Who Is This For? Severance Rights for Foreign Workers in Korea
If you are a foreign national working in Korea, this calculator is for you too. Korean statutory severance pay (toejikgeum) is a legal entitlement, not a perk: any employee who completes one year or more of continuous service, working 15+ hours a week on average, qualifies — regardless of nationality or visa type. It also works quite differently from the severance packages common in the US or Europe. There, severance usually compensates you for being laid off; in Korea it is triggered by leaving the job itself, so you receive it even when you resign voluntarily or your contract simply ends.
- E-9 and H-2 visa workers (Employment Permit System) — instead of accruing severance directly, your employer pays into departure guarantee insurance (chulguk mangi boheom), which pays out when you leave Korea. If the insurance payout is smaller than your statutory severance, your employer must make up the difference. If you later move to the skilled-worker E-7-4 visa, check how your accrued insurance is settled at that point.
- Teachers, professors, and office professionals (E-1, E-2, E-7, F-series visas) — the standard rules in this guide apply to you exactly as they do to Korean employees.
- IRP (Individual Retirement Pension) — severance is normally deposited into an IRP account rather than handed over in cash, so expect to open one before your last day. Foreign workers who depart Korea after their employment ends are a recognized exception and can take a lump-sum payment instead.
Everything below — average-wage pitfalls, bonus rules, DB versus DC pensions, and interim settlement — applies to foreign employees in exactly the same way. And if severance goes unpaid, you can file a complaint with a local Ministry of Employment and Labor office whatever your visa status, just as Korean workers do.
Severance Pay in Depth: Average-Wage Pitfalls, Pension Types, and Interim Settlement
The severance formula itself fits on one line, but real disputes happen outside the formula: which wage applies when your pay dropped right before leaving, how much of a bonus counts when it lands inside the final three months, and why the formula doesn't apply at all to DC-type pension members. This guide covers five issues beyond the standard formula that actually decide the size of your severance.
Average Wage vs Ordinary Wage — the Higher One Always Wins
Severance is based in principle on the average wage (total wages over the last 3 months before resignation ÷ calendar days in that period). But Article 2(2) of the Labor Standards Act stipulates that if the average wage falls below the ordinary wage, the ordinary wage is deemed the average wage. If you had frequent absences right before leaving, took unpaid leave, or lost overtime pay so your paychecks shrank, the average wage can drop below the ordinary wage (based on base pay plus fixed allowances) — and then the ordinary wage automatically serves as the floor. In other words, workers always get severance computed on whichever of the two is higher.
| Item | Average wage | Ordinary wage |
|---|
| Concept | Daily average of wages actually paid in the last 3 months | Amounts paid regularly, uniformly, and fixedly for contracted work |
| What's included | Base pay, allowances, plus 3/12 of annual bonus and leave allowance | Base pay and fixed allowances such as position allowance |
| Main uses | Severance, shutdown allowance, industrial-accident compensation | Overtime/night/holiday premiums, dismissal-notice allowance |
| Role in severance | The default basis | The floor when the average wage is lower |
There is also protection in the opposite direction. If the 3-month calculation window includes parental leave, maternity leave, medical leave for a work-related injury, a lawful strike, or a probation period (within 3 months), that period and the wages paid during it are excluded from the calculation (Enforcement Decree of the Labor Standards Act, Article 2). The rule exists so that a leave of absence cannot drag down your average wage and, with it, your severance. If you took parental leave right before resigning, make sure the basis is the last 3 months of normal work before the leave.
A Bonus in the Final 3 Months? Only 3/12 Counts, Not the Full Amount
The most common misconception goes: "I received a KRW 3,000,000 holiday bonus within my last three months, so the full 3,000,000 goes into the wage total." In fact, regardless of when it was paid, a regular bonus is counted at only 3/12 (three months' worth) of the total received over the year before resignation. Conversely, even if no bonus landed in the final three months, you must still add 3/12 of the annual bonus total. Annual-leave allowance works the same way: 3/12 of the annual total of unused-leave allowance already paid or confirmed before resignation is included. This is exactly why the calculator's inputs are labeled 'total annual bonus' and 'annual leave allowance.'
