Fixed-term Employment Contracts in Korea
The 2-Year Rule and Limits on Non-Renewal
Who Is a Fixed-term Employee?
A fixed-term employee is one who is engaged on a fixed-term contract of employment. Regardless of the reason for setting the term, the number of working hours, or how the contract is titled, any employee employed under a contract with a fixed duration is regarded as a fixed-term employee.
The 2-Year Rule for Fixed-Term Contracts in Korea
Under the Act on Protection of Fixed-term and Part-time Employees (“Fixed-term Act”), an employer may, in principle, employ a fixed-term employee only for a period not exceeding 2 years. If a fixed-term employee works for more than two years, the employee is automatically deemed to be employed under a contract with no fixed term (commonly referred to as permanent employment).
The two-year period includes not just continuous service under a single contract, but the total time worked under renewed fixed-term contracts.
Exceptions: When the 2-Year Rule Does Not Apply
The Fixed-term Act provides certain statutory exceptions to the two-year limitation on the use of fixed-term employees. These exceptions generally apply where the nature or purpose of the employment justifies the use of a fixed-term arrangement beyond the ordinary limit — for example, where an employee is hired for a particular project or to temporarily replace another employee who is on leave.
Where such an exception applies, the employee will not be automatically deemed a permanent employee even if the period of employment exceeds two years, and the agreed contract term will remain valid.
Renewal Is Not Guaranteed (In Principle)
As a general rule, when a fixed-term employment contract expires, the employment relationship automatically terminates without any further action required by the employer. Whether or not to renew the contract is entirely at the employer’s discretion, and a refusal to renew does not constitute a legal violation.
When Renewal Becomes a Protected Right
Courts have developed the principle that, where an employee is found to have a legitimate expectation of contract renewal based on the overall circumstances, the employer must have reasonable cause to refuse renewal. A refusal to renew without such reasonable cause may be deemed invalid, in a manner similar to an unfair dismissal.
Whether such an expectation exists is determined through a comprehensive assessment of the employment relationship and workplace practices, including whether the employee’s duties are ongoing in nature and whether there has been a consistent practice of renewal.
Employers Need a Reasonable Cause
If an employee is recognized as having a right to a legitimate expectation of renewal, the employer must have a “reasonable cause” to refuse renewal. Although the standard for renewal decisions is less strict than the “justifiable cause” required for dismissal, any refusal to renew must still be objective, reasonable, and fair under general societal standards.
Prohibition of Discrimination
An employer must not treat a fixed-term employee less favorably than a regular employee engaged in the same or similar work on the ground that the employee is employed on a fixed-term basis. For further details, see our article here.
Frequently Asked Questions
Can a fixed-term employee work for more than two years in Korea?
Yes. However, if a fixed-term employee continues to work for more than two years, the employee will generally be deemed employed under a contract with no fixed term, unless a statutory exception applies.
Can an employer choose not to renew a fixed-term contract when it expires?
In principle, yes. However, if the employee has a legally protected expectation of renewal, the employer must have reasonable cause for non-renewal.
Does repeated renewal automatically make an employee permanent?
Not necessarily. However, the total period of continuous fixed-term employment generally counts toward the two-year limit, and repeated renewals may also be relevant in determining whether the employee has a legitimate expectation of renewal.
Employer Takeaways
Employers should carefully manage the two-year threshold and ensure that fixed-term employees are not placed in circumstances that could give rise to a legally protected expectation of contract renewal. Where repeated renewals are unavoidable, clear and objective criteria should be established and applied consistently to minimize legal risk.
For assistance with managing fixed-term employment arrangements in compliance with Korean labor law, please contact us.
The 2-Year Rule and Limits on Non-Renewal
A fixed-term employee is one who is engaged on a fixed-term contract of employment. Regardless of the reason for setting the term, the number of working hours, or how the contract is titled, any employee employed under a contract with a fixed duration is regarded as a fixed-term employee.
Under the Act on Protection of Fixed-term and Part-time Employees (“Fixed-term Act”), an employer may, in principle, employ a fixed-term employee only for a period not exceeding 2 years. If a fixed-term employee works for more than two years, the employee is automatically deemed to be employed under a contract with no fixed term (commonly referred to as permanent employment).
The two-year period includes not just continuous service under a single contract, but the total time worked under renewed fixed-term contracts.
The Fixed-term Act provides certain statutory exceptions to the two-year limitation on the use of fixed-term employees. These exceptions generally apply where the nature or purpose of the employment justifies the use of a fixed-term arrangement beyond the ordinary limit — for example, where an employee is hired for a particular project or to temporarily replace another employee who is on leave.
Where such an exception applies, the employee will not be automatically deemed a permanent employee even if the period of employment exceeds two years, and the agreed contract term will remain valid.
As a general rule, when a fixed-term employment contract expires, the employment relationship automatically terminates without any further action required by the employer. Whether or not to renew the contract is entirely at the employer’s discretion, and a refusal to renew does not constitute a legal violation.
Courts have developed the principle that, where an employee is found to have a legitimate expectation of contract renewal based on the overall circumstances, the employer must have reasonable cause to refuse renewal. A refusal to renew without such reasonable cause may be deemed invalid, in a manner similar to an unfair dismissal.
Whether such an expectation exists is determined through a comprehensive assessment of the employment relationship and workplace practices, including whether the employee’s duties are ongoing in nature and whether there has been a consistent practice of renewal.
If an employee is recognized as having a right to a legitimate expectation of renewal, the employer must have a “reasonable cause” to refuse renewal. Although the standard for renewal decisions is less strict than the “justifiable cause” required for dismissal, any refusal to renew must still be objective, reasonable, and fair under general societal standards.
An employer must not treat a fixed-term employee less favorably than a regular employee engaged in the same or similar work on the ground that the employee is employed on a fixed-term basis. For further details, see our article here.
Can a fixed-term employee work for more than two years in Korea?
Yes. However, if a fixed-term employee continues to work for more than two years, the employee will generally be deemed employed under a contract with no fixed term, unless a statutory exception applies.
Can an employer choose not to renew a fixed-term contract when it expires?
In principle, yes. However, if the employee has a legally protected expectation of renewal, the employer must have reasonable cause for non-renewal.
Does repeated renewal automatically make an employee permanent?
Not necessarily. However, the total period of continuous fixed-term employment generally counts toward the two-year limit, and repeated renewals may also be relevant in determining whether the employee has a legitimate expectation of renewal.
Employers should carefully manage the two-year threshold and ensure that fixed-term employees are not placed in circumstances that could give rise to a legally protected expectation of contract renewal. Where repeated renewals are unavoidable, clear and objective criteria should be established and applied consistently to minimize legal risk.
For assistance with managing fixed-term employment arrangements in compliance with Korean labor law, please contact us.
