Severance Pay Basics

Workers with one year or more of continuous service averaging 15+ hours per week are entitled to severance, regardless of employment type (regular, contract, part-time) and including workplaces with fewer than five employees.

Employers must pay severance within 14 days of the departure date (extendable by mutual agreement). Late payment accrues 20%/yr interest, and unpaid severance can be reported to the Ministry of Employment and Labor. Retirement-pension (DC/DB) workplaces transfer the amount to an IRP account.

Statutory severance = daily average wage × 30 days × (days served ÷ 365), where the daily wage is the last 3 months’ total pay (incl. 3/12 of annual bonuses) divided by the days in that period.

Example: at 3M KRW/mo for 10 years, the daily wage is ≈ 98,630 KRW and severance ≈ 29,589,041 KRW pre-tax.

Because the last three months set the base, unpaid leave or pay cuts right before leaving reduce severance, while bonuses and overtime raise it. If the average wage falls below ordinary wage, ordinary wage applies. Consult a labor attorney for disputes.

For the same monthly average wage, shorter service simply means less severance. At 4M KRW/mo with 5 years of service, statutory severance is about 19,726,027 KRW pre-tax — compared with the 3M KRW/mo, 10-year example above (≈29,589,041 KRW), showing that years of service move the total more than the pay level does. The gap widens further at longer tenures, so when weighing a job change, factor in the severance reset alongside any pay increase.

If your employer runs a retirement pension plan, DB (defined benefit) guarantees the same service × average-wage formula above, managed by the employer, while DC (defined contribution) has the employer deposit a set share of pay into your own account each year, with the final amount depending on investment performance. Interim settlement is prohibited in principle, with exceptions only for statutory reasons such as buying a first home, a jeonse deposit, long-term medical care, or personal rehabilitation/bankruptcy. An interim settlement or DC early withdrawal also resets the service-year count used for retirement income tax, so confirm the details with HR or a tax accountant.

At departure, several items are settled alongside severance. Unused annual leave is paid out at the ordinary wage rate for each remaining day, and pro-rated pay for days worked in the final month is also due. That month’s four-insurance adjustments are often processed with the next payroll cycle or separately, so the total landing in your account is usually more than severance alone would suggest. Since several items settle at once, it helps to check the final payslip line by line — severance, leave payout and pro-rated pay — rather than assuming one number covers everything.