How it’s calculated
Korean law requires at least 30 days of average wages for each year of continuous service (Employee Retirement Benefit Security Act, Art. 8(1)). The average wage is the total wages paid in the 3 months before your leaving date divided by the number of days in that period (Labor Standards Act, Art. 2(1)6). The Ministry of Employment and Labor adds 3/12 of the bonuses and annual leave pay you received in the last year.
Severance pay = average daily wage × 30 × (days of service ÷ 365)
Example (the ministry’s worked example)
| Item | Value |
|---|---|
| Start → leaving date | Oct 2, 2014 → Sep 16, 2017 |
| Days of service | 1,080 |
| Last 3 months (Jun 16 – Sep 15, 2017) | 92 days · wages ₩7,080,000 |
| Bonus ₩4,000,000 × 3/12 | ₩1,000,000 |
| Leave pay ₩300,000 × 3/12 | ₩75,000 |
| Average daily wage | ₩88,641.30 |
| Severance pay | ₩7,868,434 |
The leaving date is the day after your last workday, and the 3 months are the ones right before it (92 days here).
Who qualifies
- One year or more of continuous service (Art. 4(1))
- 15 or more contract hours a week, averaged over 4 weeks (same article)
- It applies to workplaces of every size, including those with 4 or fewer employees (Art. 3; businesses employing only relatives who live together and domestic workers are excluded).
- Permanent, fixed-term and part-time workers, Korean or foreign, all qualify if they meet the conditions.
Good to know
- If your average daily wage is lower than your ordinary daily wage, the ordinary wage is used (Labor Standards Act, Art. 2(2)).
- Severance must be paid within 14 days of leaving, unless both sides agree to a later date for special reasons. It is generally paid into your Individual Retirement Pension (IRP) account, with exceptions such as leaving after age 55 (Art. 9).
- The result is before tax; retirement income tax is withheld when it is paid.
- With a defined-contribution (DC) pension, you receive the contributions and their investment returns instead, so the amount can differ.
- Key terms: 퇴직금 (toejikgeum, severance pay), 평균임금 (average wage), 재직일수 (days of service).
What about the U.S.?
According to the U.S. Department of Labor, there is no requirement in the federal Fair Labor Standards Act for severance pay. You receive it only if your employment contract or company policy provides it.
FAQ
Do I get severance if I worked a few days short of a year?
No. Under one year of continuous service there is no statutory severance pay, unless your company rules give it.
What date do I enter as the leaving date?
The day after your last workday. If you worked until October 31, enter November 1.
Why add bonuses and leave pay?
They count as wages for the average wage. Only 3 months’ share (3/12) of what you received in the last year is added.
Do foreign workers get severance pay?
Yes. If you worked 15+ hours a week on average for a year or more, you qualify regardless of nationality.
Sources
- Employee Retirement Benefit Security Act (Korean Law Information Center)
- Labor Standards Act, Art. 2 (average wage)
- Ministry of Employment and Labor — Severance pay calculator
- U.S. Department of Labor — Severance pay