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					social securities system in Korea

national pension

health insurance

Employment insurance

Industrial accident compensation insurance




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contents


Outline of Social Security Programs in Korea


   Korea has experienced rapid socioeconomic changes arising from industrialization, urbanization, and family
   nuclearization since 1960. Such changes have inevitably caused various social problems, leading to the need of the
   Social Security Systems. Accordingly, a series of laws and regulations have been enacted since 1960 to establish
   the Social Security System, and a variety of social security programs were developed, including social insurance,
   public assistance and social welfare service.


1. Social Insurance Programs
    4 kinds of compulsory social security system


   A. National Pension
   B. Health insurance
   C. Employment insurance
   D. Industrial accident compensation insurance


1. Social Insurance Programs
    Public Pension Scheme


   The Public Pension Scheme consists of the National Pension Scheme for employees of private companies and the
   self-employed persons, Government Employees Pension Scheme, Military Personnel Pension Scheme, and Private
   School Teachers Pension Scheme.

   In addition, there are Individual Pension Plan for the general public as a private pension and Retirement Payment
   Scheme which, although not a pension plan, functions as a post-retirement income protection mechanism for those
   working in workplaces with more than 5 employees.

   National pension is withheld every month by the rate of 9% (4.5% is employee's burden, another 4.5% is company's
   burden) of standard salary. Standard salary is usually stable within the year.


1. Social Insurance Programs
    Health Insurance Scheme


   The Health Insurance Scheme was introduced in 1977 to cover private firms with more than 500 employees. Since
   then, the scheme has been continuously extended to cover government officials and private school teachers in July
   1979 and virtually all employees, employers, and the self-employed in urban areas throughout the country in July
   1989. Medical insurance associations, which had been separated into Workplace based and Regional associations,
   united into and operated as the National Health Insurance Scheme since July 2000.

   National Health Insurance Scheme mostly provides in-kind benefits such as medical services. The Ministry of Health
   and Welfare and the National Health Insurance Corporation are responsible for its administration. In addition,
   foreigners may be covered under the Scheme if they apply for it.

   Health(medical) insurance is withheld every month by the amount of 4.31% (2.155% is employee's burden, another
   2.155% is company's burden for the year 2005) of standard salary. Standard salary usually is stable within the year.
   There is no maximum standard salary like National pension, so there is no upper limitation for this item.


1. Social Insurance Programs
    Employment Insurance Scheme


   The Employment Insurance Scheme was introduced in July 1995 to cover private firms with more than 30 employees.
   Now it covers all private firms in the country. Under the Scheme, foreigners may apply for a voluntary membership, if
   they have a stay status with work permit.

   The benefits under this Scheme are composed of three components: cash benefits during involuntary
   unemployment, financial support to employers for the stabilization of employment, and financial support to companies
   to improve the working ability of workers. The Scheme is administered by the Ministry of Labor and the Korea Labor
   Welfare Corporation.

   Every March of each year, company pay whole year's insurance in advance by computing 1.15% of last year's
   salary total. After payment of whole year's contribution in advance, company withhold 0.45% of each employee's
   salary every month. As a result, the contribution is allocated as follows.
                Employee's contribution                                       0.45%
                Company's contribution                                        0.70%




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1. Social Insurance Programs
    Industrial Accident Compensation Insurance Scheme


    The Industrial Accident Compensation Insurance Scheme was introduced in 1963, and the coverage of the Scheme
    has been extended over time. At present, all workplaces, including foreigners, are covered. The Scheme provides
    in-kind benefits such as medical treatment and various cash benefits such as leave benefits, disability benefits, and
    survivor benefits. The Scheme is administered by the Korea Labor Welfare Corporation under the supervision of the
    Ministry of Labor.

    The rate is diversified depending on the scope of business.
    This is paid only by the company.
    There is no employee's contribution on this.


Authorities handling social securities in Korea


    National Pension
            National Pension Corporation                         www.npc.or.kr
    Health Insurance
            National Health Insurance Corporation                www.nhic.or.kr
    Employment insurance & Industrial accident compensation insurance
            Korea Labor Welfare Corporation                      www.welco.or.kr


2. Public Assistance


    The Public Assistance Scheme is designed to provide a minimum standard of livelihood for those who cannot
    maintain their livelihood by themselves owing to physical disability, disease, old age, or other reasons. Public
    Assistance Scheme includes the National Basic Living Security Scheme, Medical Aid, Disaster Relief, Aid for the
    Disabled Veterans, etc.

