Korea Severance Pay Calculator
In Korea, severance pay (toejikgeum) is a statutory benefit, not a negotiated perk: anyone with at least one year of continuous service who averages 15 or more hours of work per week is entitled to it when they leave. The Employee Retirement Benefit Security Act sets the floor at 30 days' worth of the average wage for every year of continuous service, and that floor applies to foreign employees on E-7, E-2, F-series and other work-eligible visas exactly as it does to Korean nationals. The calculation does not start from your monthly salary — it starts from the average daily wage, which is the total pay actually received in the three months before your last day divided by the calendar days in that period. That is why two people on the same annual package can end up with different payouts depending on how bonuses, unused annual leave, and overtime were paid out.
Key points
- Eligibility: one year or more of continuous service, averaging at least 15 hours per week. Contract, part-time, and foreign workers are covered, and workplace size does not matter.
- Formula: average daily wage × 30 days × (days of service ÷ 365). The average daily wage is the three-month wage total divided by the calendar days in that period.
- Deadline: payment is due within 14 days of your last day. Without a mutual agreement to extend, late payment accrues 20% annual interest and can be filed as wage arrears.
Examples
₩3,000,000 per month, exactly 3 years
Started 4 January 2021, last day 4 January 2024 — 1,095 days of service. Step 1: the three-month wage total is ₩3,000,000 × 3 = ₩9,000,000. Step 2: the average daily wage is ₩9,000,000 ÷ 91.25 days ≈ ₩98,630. Step 3: severance is ₩98,630 × 30 × (1,095 ÷ 365) ≈ ₩8,876,712. With no bonus or leave pay in the mix, the result lands close to the rule of thumb of "one month's salary per year of service" (₩9,000,000), but note that dividing by 91.25 days and multiplying back by 30 produces about ₩2,958,904 per year — slightly less than a full month's salary.
Five years with a bonus and unused leave pay, ₩3,200,000 per month
Started 1 July 2019, last day 30 June 2024 — 1,826 days of service — earning ₩3,200,000 per month plus a ₩6,400,000 regular annual bonus and ₩960,000 in pay for unused annual leave from the previous year. Step 1: salary ₩3,200,000 × 3 = ₩9,600,000. Step 2: bonus share ₩6,400,000 × 3/12 = ₩1,600,000. Step 3: leave pay share ₩960,000 × 3/12 = ₩240,000. Step 4: total ₩11,440,000 ÷ 91.25 days ≈ ₩125,370 average daily wage. Step 5: ₩125,370 × 30 × (1,826 ÷ 365) ≈ ₩18,815,784. Running the same case on salary alone gives ₩15,789,469, so the 3/12 inclusion rule alone is worth about ₩3.03 million. If your payslip shows a bonus or leave-pay line, enter it.
Leaving a few days short of one year, ₩2,500,000 per month
Someone who started on 11 March 2024 and leaves on 10 March 2025 has 364 days of service — short of the one-year threshold, so no statutory severance accrues at all. Leaving two days later, on 12 March 2025, gives 366 days and clears the threshold: Step 1: ₩7,500,000 ÷ 91.25 days ≈ ₩82,192 average daily wage. Step 2: ₩82,192 × 30 × (366 ÷ 365) ≈ ₩2,472,509. A two-day difference is worth over ₩2.4 million here. Continuous service counts the calendar period from your start date to your last day, not the days you actually worked, and a probation or internship period is generally included when the employment relationship continued without a break.
What counts toward the average wage
| Item | Included? | How it is counted |
|---|---|---|
| Base salary | Yes | Full amount actually paid over the final three months |
| Regular annual bonus | Yes | Annual amount × 3/12 |
| Pay for unused annual leave | Yes | Previous year's entitlement × 3/12 |
| Fixed meal and commuting allowances | Yes | Full three-month amount if paid regularly and uniformly |
| Overtime, night, and holiday premiums | Yes | Amounts actually paid during the three months |
| Congratulatory and condolence money | No | Treated as a gratuity rather than wages |
| Irregular performance bonuses (e.g. company profit share) | Generally no | May count if the obligation and rate are fixed in advance |
| Welfare benefits (tuition support, resort subsidies, etc.) | Case by case | May count if paid regularly and uniformly to all employees |
Based on the definition of average wage in Article 2 of the Labor Standards Act. Individual cases vary — consulting a labor attorney (nomusa) is recommended.
