Article 13 of the FEA).^[2]

The following describes in detail the application of social insurances with foreign workers.

II. Social Insurance for Foreign Workers

<Table 1> Social Insurances and their Application to Foreign Workers

1. Industrial Accident Compensation Insurance (IACI) Act

Since the IACI Act stipulates in Article 1 (Purpose) that its purpose is to “compensate workers for work-related accidents promptly,” foreign workers must be protected. Regardless of their eligibility for working visas, all are covered by the IACI Act. If a foreigner is injured while providing work, whether he or she is an industrial trainee or an illegal foreign worker, the accident will be compensated for as an industrial accident. This has been confirmed by a Supreme Court case.^[3] Workers are subject to workers' compensation in the event of a work injury, regardless of whether they are Korean citizens or illegal workers. The Supreme Court has made it clear that illegal stays are subject to crackdowns, but that illegal residents should also be covered by industrial accident insurance in the sense that workers must be protected by labor law for labor already provided.

The IACI Act is a social insurance system in which the State carries out compensation on behalf of the employer under the Labor Standards Act if a worker is injured or ill from work. Accident compensation is applied to all businesses or workplaces using workers, taking into account the risk, size and place of business. The following types of work are not covered by the IACI Act (Article 6): ① construction with a total construction cost of less than 20 million won, ② construction by a non-housing business or non-contractor, construction of buildings with a total floor area of ​​less than 100 square meters (200 square meters for waterline construction), ③ household service ④ businesses with fewer than five workers in agriculture, forestry, fishing and hunting.^[4] Therefore, in the event a business or workplace is not covered by the IACI Act and has an industrial accident requiring medical treatment for three days or less, the Labor Standards Act requires the employer to compensate for the work injury/illness.^[5]

2. Employment Insurance Act (EIA)

Employment insurance grants benefits to eligible people to prevent undue hardship from unemployment, promote employment, develop the vocational skills of workers, and promote job-seeking activities. It thereby contributes to the economic and social development of the nation (Article 1 of the EIA). Employment insurance applies to all businesses or workplaces in principle, with exceptions in consideration of the size of business. It applies to all workers because its main purpose is to provide stability for unemployed persons, so does not apply if those persons do not need help or are protected by other insurance. Those excluded from employment insurance are: ① 65 years of age or older, ② Those working fewer than 60 hours a month (15 hours a week), ③ Civil servants under the National Civil Service and Local Public Service Act, ④ Those to whom the Private School Teachers Pension Act applies, ⑤ Sailors under the Seafarers Act, ⑥ Foreign workers who are not eligible for residency. However, foreigners with status of residence may subscribe and benefit.

<Table 2> Foreign Worker Eligibility for Employment Insurance (as of Dec. 2016)

Source: Korea Labor Welfare Corporation, “Working Guide for Workers and Workers' Compensation and Employment Insurance 2017,” p. 18.

※ ‘×’ denotes those foreigners ineligible for employment insurance.

Unemployment benefits of course include unemployment benefits, but also maternity leave allowances and childcare leave benefits. Therefore, foreigners cannot receive maternity leave benefits and childcare leave benefits as well as unemployment benefits if they do not have employment insurance. If a foreign worker who is staying for employment in Korea does not intend to receive unemployment benefits, he or she may not subscribe.

3. National Health Insurance Act (NHIA)

All business and local subscribers covered by National Health Insurance are required to pay premiums. However, foreign workers (E-9) and visiting Korean workers (H-2) under the employment permit system in the Foreign Employment Act and in Article 7 (4) of the Long-Term Care Insurance Act can be exempted through a separate application process through a nursing care insurance subscriber. All other foreign workers who do not have a basis for exemption are automatically subscribed to long-term care insurance and pay the premium along with the health insurance premium.

4. National Pension Act (NPA)

Foreigners working in workplaces are subject to the National Pension Act (Article 126) and foreign nationals residing in Korea shall, of course, become business or regional subscribers. However, if the law equivalent to Korea’s NPA in the foreigner’s country of citizenship does not apply to Republic of Korea nationals living there, the national pension system in Korea corresponding to the national pension shall be taken as the principle of a reciprocity with foreign countries Those not covered by the National Pension Scheme are those here on temporary stay visas or without income.^[6]

National Pension applies to foreign nationals when they are employed at a workplace that must subscribe to it. To receive the pension benefit, the foreign national must have paid into the national pension for at least 10 years and reach the age of 60. This is not easy for most foreign workers to do. In this case, a lump-sum refund will be given, which will be handled in accordance with the social security agreement Korea has with that national’s country of citizenship. In addition, the National Pension Act was amended in January 2015 in accordance with the decision of the Constitutional Court in recognition of the property value of national pensions (Article 126 of the NPA).^[7]

III. Insurances Exclusive to Foreign Workers

<Table 4> Insurances Exclusive to Foreign Workers

Source: MOEL, 2016 Manual of Employment Permit System, p. 452.

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: FEA). The employer must pay a monthly premium of 8.3% of a worker’s monthly ordinary wage 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.^[8] Departure Maturity Insurance is operated 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 decided that payment of severance pay when leaving Korea would be in line with the purpose of the Foreign Employment Act, even if retirement benefits were paid on the basis of departure, rather than on the premise of terminated employment relations. ^[9]

If a foreign worker has worked for less than one year after the Departure Maturity Insurance is purchased, the insurance will not be paid to the foreign worker but return to the employer instead. insurance benefit will be returned to the. Since the 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 the 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 2 million won. 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 encouraging foreign workers to leave the country when their period of stay expires and to help them have the money necessary for returning home (Article 15 of the Foreign Employment Act). Payment of insurance premiums must be made within 80 days of the date of entry (E-9 Non-professional Foreigners) or the start 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 the status of residence.

4. Accident Insurance

Foreign workers (E-9, H-2 status of residence) 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 depending on gender and age. As insurance premiums are low, insurance benefits are limited. A maximum of 30 million won is paid if a foreign worker dies or acquires a disability, and 15 million won for illness. In other words, if you are hospitalized for a personal illness and receive surgery or long-term care, the benefits from this insurance are not enough to cover such large medical expenses.

IV. Conclusion

The four main insurances for foreign workers are granted natural benefits. With Industrial Accident Compensation Insurance, there is insufficient compensation to workers injured/ill from industrial accidents at workplaces hiring fewer than five workers in rural areas. If Employment Insurance is voluntary and foreign workers become unemployed or find another job, most will be excluded from maternity leave or parental leave. Illegal residents are excluded from National Health Insurance coverage. Paying into the National Pension Scheme is mandatory for non-professional foreign workers (E-9), even though it is impossible, under the short-term visa system, for them to stay long enough to be eligible for the benefits. which is another burden that the employer should pay as the employer’s burden in premiums. So, the National Pension should be excluded from the mandatory social insurances.

In terms of insurances exclusive to foreign workers, there are many things needing improvement. Although the Departure Maturity Insurance, which is paid in lieu of retirement allowance, is paid on the premise of the worker leaving Korea, even if the foreign worker stays for a long time, he/she may not receive that money. Guaranty Insurance is also limited in effectiveness because it is provided on the premise that the Labor Office confirms that wages have indeed not been paid. The amount of reserves are so small and the limitations so great with Accident Insurance that the benefits are largely inconsequential. Insurance premiums need to be raised to a level that reflects the need.