Hagwon monthly deductions: what actually disappears before the money hits your account
Korean hagwons withhold four things every month—income tax, pension, health insurance, and employment insurance. Here's what each costs, what you get back, and the one deduction half of new teachers miscalculate.
Park English · 2026-08-26 · 3 min read
Your contract says 2.3 million won a month. Your first transfer is 1.96 million. Nothing was stolen—you just met the four deductions every E-2 teacher pays, and one of them works differently than you expect.
The four lines that come out every month
| Deduction | Rate | On 2.3m | What it pays for |
|---|---|---|---|
| Income tax | 3–5% sliding | ~80,000₩ | Withheld monthly, settled in February when you file |
| National Pension | 4.5% | 103,500₩ | Half you, half employer. Refundable lump sum when you leave Korea |
| Health insurance | ~3.5% | ~80,000₩ | Covers clinic visits, prescriptions, most procedures |
| Employment insurance | 0.9% | 20,700₩ | Unemployment fund. You won't see this again |
Total monthly hit on a 2.3 million won salary: roughly 285,000 won. Some of that comes back. Some doesn't.
The pension is half-refundable, but only after you leave
National Pension takes 4.5% of your gross pay. Your hagwon matches it, so 9% total goes in. When you finish your contract and leave Korea for good, you file a lump-sum refund claim. You get back what you paid in, minus about 20% withholding tax. The employer's half stays in the system.
On a two-year contract at 2.3 million a month, you pay in roughly 2.5 million won. You'll see about two million of that refunded, six to eight weeks after you file the paperwork from home. The rest is gone.
Income tax gets reconciled once a year
Hagwons withhold 3–5% for income tax depending on your salary bracket. In February, after the calendar year closes, your school files a year-end adjustment. If you worked the full year and had no other Korean income, you usually get 80–150,000 won back. If you started mid-year or left early, the refund is smaller or you owe a little.
Teachers who work at two hagwons in one calendar year—switched jobs, did a summer camp on the side—sometimes owe tax in February because the second employer didn't know about the first. The withholding rate assumes you earned nothing else.
Health insurance is the one you actually use
The 3.5% for health insurance is the best deal in the basket. Walk-in clinic visits cost 5,000–15,000 won after insurance. Prescriptions are subsidised. An MRI that would be $800 in the US runs 80,000 won here. You're covered the month the deduction starts.
No separate card. Your ARC is your health insurance ID.
Employment insurance you will never see again
The 0.9% employment insurance funds Korea's unemployment benefit system. E-2 visa holders are not eligible to claim it, even if you lose your job. It comes out anyway, because the law requires it for all employees. Consider it a exit tax.
The mistake: your housing allowance is taxable
If your contract pays 2.1 million base + 200,000 housing allowance, your taxable income is still 2.3 million. Pension, health, and employment insurance come off the whole amount. Teachers who think "housing allowance" means tax-free get surprised on payday one.
The exception: if your hagwon pays your rent directly to a landlord and gives you no cash allowance, that's not counted as income. But if they hand you 200k and you pay the landlord yourself, it's salary.
What hits your account on the 10th
2,300,000 won gross – 103,500 pension – 80,000 health – 20,700 employment – 80,000 income tax = 2,015,800 won net
First-month pay is sometimes lower because your start date was mid-month, or because the hagwon held back a few days as a buffer. By month two it stabilises.
One thing that varies
Some hagwons pay severance monthly instead of as a lump sum at the end. If yours does, you'll see an extra line on your pay stub: "퇴직연금" (retirement pension), roughly 8.3% of your monthly base. That amount still gets taxed and has pension/health deducted from it, so the net bump is smaller than the 8.3% suggests. When the contract ends, you don't get a separate severance payment—you've already been paid it.
Most schools do lump-sum severance. A few do monthly. Your contract will say which.