Severance pay in Korea — who gets it, how much, and when it must be paid

Severance pay (퇴직금) is not a bonus and not a company policy. It is a statutory debt the employer owes you, and the Act that creates it contains no nationality requirement anywhere.

Short answer

Do you qualify?     continuous service 1 year or more
                    AND 15+ contractual hours a week, averaged over 4 weeks

How much?           30 days of AVERAGE WAGE per year of service, at minimum

When?               within 14 DAYS of the reason arising

Leaving Korea?      you can be paid directly — no IRP account needed

Who qualifies

Employee Retirement Benefit Security Act, Article 4(1):

An employer shall establish at least one retirement benefit scheme in order to pay benefits to retiring employees. Provided, that this shall not apply to an employee whose period of continuous service is less than one year, or an employee whose contractual work hours average less than 15 hours a week over four weeks.

Two thresholds, and only two. Article 2(1) defines "employee" by reference to the Labor Standards Act — so the test is whether you are an employee, not what passport you hold or which visa you are on.

Note what is not in the list: no requirement to be full-time, no requirement to have a written contract, no requirement that the employer registered you anywhere.

How much

Article 8(1):

An employer intending to establish a severance pay scheme shall establish a scheme capable of paying a retiring employee, as severance pay, not less than 30 days' average wage for each year of continuous service.

The words "not less than" matter. A company can pay more; it cannot pay less, whatever the contract or the work rules say.

Average wage is a calendar-day figure

Labor Standards Act, Article 2(1)6:

"Average wage" means the amount calculated by dividing the total wages paid to the employee during the three months preceding the day on which the cause for calculation occurred by the total number of days in that period.

The divisor is total days on the calendar, not days worked. People who work six days a week often expect a higher figure than they get, because Sundays are in the denominator too.

Total wages over the last 3 months  ÷  total calendar days in those 3 months
   = average daily wage
   × 30  × years of service   = severance pay

"Total wages" is total — bonuses and allowances that count as wages belong in it, not just base pay.

The floor that protects you

Labor Standards Act, Article 2(2):

If the amount so calculated is less than the employee's ordinary wage, the ordinary wage shall be the average wage.

This exists for exactly one situation: your hours were cut in your last months, so the three-month average dropped. The law refuses to let that shrink your severance. If your final months were unusually quiet, check this clause.

When it must be paid

Article 9(1) and Labor Standards Act Article 36 both give the same deadline: within 14 days of the cause arising. The parties can agree to extend it where there are special circumstances — an agreement, not an employer's decision.

Labor Standards Act Article 37(1) adds delay interest, at a rate set by Presidential Decree of up to 40% per annum, running from the day after the deadline until payment. We have not verified the exact rate in the Decree, so we do not print a number here — ask the Ministry of Employment and Labour on 1350.

Two things that matter specifically to foreigners

1. You do not need an IRP account if you are leaving Korea

Since 2021, Article 9(2) has required severance to be transferred into an Individual Retirement Pension (IRP) account the employee designates. Opening one is awkward if you are about to fly home and close your Korean bank account.

Enforcement Decree Article 3-2(1)4 (added 13 April 2022) removes the requirement for:

an employee who provided labour in Korea under a status of stay permitting employment activities under Article 23(1) of the Enforcement Decree of the Immigration Act, and who has departed Korea after retirement

The statuses in that list are C-4, E-1 through E-10, and H-2. If that is you and you are leaving, the money can be paid to you directly.

The Decree's other exceptions: retiring at 55 or older, an amount at or below the threshold published by the Minister of Employment and Labour, the death of the employee, and deductions required by other statutes.

2. Departure guarantee insurance is not the same thing

E-9 and H-2 workers have a separate departure guarantee insurance (출국만기보험) under the Act on the Employment of Foreign Workers. The structure is that where the insurance payout is less than the severance pay owed under this Act, the employer covers the difference.

We have not read the provision in the Foreign Workers Employment Act that creates that top-up duty, so we do not cite it. What we can say from this Act is that Article 8(1) sets a floor of 30 days' average wage per year, and an insurance product does not lower it. If your payout looks smaller than the formula above, that gap is the thing to ask about — call 1350.

Interim settlement resets your clock

Article 8(2) with Enforcement Decree Article 3 allows early settlement for prescribed reasons — buying a home is the familiar one. The confirmed reasons we read include a wage peak system, a reduction of contractual hours by at least 1 hour a day or 5 hours a week continuing for three months or more, a reduction in severance caused by shorter hours, and disaster damage designated by the Ministry.

The consequence is in the same paragraph: after an interim settlement, continuous service is counted afresh from the settlement date. Employers must keep the supporting documents until five years after the employee leaves.

Frequently asked questions

I worked 11 months. Do I get anything? Not under Article 4(1) — one year of continuous service is the threshold. Check the actual start and end dates carefully before accepting that answer, including any probation period, which normally counts.

I am part-time. Does that disqualify me? Only if your contractual hours average under 15 a week across four weeks. Part-time work above that line qualifies exactly like full-time work.

My employer says foreigners are not entitled to severance. There is no nationality condition in the Act. Article 2(1) defines an employee by reference to the Labor Standards Act and stops there.

They paid late. Is that just how it goes? No. The 14-day deadline is statutory, and Article 37 attaches delay interest to missing it. Report it to the Ministry of Employment and Labour on 1350.

Sources

Employee Retirement Benefit Security Act (근로자퇴직급여 보장법)
   Art. 2 (definitions) · Art. 4 (duty to establish a scheme)
   Art. 8 (severance pay, interim settlement) · Art. 9 (payment, 14 days, IRP)
   Arts. 44-46 (penalties)
   https://www.law.go.kr/법령/근로자퇴직급여 보장법

Enforcement Decree — Art. 3 (interim settlement grounds)
   Art. 3-2 (exceptions to IRP transfer, incl. departure after retirement)

Labor Standards Act (근로기준법)
   Art. 2(1)6 (average wage) · Art. 2(2) (ordinary wage floor)
   Art. 36 (settlement of wages) · Art. 37 (delay interest)
   https://www.law.go.kr/법령/근로기준법

Ministry of Employment and Labour: 1350 (foreign-language counselling)