Severance Pay in Korea

Category : Career/Business / Visa/Legal Issues/Tax
Nov 28, 2014

Severance pay seems like a pretty great deal. You work for 12 months and then you get paid for an extra month of work. That’s awesome. Foreigners discuss reasons to take a job in Korea and severance pay is often a big draw. It’s nice to go back home with an extra wad of cash in your hand.

 

But did you know severance pay is not a perk? It’s a requirement! That’s right folks. Your job isn’t being ‘kind’ or ‘generous’ by throwing in that few million won at the end. They have to pay you an extra month’s salary when you complete your contract as stipulated by Korean law (under article 34 of the Labor Standard Act of Korea). If you haven’t been receiving severance pay after completing your contract, you should be. So, from now on, request it in your contract and come to the negotiating table armed with information.

 

How much is Severance Pay?

 

 Severance pay = consecutive years employed x average wage of 30 days

 

  1. Equivalent to 30 days of pay (not less a day) after completing one full year (12 months of work).
    • The 30 days of pay is calculated as an average of the last 3 months of pay.
  2. If you work more than one year, then you should be paid severance pay for each consecutive year working at the same company. It is calculated at the end of your final contract and paid in one lump-sum.
  3. The amount should be paid within 2 weeks of termination of your contract.
  4. In Korea, bonus pay (additional pay for things like overtime, and professional achievements) is not added to your regular monthly pay, but rather, it is included in the severance pay you receive at the end of your contract. Bonus pay is calculated by dividing the total bonus pay amount due for 1 year by 12 (for months in a year). That amount (1 month of bonus pay) is then added to the amount of severance pay owed for 1 year. That total (severance pay and bonus pay) is then multiplied by the number of years you worked at the company (see example below).

 

Example A: Severance Pay after 1 year worked

You worked for 1 full year at 2,300,000KRW per month. The pay was the same during the last 3 months of your contract.

Average pay for 30 days =2,300,000 x 3

  1.  

                                =2,300,000

Severance pay    = years employed x average wage of 30 days

=1 x 2,300,000

  •  

 

à Therefore, at the end of your contract you will be paid an additional 2,300,000KRW as severance pay on top of your last month of pay.

 

Example B: Severance Pay-multiple years with a salary raise

You worked for 4 consecutive years at the same company. You started at 2,000,000KRW per month, but by the end of your fourth year you made 2,500,000KRW per month. In the last 3 months at the company you made 2,500,000KRW per month. Your average 30 days’ pay is based on the last 3 months at the company, so it’s 2,500,000KRW.

Average pay for 30 days =2,500,000 x 3

  1.  

                                =2,500,000

Severance pay    = years employed x average wage of 30 days

                     = 4 x 2,500,000

                     =10,000,000

 

à Therefore, at the end of your contract, you will be paid an additional 10,000,000KRW as severance pay on top of your last month’s pay.

 

Example C: Severance Pay including Bonus Pay

You worked at the same company for 5 consecutive years. Your monthly salary was 3,000,000KRW during your last 3 months at the company. During your last year at the company you were entitled to 2,000,000KRW in bonus pay for overtime hours worked.

Average pay for 30 days =3,000,000 x 3

  1.  

                                =3,000,000

Bonus Pay for 1 month  =2,000,000/12

                                =166,667

Severance Pay for 1 year =3,000,000 + 166,667

                                =3,166,667

Total Severance Pay       =years employed x (average wage for 30 days + bonus pay)

                                =5 x 3,166,667

                                =15,833,335

 

à Therefore, at the end of your contract you will be paid an additional 15,833,335KRW as severance pay (including bonus pay) on top of your last month’s pay.

 

Who is Eligible for Severance Pay?

  • Any employed person, Korean and foreign alike, who has worked for the duration of his/her 1 year contract.
  • The employee must complete a 1 year contract.
  • The employee must be employed full-time (more than 15 hours/week or 60 hours/month).

 

à Did you know?

  1. In Korea, severance pay is also termed ‘retirement pay’ or Twejiggeum /퇴직금. For Koreans, severance pay is often their retirement pay because they have been working at a company for so long. When they leave their company, they are retiring. In the case of foreigners who often only stay in Korea for a few years, they receive severance pay, but it is the same thing calculated in the same way.
  2. To be eligible, you must complete a full 1 year contract. If you then complete only part of the next year (at the same company), you are still entitled to severance pay for those months worked beyond 1 year. Your severance pay in that case is then prorated based on a 1 year calendar, 365 days.
  3. For example: If you work for 1 year and 7 months, you will be paid severance pay for 1 year and 7 months. If you work at a company for 6 years and 3 months, you will be paid severance pay for 6 years and 3 months.
  4. Article 6 of the Labor Standard Act of Korea stipulates that all employees regardless of sex, nationality, religion or social status should not be discriminated against by their employer. Therefore all employees are eligible for severance pay.
  5. Article 22 of the Labor Standard Act of Korea stipulates that a foreign worker cannot be discriminated against even if that employee violates immigration law. In other words, even if you are working in Korea illegally, you are entitled to severance pay.

 

The Ministry of Labor

The Ministry of Labor is in charge of labor laws and can help foreigners who have problems with their employers. The Ministry of Labor will follow and apply the Labor Standard Act of Korea which is explicit in outlining the labor laws of Korea. The Ministry of Labor offers services for foreigners working in Korea. Do not hesitate to call if you have a problem at your workplace or if you need to clarify your rights.

 

  1. The Ministry of Labor Official Website

 

National Labor Consultation Center

Phone counseling service is available from Monday to Friday, from 9:00 to 18:00.

  1. Overseas Phone: +82-31-345-5200
  2. Domestic Phone:  031-345-5200
  3. Website counseling forum

 

International Cooperation Bureau

This is the Ministry of Labor office that deals with policies and the Labor Acts.

  1. Phone: +82-2-2110-7436 or +82-2-2110-7445
  2. Email: molab506@moel.go.kr

 

Foreign Workforce Policy Division

This part of the ministry deals mainly with non-professional foreign workers (migrant workers and laborers)

  1. Phone: +82-2-2110-7198

 

Tags : Severance. Contract. Employment.

Lindsey lived and worked in Seoul, South Korea for over 5 years. While there, she dabbled in different areas of work and explored the culture. She spent time teaching elementary students, business English to adults and high school students about college preparation. She also studied Korean, wrote blogs and tasted as many foods as she possibly could including fermented skate fish. Over the years, Lindsey developed a love for Korea and the culture. She is keen to share her knowledge of Korea with others and she will always consider Korea a second home.

Your first-hand experiences really help

The overall rating of this trip

Title
Your review

Sharing with friends

I certify that this review is based on my own experience and is my genuine opinion of this hotel, and that I have no personal or business relationship with this establishment, and have not been offered any incentive or payment originating from the establishment to write this review. I understand that TripAdvisor has a zero-tolerance policy on fake reviews.

0 reviews from our community Write a Review

theworknplay

COPYRIGHT 2003-2015 WorknPlay Inc. ALL RIGHTS RESERVED