FAQ
I am leaving before one year. Do I get nothing?
Statutory severance under the Employee Retirement Benefit Security Act accrues only from one year of continuous service, so eleven months of work generally creates no statutory claim. That said, if your employment contract or the company's rules of employment promise a pro-rated payment below one year, those terms apply and are worth checking. If your employer runs a DC retirement pension plan and has already deposited contributions, the treatment can differ, so ask to see the pension rules. Separately from severance, unpaid wages, overtime, and pay for unused annual leave can be claimed regardless of how long you worked.
Which applies — the average wage or the ordinary wage?
The average wage is the default. However, Article 2(2) of the Labor Standards Act provides that if the calculated average wage falls below the ordinary wage, the ordinary wage is treated as the average wage instead, so in practice the two are compared on a per-day basis and the higher figure is used. Because the average wage depends entirely on what was actually paid in your final three months, unpaid leave, absences, or a quiet stretch with little overtime can pull it down — and a bonus paid in that window can push it well above the ordinary wage. If your employer calculated on the ordinary wage only, compare it against the average-wage figure and, if the gap is meaningful, ask for a recalculation with your payslips as evidence.
What is the difference between DB, DC, and IRP plans?
Under a DB (defined benefit) plan the payout is fixed in advance as 30 days' average wage per year of service, and the employer bears the investment risk — this is the structure closest to what the calculator shows. Under a DC (defined contribution) plan the employer deposits at least 1/12 of your annual wages into your account each year and you direct the investments, so gains and losses are yours and the final amount will differ from the estimate here. As a general rule of thumb, DB tends to favour employees at companies with strong annual raises, while DC can work out better when investment returns outpace wage growth — but it depends on your situation. IRP (Individual Retirement Pension) is less a plan than an account: if you leave before age 55, your retirement benefit is generally transferred into an IRP rather than paid as cash, with exceptions for small balances. Foreign employees leaving Korea permanently can usually apply to close the IRP and receive a lump sum, and it is worth arranging this before your departure date.
How much retirement income tax will be withheld?
Retirement income tax is calculated differently from ordinary income tax, so there is no single rate to quote. Broadly, the steps are: (1) subtract the years-of-service deduction from the gross severance; (2) divide by years of service and multiply by 12 to get the "converted" annual amount; (3) subtract the converted-amount deduction and apply the basic income tax brackets; (4) multiply back by years of service and divide by 12. The years-of-service deduction, as revised in 2023, is ₩1,000,000 × years for up to 5 years; ₩5,000,000 + ₩2,000,000 × (years − 5) for 6–10 years; ₩15,000,000 + ₩2,500,000 × (years − 10) for 11–20 years; and ₩40,000,000 + ₩3,000,000 × (years − 20) beyond 20 years. This structure means longer service produces a lower effective rate, and taking the money as a pension from an IRP rather than as a lump sum reduces the tax to roughly 60–70% of the lump-sum amount. Because individual circumstances vary, confirm the exact figure through the National Tax Service (Hometax) or the withholding receipt your employer issues.
It has been more than 14 days and I have not been paid. What now?
Article 36 of the Labor Standards Act requires all outstanding money, severance included, to be settled within 14 days of departure, extendable only by agreement between the parties. Without such an agreement, Article 37 adds 20% annual interest from the day after the deadline until payment. Start by requesting payment in a form that leaves a record — a text message, an email, or a certified letter (naeyong jeungmyeong). If that fails, file a wage-arrears complaint through the Ministry of Employment and Labor's online labor portal or at the regional labor office with jurisdiction over the workplace; a labor inspector will investigate and issue a corrective order. Many cases settle at that stage. If the employer still refuses, the case can proceed criminally while you pursue a civil claim, and the Korea Legal Aid Corporation offers free assistance. Note that the claim generally expires after three years, so do not let it drift. Interpretation support is available on the labor counselling line (1350).
What if parental leave or sick leave falls within the final three months?
Article 2 of the Enforcement Decree of the Labor Standards Act excludes several periods from the averaging window precisely so that they cannot depress your average wage: probation, business suspension attributable to the employer, maternity leave, medical treatment for a work-related injury or illness, parental leave, lawful industrial action, and military service, among others. Both the period and the wages paid during it are removed, and the average wage is computed from what remains — so returning from parental leave shortly before resigning does not normally collapse the figure. Personal sick leave taken with the employer's approval is also on the exclusion list, whereas unapproved absence is not and can drag the average down. Even then, if the average wage ends up below the ordinary wage, the ordinary wage governs. For complicated cases, bring your payslips to a labor attorney or the Ministry's counselling service.