    The National Basic Living Security program aims to fill the income shortage of those who meet certain asset criteria
    and earn less than the minimum cost of living. The minimum cost of living, calculated every 5 years, varies depending
    on the number household members and is being indexed to the annual rate of price increase. The National Basic
    Living Security Scheme provides residence, medical, educational, delivery, funeral, and self-support benefits. The
    last among these, self-support benefits, aim to encourage those aged from 18 to less than 60 with labor capability to
    support themselves.

    The self-support benefits include occupational training, job search assistance, social enterprise project, public
    works project, and voluntary service to help for start-ups. Those with labor capability are 'conditional beneficiaries'
    who are paid benefits for the cost of living only if they try to maintain their livelihood by themselves.



3. Social Welfare Service


    Social Welfare Service provides those in need of social protection with admissions to special welfare institutions, free
    meals, occupational training, employment service, and counseling. And especially, the Korean government has tried
    to improve the quality of the Social Welfare Scheme by expanding welfare facilities for those with severe or multiple
    disabilities and by providing comprehensive services.

    Social Welfare services have been provided largely for the socially vulnerable ones such as the disabled, old-aged,
    children, woman, etc. Recently, however, their scope of coverage is being extended to enhance the quality of life of
    community residents through continuous cooperation between people and government, encouraging voluntarily
    services and fostering connections between those in need of help and those offering help.




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contents


National Pension Scheme
    Foreigners and Coverage


   At the time of the introduction of the Scheme, foreigners were not mandatorily covered. Only foreigners
   working in a workplace covered under the Scheme could be covered as an Workplace based Insured
   Person by submitting an application.

   Foreigners working at the workplace with more than 5 full-time employees were included in the mandatory
   coverage in August 1995 and those working at the workplace with less than 5 employees including
   self-employed foreigners were also included in the mandatory coverage in April 1999. Accordingly,
   foreigners aged from 18 to less than 60 who reside in Korea must be, in principle, covered under the
   Scheme. But foreigners falling under any of the following items are excluded from the coverage.

   1) Those whose country does not mandatorily cover Korean citizens under its pension scheme.
   2) Foreigners who are not registered under the Immigration Act, or to whom the forced deportation order
      has been issued under the same Act, or who are staying in Korea without being permitted to extend
      their term of stay.
   3) Among the registered foreigners under Immigration Act, those whose stay status falls under any of the
      followings; culture & art, studying abroad, industrial training, general training, religion, visiting & living
      together and others.
   4) People excluded from the mandatory coverage of National Pension Scheme, by the social security
      agreement.


National Pension Scheme
    Foreigners and payment of Lump-sum Refund


   Foreign Insured Persons under the National Pension Scheme are equally treated as the national Insured
   Persons. For example, there is no discrimination in terms of the benefit amount and remitting benefit
   abroad, etc. But there is a certain distinction regarding Lump-sum Refund. In principle, Lump-sum Refund
   is not paid to foreigners leaving Korea after having been covered under the Scheme. But, in the case of
   foreigners falling under any of the following items, Lump-sum Refund is paid.

   1) People whose country grants Koreans a benefit corresponding to Lump-sum Refund under the National
      Pension Scheme.
   2) People whose country concludes a social security agreement with Korea to secure benefit right by
      totalling Insured period in each country.


National Pension Scheme
    Contribution


   The National Pension Scheme is a social insurance scheme. Accordingly, the expenditure required for
   payment of benefits and others is mainly financed from contributions paid by Insured Persons and their
   employers. The contribution of Workplace based Insured Persons is equally shared by the employer and
   the employee (the Insured Person), while Individually Insured Persons, including Voluntarily Insured Persons
   and Voluntarily & Continuously Insured Persons, pay all amount of their contributions themselves. The
   government's financial support is temporarily provided for some portion of contributions paid by farmers
   and fishermen. On the other hand, some part of administration costs of the National Pension Corporation
   is supported by the government because National Pension Scheme is enforced under its responsibility.


National Pension Scheme
    Contribution Rate


   The contribution rate was set low at the initial stage of the Scheme and has been gradually increased for
   the purpose of alleviating the financial burden on the Insured Persons and employers, with consideration
   of its effects on the national economy.
   Also, the maximum limit of contribution rate will remain in the region of 9% until 2009 and will be adjusted
   afterward according to the financial recalculation planned to be conducted every five years.

   The contribution rate was raised from 3% in 1988, through 6% in 1993, and to 9% in 1998.
   During the period 1988-1992, the contribution of the Workplace based Insured Persons was equally shared
   by the employee and employer. And, during 1993-1998, the contribution was equally shared by the
   employee, employer, and retirement payment reserve. However, since April 1999, each of the employee
   and the employer has been taking a half of the responsibility of paying contributions. But Voluntarily &
   Continuously Workplace based Insured Persons should pay all their contributions by themselves.


