Severance Pay Calculator

Who Is This For? Severance Rights for Foreign Workers in Korea

Foreign nationality by itself does not remove protection under Korea's retirement-benefit rules. Entitlement still depends on worker status in substance, at least one year of qualifying continuous service, and the statutory four-week average scheduled-hours test. Visa, employment-permit, workplace, plan, and service-history facts can affect how the benefit is funded or paid, so this calculator cannot decide eligibility from nationality or visa type alone. Voluntary resignation or contract expiry does not by itself eliminate an otherwise accrued statutory benefit.

• E-9 and H-2 workers under the Employment Permit System — departure-guarantee insurance may fund all or part of the benefit. Check the insured period, payout conditions, and whether the employer owes a statutory shortfall rather than treating the insurance amount as the final calculation.
• Other visa categories — nationality and visa labels do not replace the worker-status, service-period, hours, and plan analysis. Confirm any occupation- or status-specific issue with the labor authority.
• IRP (Individual Retirement Pension) — retirement benefits are generally transferred to an IRP subject to statutory exceptions. Confirm whether a departure-related or other exception applies before choosing a cash or account payment route.

The same statutory concepts—worker status, average wage, the applicable retirement plan, and continuous service—are the starting point for foreign workers. If a benefit appears unpaid, preserve the contract, payroll, time, insurance, and departure records and ask the Ministry of Employment and Labor or a qualified adviser to review the individual case.

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.

The Ordinary-Wage Floor in an Average-Wage Calculation

Statutory severance is based in principle on the average wage (total qualifying wages over the last three months before retirement ÷ calendar days in that period). Article 2(2) of the Labor Standards Act deems ordinary wage to be average wage when the properly calculated average is lower. Statutory excluded periods and the items that qualify as ordinary wage must be determined first, and a DC account follows a different structure. This calculator does not ask for ordinary wage and therefore cannot apply that floor automatically.

If the three-month window includes a statutory exclusion period such as parental leave, maternity leave, treatment for a work-related injury, a lawful labor dispute, or an initial probation period of up to three months, the covered days and wages are removed from the denominator and numerator under Article 2 of the Enforcement Decree of the Labor Standards Act. When an exclusion occupies all or most of the window, additional calculation rules and payroll records may be needed; this calculator's simple three-month inputs cannot determine the final amount.

A Bonus in the Final 3 Months? Only 3/12 Counts, Not the Full Amount

For a wage-type regular bonus, Korean administrative practice generally allocates 3/12 of the amount paid during the year before resignation to the average-wage total instead of counting a payment received in the final three months in full. Annual-leave pay needs a separate timing check. Ministry of Employment and Labor guidance includes 3/12 of qualifying unused-leave pay whose right arose before retirement, but excludes pay whose entitlement first arises because of retirement. Enter only the annual amount that qualifies for 3/12 allocation after checking its accrual year and payment basis; the calculator cannot classify it for you.

• Example setup — monthly salary KRW 3,000,000, wage-type annual bonus KRW 6,000,000, KRW 1,200,000 leave allowance confirmed as qualifying for 3/12 allocation, 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 (assuming a resignation date whose preceding three calendar months span 91 days)
• Severance = 118,681 × 30 × (1,095 ÷ 365) ≈ about KRW 10.68 million
• Under these assumptions, omitting both apportioned amounts yields about KRW 8.9 million, roughly KRW 1.78 million below the example with them included. Actual inclusion depends on the payment rules and accrual year.

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, first check the plan and its rules. A DB (defined benefit) plan must provide at least the statutory level of 30 days' average wage per year of continuous service, while the employer bears the investment responsibility. Under a DC (defined contribution) plan, the employer generally contributes at least 1/12 of the member's annual total wages each year and the member's benefit depends on actual contributions, investment results, and fees. This calculator does not receive plan rules or year-by-year wages, so it cannot reproduce either account's final balance.

A wage-peak system or a rising salary path can affect DB and DC outcomes, but the actual advantage and any suitable switch date depend on year-by-year wages, how transferred reserves are calculated, the remaining investment period, returns, and fees. This calculator's DC figure is only an illustration that divides the three-month salary input by three, assumes that monthly pay stayed unchanged throughout service, and contributes 1/12 of it each month, then applies the return rate you enter. Separately entered bonus and leave-pay amounts are not included in this DC illustration. It does not determine an actual account balance or an optimal switch date, so do not choose between DB and DC from this figure alone; review your employer's and pension provider's records as well.

Under 1 Year, Contract Workers, Part-Timers, 3.3% Freelancers — Where the Eligibility Line Is Drawn

First determine whether the person is a worker in substance under the Labor Standards Act, regardless of the contract label, and then review at least one year of continuous service and the statutory 4-week average scheduled-hours rule. If hours changed by period or the contract differs from the actual working relationship, this calculator's single input cannot conclusively determine eligibility.

• Probation and internships — a period may count from the first working day when worker status exists and the same employment relationship continues without a break.
• Repeated fixed-term contracts — continuity depends on the length and reason for gaps, whether work stayed the same, renewal practice, and the parties' intent; formal contract dates alone are not conclusive.
• Leaves of absence — statutory leave and personal leave do not necessarily receive identical continuous-service treatment, and work rules or a collective agreement may matter. Tenure treatment is also distinct from excluding days and wages from the average-wage calculation.
• The 15-hour rule — periods averaging fewer than 15 scheduled hours per week over four weeks may be excluded from the retirement-benefit statute. If hours changed over time, each period needs review; a single current-hours input cannot determine entitlement.
• 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.

Related Tools and Guides

• Korean Severance Pay 2026 Guide — the calculation formula, retirement income tax tenure deductions, and IRP rollover strategy in detail
• Net Salary Calculator — check the monthly pay structure (base + allowances) your average wage starts from
• Interest Calculator — simulate compound returns if you deposit your severance payout