How Korea's retirement benefit system is structured
Retirement benefits in Korea come in two forms. The older one is the lump-sum severance payment made by the employer when you leave. The newer one is the retirement pension, where money is set aside with a financial institution during your employment and paid out later. Employers must adopt at least one of the two, and whichever they choose, the payout cannot fall below the statutory floor of 30 days' average wage per year of continuous service. The figure this calculator produces is that statutory floor.
Coverage is broad. Even a workplace with a single employee is subject to the rule, and fixed-term, part-time, and foreign workers qualify as long as they meet the one-year and 15-hour tests. Where short contracts are renewed repeatedly without a real break, the periods are generally added together when assessing continuous service. Conversely, someone hired on a freelance contract may still be treated as an employee if the substance of the relationship — fixed hours, supervision, direction over how the work is done — looks like employment. Businesses employing only cohabiting relatives and domestic workers fall outside the scheme.
Taking severance early, known as interim settlement, is prohibited as a general rule. It is permitted only for the reasons listed in the legislation, such as buying a home as a first-time homeowner, funding six months or more of medical care for yourself or a dependant, personal bankruptcy, or the introduction of a wage-peak system. Arrangements that simply fold a severance component into each month's pay are frequently held invalid, which can leave the employee able to claim severance again on departure — though the money already received is usually accounted for. If you are in this situation, get individual advice before acting.
What "the final three months" actually means
The three-month window is a calendar period ending on your last day, not simply your last three payslips. Depending on which months it covers, the window runs from 89 to 92 days, and the wage total is whatever was actually paid within it. Someone leaving on 31 December is measured over 1 October to 31 December, or 92 days; someone leaving on 31 March is measured over 90 days (91 in a leap year). This is why two people on identical salaries can see slightly different average daily wages purely because of when they resigned.
For simplicity, this calculator treats the three-month wage total as monthly salary × 3 and approximates the period as 91.25 days, one quarter of a year. Expect the result to sit within roughly one or two percent of a formal calculation. If your pay varies month to month, or overtime piled up just before you left, work it out precisely by laying out three payslips and substituting the real totals and the real number of calendar days. One detail people frequently miss: bonuses and unused-leave pay enter the calculation as 3/12 of the annual figure, not as three months' worth.
Several exceptions exist, and they all serve the same purpose — preventing a temporary distortion from shrinking your entitlement. First, if the calculated average wage is lower than the ordinary wage, the ordinary wage is used. Second, parental leave, maternity leave, treatment for work-related injury and similar periods are stripped out of the window before averaging. Third, if the triggering event occurs before you have completed three months of employment, the calculation uses the period you actually worked. Read together, these rules mean a bad final quarter should not, by itself, cost you money.
What to do when severance is not paid
Gather evidence first. The core documents are your employment contract, payslips for the final three months, bank statements showing salary deposits, any attendance records, and proof of your employment period such as a certificate of employment or your four-major-insurance enrolment history. Then request payment in writing — a message, an email, or a certified letter — so that the demand, the amount, and the date are on the record. Doing this properly makes every later step easier.
If payment still does not arrive, file a wage-arrears complaint online through the Ministry of Employment and Labor's labor portal, or in person at the regional labor office covering your workplace. A labor inspector will summon both sides, investigate, and issue a corrective order where arrears are confirmed. A large share of cases resolve at this point. If the employer holds out, the matter can be referred for criminal prosecution while you separately bring a civil claim to obtain an enforceable judgment. The Korea Legal Aid Corporation provides free legal support, including representation for workers below certain income thresholds, and interpretation assistance is available for foreign workers.
Where the employer has gone bankrupt or effectively shut down, the state can step in through the substitute payment (daejigeupgeum) scheme, administered by the Korea Workers' Compensation and Welfare Service. The bankruptcy version applies where a court has issued a bankruptcy or rehabilitation decision or the Ministry has recognised de facto insolvency; a simplified version is available where arrears are confirmed even though the business is still operating. Both carry caps, filing deadlines, and eligibility conditions, so obtain the official confirmation of unpaid wages and then check which route fits your case. Keep in mind that the severance claim generally expires three years after it arises — and if you are leaving Korea, settle severance, IRP, and your National Pension lump-sum refund before you depart.
Sources
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