Severance pay (퇴직금)
Anyone employed in Korea for a year or more is owed severance. This uses the statutory method: average daily wage over the last three months, times 30 days per year of service.
How it works
Severance = average daily wage × 30 × (days of service ÷ 365). The average daily wage is total pay over the three months before leaving, divided by the days in that period (about 92).
Bonuses and annual-leave pay received over the previous year are added at 3/12 of their annual amount, exactly as the law prescribes.
If your average wage is lower than your ordinary wage (for example after unpaid leave), the law uses the ordinary wage instead, so your real figure may be higher.
Assumptions
- Three-month period counted as 92 days
- Under one year of service returns zero (statutory rule)
- Retirement income tax and DC-plan investment returns not included
FAQ
When must severance be paid?
Within 14 days of leaving, unless both parties agree to extend.
Does this apply to foreign workers?
Yes. Any employee with a year or more of service is covered regardless of nationality, including E-9 and E-7 visa holders.
Is severance taxed?
It is taxed as retirement income under a separate, much lower schedule than regular salary.