Recently, an article caused a stir with its striking projection that SK Hynix's performance bonus could reach 1.29 billion won by 2027. This figure was calculated based on Macquarie Securities' estimate of SK Hynix's 2027 operating profit at 447 trillion won. Under the assumption that 10% of operating profit determined through labor-management negotiations would be utilized as Profit Sharing (PS), dividing approximately 44.7 trillion won by the expected employee count of 34,500 at the end of 2025 yields this amount. The news that an amount far exceeding the annual salary of large corporation executives would be paid to all employees was more than enough to capture public attention. Of course, it is true that the 447 trillion won operating profit underlying this figure diverges considerably from the general forecasts of domestic securities firms, but if such a bonus were actually paid, one cannot help but wonder how much workers would actually take home.
From a tax law perspective, income received from an employer—regardless of whether it is called salary, bonus, or performance pay—mostly falls under earned income as compensation for labor. In Korea, all earned income generated from January 1 to December 31 is aggregated to calculate total salary. The taxable base is derived by subtracting earned income deductions and other items, and the calculated tax is determined by multiplying by the income tax rate corresponding to the applicable bracket. Afterward, various tax credits and reductions are applied, and previously paid taxes are deducted to finalize the final tax payable. Therefore, if a performance bonus of 1.29 billion won is paid, the actual take-home pay can only be known accurately by combining it with the existing annual salary and calculating the substantive burden of income tax as well as the four major insurance premiums and other public dues.
Let us assume a situation where, based on income attributable to 2026, a worker with an annual salary of 100 million won receives a performance bonus of 1.29 billion won, bringing the total salary to 1.39 billion won. First, the earned income deduction is applied to the total salary, but under the current Income Tax Act, when earned income exceeds 362.5 million won, the deduction limit is capped at 20 million won. Therefore, the earned income amount becomes 1.37 billion won. Assuming only a basic deduction of 1.5 million won for personal exemptions is applied, the taxable base is calculated at approximately 1.3685 billion won. Under current income tax rates, the top rate of 45% applies to the bracket exceeding 1 billion won in taxable base. The calculated income tax based on this amounts to approximately 550 million won, with an additional local income tax of 55 million won (10% of income tax) imposed. In the end, income tax and local income tax combined alone amount to approximately 605 million won, meaning 43.5% of the total salary goes to taxes.
When the employee's share of the four major insurance premiums—quasi-taxes of a social insurance nature—is added, actual disposable income decreases further. The four major insurance rates below are all based on the 2026 employee burden. National Pension has an upper limit on the standard monthly income (6.37 million won in the first half, 6.59 million won in the second half), so even high-income earners do not face a large additional burden, staying at about 3.7 million won annually (4.75%). However, health insurance and long-term care insurance have a monthly employee burden cap of 4,591,740 won, and since they are imposed proportionally to total compensation up to an annual compensation of about 1.5327 billion won, the burden is significant. Applying the combined health insurance premium rate (3.595%) and long-term care insurance rate (13.14% of health insurance premium) yields approximately 56.54 million won, and employment insurance (0.9%) imposes 12.51 million won. The employee's share of the four major insurance premiums alone totals approximately 72.75 million won. The structure in which health insurance premiums and the like increase sharply in proportion to total compensation as income rises places a heavy burden on high-income workers.
As a result, subtracting 605 million won in taxes and 72.75 million won in four major insurance premiums from a total salary of 1.39 billion won leaves a final take-home amount of approximately 712.25 million won. This figure is only about 51.2% of the pre-tax amount. Despite earning nearly 1.4 billion won, having to pay nearly half—around 700 million won—in taxes and quasi-taxes may feel somewhat harsh, but this is the cold reality facing high-income workers in Korea today. While it is commonly thought that a high salary is unconditionally good, under a progressive tax rate structure, there are brackets where the increase in taxes rises more steeply.
So at exactly what point does a worker begin sharing more than half of their income with the state? Under current law, a 42% income tax rate applies to taxable base amounts exceeding 500 million won and up to 1 billion won. Including local income tax, the rate becomes 46.2%, and adding approximately 5% for the four major insurance rates including health and employment insurance, the effective marginal tax rate already exceeds 50%. In other words, from the point where the taxable base exceeds 500 million won, more than half of any additional income earned can be said to go to taxes and quasi-taxes. In the bracket exceeding 1 billion won, the tax rate including local income tax alone reaches 49.5%.
Of course, receiving such a large performance bonus as an employee is clearly one of the few great fortunes in life. However, this case also serves as an indicator that starkly reveals the reality of Korea's progressive earned income tax structure. Even with the same income, receiving it solely as earned income, diversifying it into business income or financial income, or managing it through a corporate entity leads to entirely different results in terms of tax burden. Therefore, the higher the income of a worker, the more necessary it is to conduct a thorough tax review in advance regarding the composition and method of receiving one's income. Taxes are an unavoidable obligation, but if one accurately understands the system and prepares in advance, it is an area that can be sufficiently managed. A rational tax plan will be the first step in fully preserving the value of legitimately earned income.
