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Published by Chung & Partners Since 2008

Introduction to the Severance Payment Under Korean Labor Law


We’ve been frequently asked about the severance payment under Korean labor law.  Basically, the severance payment is being regulated by the Guarantee of Workers’ Retirement Benefits Act(“GWRBA”), not by Labor Standard Act(“LSA”).  (Some Korean law related sites refer to LSA as it regulates the severance payment matters, but it is not correct).  GWRBA provides for the minimum amount of severance payment which the employer shall be required to pay to a retiring or resigning employee.

With that said, then what is the statutory severance payment under GWRBA?  Under GWRBA, an employee is entitled to receive a severance payment at the rate of 30 days’ “average wage” for each “continuous year of service.”  Of course, this is the statutory minimum amount of the severance pay.

In calculation of the “average wage”, a base salary and other payments such as overtime payment, position allowance, incentive allowance paid to all employees to promote efficiency shall be included.  With respect to the bonus payment, if it was paid irregularly and one-time out of company’s profit, it shall not be included.

Under the established court precedents, the “continuous year of service” means the period from the time of execution of an employment contract to the time of employment termination”. If an employee, however, was absent from work for a certain period of time during the “continuous years of service”, such as taking a personal leave for study or serving in military, those non-employment periods shall be excluded from the “continuous years of service”.

We hope this brief introduction to be of assistance to you.  If you have more questions on severance payment or any other Korean labor law related issues, please send an email by simply clicking here or visit Legal Consultation page. Our Korean licensed lawyers, not a U.S. lawyer residing in Korea, will answer your inquiry.

Also you can find a stack of legal information and articles on Korean labor law, written by a Korean licensed lawyer, by clicking here.

© Wonil Chung, Korean Licensed Lawyer, Chung & Partners, Korean Full Service Law Firm.  All rights reserved.

Because of the generality of this update, the information provided herein, which may or may not reflect the most current legal development, may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. 

Author: Korean Qualified Lawyer

Korean Licensed Lawyer 韓国の弁護士

15 thoughts on “Introduction to the Severance Payment Under Korean Labor Law

  1. Pingback: [Case Report] Attorney Wonil Chung Wins for Expat’s Korean Severance Entitlement – Foreign Employers Cannot Circumvent Severance Liability through a Contract Manipulation | Ask Korea Law

  2. Pingback: [Q&A: Labor Law] I Work for Korean Branch of U.S. Company. My Employment Contract Provides U.S Law Shall Apply and Severance Pay Is Not Granted. Can I Still Get a Severance Pay Pursuant to Korean Labor Laws? | Ask Korea Law

  3. Hi,
    My employer states that, because his business is registered as a Korean branch from a Singaporean entity, he has no obligation regarding the severance payment. Does it make sense to you?

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  5. Hello, I am working for a private academy and my contract that I signed states the dates November 29, 2010 to November 28, 2011. My boss is refusing to give me severance pay because they say I didn’t start working for them until January 3. When I gave them my letter for a 60 day notice they did not inform me that they would not be giving me my money or a flight ticket home.
    Also, I feel they have broken the contract as they have not paid me on time three different months. In the contract it states they shall pay in full on the 7th of every month and my bank statements show that they have been late. Please, help me with this conflict.

  6. I am teaching to my institutes for almost 3 years now but in our academy we just have 3 employees.Am I entitiled for a severance pay?

  7. Hello, can you advise if this severance pay is applicable for seconded employees in Korea?

  8. If a contract states that there will be no severance, and a teacher signs it, is this legal? The reason I ask is that we have some schools that want to exclude severance or pension. I’d like to be sure if they can do this or not.

    • So long as the teacher is regarded as an employee under Korean law, that contract is illegal.

      • Thank you! And, what about if they’re not mentioned as an “employee” in the contract, but an “instructor” working for an “institution”? Would it still be illegal?

        Is it okay for a school to not offer pension?

      • Thank you! What about if the contract states that you are an “instructor” working for an “institution” and not an “employee”? Is is legal then?

        Also, is it legal to NOT offer pension?

        Many Thanks!

  9. Article 34 of the LSA notes that: “The retirment allowance system which an employer pay retiring workers retirement allowances shall be in accordance with the Guarantee of Workers’ Retirement Act.

  10. Thanks! I myself had always referred to the severance clause in the LSA when making arguments with the Labor Board or talking about severance with other teachers. Now I know better.

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