Social Security Agreement
   What are the objectives of concluding a social security agreement?




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   A social security agreement is concluded to benefit the nationals of contracting countries through the
   coordination of those countries' different social security systems. It has four basic objectives as follows:

   First, the agreement is to reduce the financial burden on persons (e. g., detached employees and their
   employers or self-employed persons) who would find themselves covered under and have to pay social
   security contributions to the systems of two countries for the same work. As a result contributions are
   paid to only one system of either country (Elimination of dual coverage).

   Second, the agreement is to help persons (e. g., long-term residents or immigrants in the other country)
   who have divided their careers between two countries acquire benefit eligibility by totalizing their periods of
   coverage in both countries. Without totalization, benefits would not be acquired under a country's national
   law alone as a result of insufficient periods of coverage (Totalization of periods of coverage).

   Third, the agreement is to ensure that nationals from one country, who are subject to the applicable
   legislation of the other country, be accorded the same treatment under the other country's social security
   system as that country accords its own nationals in the application of that legislation. This includes
   eligibility for and the payment of benefits (Equal treatment).

   Fourth, the agreement is to guarantee that benefits are remitted without restrictions to persons who stay in
   either country and who have acquired benefit eligibility under either or both system(s) of two countries
   (Benefits remittance without restriction).


Social Security Agreement
   Which legislation does a social security agreement apply to?


   The legislation to which the social security agreement applies may be somewhat different, depending on
   the way the social security laws of the contracting countries are organized.

   Korea makes it a principle that only the National Pension Act be covered by the agreement. However,
   under the agreements with the United States and Germany, the Industrial Accident Compensation
   Insurance Act and the Employment Insurance Act have been included under the applicable legislation of
   Korea, respectively.


Social Security Agreement
   Which country's social security legislation applies to an individual?


   An employee is insured in the country where s/he exercise occupational activity. For example, a Korean
   national employed in the United States is only subject to the U.S. legislation on social security and is
   exempt from the corresponding Korean legislation. Also, a Canadian citizen employed in Korea is only
   covered under the Korean legislation on social security and is exempt from the corresponding Canadian
   legislation.

   If an employee is employed in one contracting country, but transferred to work in the other contracting
   country for a temporary period, s/he is not subject to the legislation of the other contracting country and
   remain insured under the legislation of the first contracting country.

   If a person is self-employed, s/he is subject to the legislation of residing country under the agreements
   with the United States, the United Kingdom, Canada, China and the Netherlands. Under the agreement with
   Germany, s/he is subject to the legislation of the country where s/he exercises self-employment activity.

   A Korean national who resides in Korea and who is engaged in a self-employment activity in the United
   States is covered under the Korean legislation and is exempt from the U.S. legislation. However, A Korean
   national who has permanent residence in Korea and who exercises a self-employment activity in Germany
   is covered under the German legislation and is exempt from the Korean legislation, irrespective of where
   that person has permanent residence.


Social Security Agreement
   Who is eligible for a Korean Lump-sum refund?


   If your country has a totalization agreement social security with Korea, you are treated like other Korean
   nationals regarding a lump-sum refund, as well as pension benefits under the legislation of Korea.
   Therefore, if you die or permanently leave Korea, or reach age 60, or meet other qualifying conditions for
   the Lump-sum refund before qualifying for an Old Age, Disability or Survivors pension, the Lump-sum
   refund may be paid to you or your survivors (in case of your death).

   If your country does not have a social security agreement with Korea, you are not treated equally with
   other Korean nationals regarding the lump-sum refund, but are treated according to a reciprocity rule.
   Under this rule, only the nationals from 27 countries※ may receive the Korean lump sum refund. Please
   refer to Article 102 of the National Pension Act and Article 85-3 of the Enforcement Decree of the National
   Pension Act.




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※ Venezuela(if completed at least 24 months of periods of contributions) ; Grenada, Nigeria,
Barbados, Saint Vincent and Grenadines, Zimbabwe, Cameroon, Congo, Thiland, Togo(for the above 9
countries, if completed at least 12 months of periods of contributions) ; Belize(if completed at least 6
months of periods of contributions) ; Ghana, Malaysia, Bermuda, Sudan, Sri Lanka, Switzerland, El
Salvador, Jordan, India, Indonesia, Kazakhstan, Kenya, Trinidad and Tobago, HongKong, Turkey,
Colombia ; (as of December, 2004)




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contents


 What is the National Health Insurance?