- Example setup — monthly salary KRW 3,000,000, annual bonus KRW 6,000,000, leave allowance KRW 1,200,000, exactly 3 years of service (1,095 days)
- 3-month wage total = 9,000,000 (3 months' salary) + 1,500,000 (bonus 6,000,000 × 3/12) + 300,000 (leave allowance 1,200,000 × 3/12) = KRW 10,800,000
- Daily average wage = 10,800,000 ÷ 91 days ≈ KRW 118,681
- Severance = 118,681 × 30 × (1,095 ÷ 365) ≈ about KRW 10.68 million
- Leaving out the bonus and leave allowance yields about KRW 8.9 million — missing roughly KRW 1.78 million
One caveat: the bonus here means a bonus scheduled to be paid regularly under work rules or a collective agreement. One-off performance payouts decided case by case based on company results (profit sharing, incentives) sit in contested territory — court rulings on whether they count toward the average wage go both ways — so if the amount is large, consulting a labor attorney is the safe move.
Statutory Severance, DB, and DC — Same Benefit, Different Math
If your company runs a retirement pension, the first thing to check is which plan you are in. A DB (defined benefit) plan fixes the amount exactly like statutory severance — 'average wage at resignation × 30 days × years of service' — and the company bears the investment responsibility. A DC (defined contribution) plan works differently: the company deposits at least 1/12 of your annual total wages into your own account each year, and you invest it yourself, keeping the gains (or losses). For DC members, the average-wage formula simply does not apply.
| Item | Statutory severance / DB | DC |
|---|
| How it's computed | Average wage at resignation × 30 days × years of service | Annual contributions (at least 1/12 of annual wages) + investment returns |
| Who invests / bears risk | The company | The worker |
| Wage increases reflected? | Entire tenure computed at final wage → automatic | Based on wages at contribution time → later raises not reflected |
| Favorable when | Wage growth is high (promotions, step increases) | Investment returns beat wage growth, or you change jobs often |
One practical point: because DB uses your wage 'at resignation,' the standard playbook is to switch to DC before a wage-peak system cuts your pay, locking in the higher wage basis earned up to that point. Conversely, while your salary is climbing steeply, staying in DB tends to pay off. Plug an expected return rate into this calculator's DB/DC comparison and the crossover shows up in actual numbers.
Under 1 Year, Contract Workers, Part-Timers, 3.3% Freelancers — Where the Eligibility Line Is Drawn
There are only two requirements — 1+ year of continuous service and an average of 15+ hours per week over 4 weeks — and employment type does not matter. The real disputes are about where 'continuous service' starts and ends.
- Probation and internship periods count — if employment continued at the same company, continuous service runs from the first day of probation.
- Repeatedly renewed contracts — even if contracts were formally broken and renewed, courts tend to add up the entire period when gaps were short and the work continued.
- Leaves of absence count toward tenure in principle — statutorily protected leave such as parental leave is part of continuous service. For purely personal leaves of absence, however, the Ministry of Employment and Labor's position is that work rules or a collective agreement may exclude them from tenure. Either way, this is separate from being excluded from the average-wage calculation.
- Ultra-short-time workers (under 15 hours/week) are excluded — even past one year, they are not entitled to severance. If weekly hours fluctuate, eligibility is judged on 4-week averages.
- Even on a 3.3% freelancer contract, if your working hours and location were fixed and you worked under the company's direction and supervision, you can be recognized as a de facto employee and claim severance. This is a classic employee-status dispute before labor offices and courts.
- 3-year statute of limitations — the right to claim severance expires 3 years after the resignation date. If you have unpaid severance, check the clock first.
Interim Settlement Isn't On Demand — Only for Legally Defined Reasons
Interim settlement of severance has been prohibited in principle since 2012 and is allowed only for reasons defined in the Enforcement Decree of the Employee Retirement Benefit Security Act. The main qualifying reasons are:
- A non-homeowner worker purchasing a house in their own name
- A non-homeowner worker funding a jeonse or rental deposit — limited to once per workplace
- 6+ months of medical care for the worker, spouse, or dependents — where the worker bears medical costs exceeding 12.5% of their annual total wages
- Bankruptcy adjudication or commencement of personal rehabilitation within the last 5 years of the application date
- Wage reduction due to a wage-peak system or similar arrangements
- Reduced severance due to shortened contractual working hours, and damage from a disaster
Two warnings. First, even with a qualifying reason, the company is not obligated to agree. Interim settlement is discretionary — it requires both the worker's request and the employer's consent. Second, after an interim settlement, severance is recalculated using only the period afterward, effectively resetting your severance tenure. DC plan members, meanwhile, must use a separate 'early withdrawal' system instead of interim settlement, and its list of permitted reasons is slightly narrower.
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