"The government will address risks in job markets through an extra budget for jobs and more job sharing programmes," the prime minister's office said in a statement, following the decision reached at a special high-level meeting on the economic crisis.
The money will come from a supplementary budget of about 30 trillion won ($22bn) the government is expected to put before parliament next week.
Of the total, 4.9 trillion won ($3.48bn) will be used on support measures to pror up the job market including creating temporary jobs.
The budget for claims arising from job cuts will also be expanded by 1.6 trillion won ($1.15bn) in response to soaring unemployment.
According to the government the unemployment rate in February rose to 3.9 per cent, the highest in almost four years.
The South Korean finance ministry has forecast the export-reliant economy will shed an average of 200,000 jobs each month from year-earlier levels.
The country's export-driven economy is teetering on the edge of its first recession since 1998, with demand for cars and consumer goods plunging sharply.