   The National Health Insurance Corporation(NHIC) is the only public insurer managing the National Health
   Insurance under the supervision of the Ministry of Health & Welfare, the Republic of Korea. The insured of
   NHI can be categorized into the employee insured and the self-employed insured. The NHI is the system
   of which the contributions made by the insured persons are consolidated into a fund and insurance
   benefits are provided upon their need. The system aims to share the burden among the insured persons
   and provide medical services.


Coverage


   Covering total population, the Health Insurance System of Korea constitutes one of major parts of the
   Korean social insurance system. Enrollment is mandatory for Koreans residing in the Korean territory,
   except for some Medical Aid beneficiaries.

   The insured persons under the National Health Insurance Program are classified into two population
   categories : the employed insured and the self-employed insured.

   In Oct. 2003, the total number of persons covered by the NHI reached over 47 million, or 97.0 % of the total
   population. The remaining 3.0%, 1.4 million, who are indigent or belong to low-income brackets, are
   covered by the Medical Aid Program, a Korean social assistance program.


Contribution


   Health(medical) insurance is withheld every month by the amount of 4.31% (2.155% is employee's burden,
   another 2.155% is company's burden for the year 2005) of standard salary. Standard salary usually is
   stable within the year. There is no maximum standard salary like National pension, so there is no upper
   limitation for the contribution amount.

   The national health insurance is financed from the contributions paid by the insured and their employers,
   and government subsidies. As the national health insurance program is run as a social insurance program,
   the contributions from the insured are the major source of its revenue of the program.

   With the Integration Reform implemented, the health insurance program is being operated by a single
   insurer, the NHIC. Even though the organizational integration had been fully achieved in July 2000, the
   pooling of insurance finances between the funds of employees and those of the self-employed was
   adopted just on July 1, 2003, which had been managed separately until then.


Payment of the Contributions


   The payment of contributions is the responsibility of employers and all members of households. They are
   required to pay their monthly contribution by the 10th day of the following month. In the case of any failure
   of payment, the insurer (NHIC) could carry out coercive collection in accordance with the relevant
   provisions of the law.


Conditions for Enrollment


   Those who have registered as foreigners at the Immigration Bureau and meet one of the following
   conditions can make apply for the enrollment of national health insurance at the NHIC

   For the employee insured :
       those who are the employers or the employees of work places;

   For the self-employed insured :
       those who excluded from the employee insured and have one of following residence status : F-2, F-4, D-1∼9, E-1∼5,
       E-7∼8, F-1(spouses and children of Korean nationals) and those who are the spouses and children under 20 years of
       age of foreigners.


Enrollment procedures and required documents


   For the employee insured :
       The foreign workers shall make an application for the enrollment to the employer of the work place who are responsible for
       remitting the application at NHIC with the required documents. The enrollment is retroactive to the date he/she employed.




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   For the self-employed insured :
       The foreigner shall make an application for the enrollment with the certificate of foreigner registration and the passport at the
       nearest NHIC office in his/her residential area. The enrollment is retroactive to the date he/she registered his residence in
       Korea.


Imposition of contributions and payment


   The employee insured
      The Contribution amount shall be calculated by 「monthly salary contribution rate 」and be deducted from the monthly salary
      (50% of which are paid by the employer). The duty of the payment is retroactive to the date he/she was employed

   The self-employed insured
      The Contribution amount for those who have income shall be calculated by 「monthly income contribution rate 」, and for
      those who have no income shall be the amount of the「Average monthly contributions of the self-employed in preceding
      year」. The duty of the payment is retroactive to the date he/she registered his/her residence in Korea.


Insurance Benefits


   The benefit package for foreigner is as same as that for Korean nationals. When the insured person and
   the dependents, no matter what they are foreigners or Korean nationals, get health care service at the
   health care facilities, they have to pay only amount as follows;

   For treatment at the hospitals and medical clinics:
       20%∼50% of the total charges applicable by NHI

   For prescription drugs filled at the pharmacy :
       30% of the total charges applicable by NHI




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contents

The Employment Insurance is designed for prevention of unemployment and
promotion of employment.

Employment Insurance is an important pillar or social security system, incorporated
with not only its traditional function of providing the unemployed with cash benefits to
maintain the unemployed's standard of living and help their re-entry into society, but
also functioning to prevent unemployment, promoting job security.


Subscription & Contribution

  All employers hiring one or more workers are subject to register their entry to this
scheme with Korea labor Welfare Corporation(Welco)'s branch offices and pay
employers' and employees' contributiongs. Benefits under Employment Insurance
include unemployment benefits and vocational ability development programs, which
are carried out by the Government.


Benefits for Workers

 Unemployment Benefits
    - Stabilize job's seeker's standards of living and help their re-entry into society

 Vocational Ability Development Program
    - Promote worker's vocational ability development and enhancement

 Employment Security Program
   - Encourages employers to maintain employment security and prevent unemployment

Benefits for Employees

   An amount equal to 50% of the average daily wage is awarded to a person who
has involuntarilly left for 90~240 days. Special and Individual Extended Benefits will
be paid for another 60 days in special case. In addition, Employment Promotion
Allowance, Subsidy for taking education courses, Loans for tuition fees and Subsidy
for vocational training of the unemployed, etc are provided.

Benefits for Employers

 Employment stabilization subsidy is granted to an employer who maintains a certain
number of employees instead of employment reduction in certain case. An employer
hiring senior citizens, unemployed female household heads and long-term unemployed
are favored with subsidies and loans for the expenses for training, establishing
vocational training facilities & equipment.


Subsidies to workers

Providing job seeker’ s benefits up to 240 days
  Job seeker's benefits are paid during periods of involuntary unemployment, such
as a company's disclosure, bankruptcy and/or layoff. However, the claimant must
actively seek work or make a reasonable effort to obtain work. If this criteria is
satisfied, they can receive benefits for 90~240 days depending on the coverage
period and their age on leaving their company. It amounts to 50% of the average
daily wage (up to ₩35,000 per day)

Special and Individual extended benefits are paid to the prolonged unemployed
  The prolonged unemployed who haven’ t found a job after a specified period can
receive payment. In addition, Employment promotion allowances, Subsidy for taking
classes, Loans for tuition of workers, and Subsidy for vocational training of the
unemployed are provided.


Subsidies to Employers

Subsidy for employment maintenance
   A portion of wages and training fees are paid for 180 days to those employers
who maintain employment in spite of layoffs due to managerial reasons. (Subsidy for
allocating labor resources is paid for 1 year)

Subsidy for hiring senior citizens
  Subsidies are paid to those who hire senior citizens aged: 55~60 years and who
have been unemployed for over 3months registering for work. This subsidy is also
paid for 6 months to employers who hire retired senior citizens.

Subsidy for hiring women




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 Subsidies are paid to those who hire female heads of families and hire retired
women after pregnancy, delivery, nursing and maintain employment of women after
maternity leave.

Subsidy for hiring the long term unemployed
  Subsidies are paid for 6 months to those who hire the prolonged unemployed,
who have been unemployed for over 6 months based on the date they register for
work at the public employment office.

Subsidy for vocational ability development training
  A portion of designated training fees are paid to those who execute vocational
ability development training in compliance with Worker's Vocational Training Promotion
Act.

Subsidy for paid-vacation training
  A portion of wages and training fees are paid when an employee, who has been
unemployed over 1 year, is granted paid-vacation training over 30days.

Subsidy and loans for the cost of establishing vocational training facilities &
equipment Subsidies are paid when a company claims the cost of establishing
vocational training facilities to implement Vocational ability development training.




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contents

Coverage & Contribution

      All employers who employ one or more employees are required by law to pay
    contributions to this insurance.


Recipients

      Voluntary coverage for small-medium businesses who employ less than 50
    employees.
    Foreigners are also covered.


Medical Care & Treatment

    Cash benefits
      If the recipient is unable to work due to medical care or medical care is over or
    workers die from occupational accidents, cash benefits are transferred to bank
    accounts of the recipient in coincidence with the determination of paying benefits.

    Medical Benefits
      Medical care is provided to injured workers until they have recuperated. It includes
    a full range of services, such as medical treatment, medication, appliances,
    prostheses, artificial limbs, surgery, extra care, hospitalization, nursing, transportation,
    recurrence and hospital relocation. Full expenses of medical care are entirely covered
    and are paid by Korea labor Welfare Corporation(Welco) to hospitals in compliance
    with the regulation set by the Minister of Labor.

    Nursing Benefits
       Payable in accordance with current nursing fees to nursing services always or
    frequently used by others who have a residual chronic disability after medical care.

    Temporary Disability Benefits
      70% of the average daily wage gets paid to injured workers to compensate for
    their loss of income during the period they were unable to work because of injury.

    Permanent Disability Benefits
      If the disability still exists after receiving medical care, injured workers are paid
    according to their impairment rating.

    Survivor Benefits
      If workers have died due to occupational accidents or diseases, cash benefits will
    be paid to eligible surviving dependents. Pension payment is included in this.
    However, it also can be paid in half as a lump sum and half as a pension if desired.




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