Recently we got a question from a gentleman asking what the exact meaning of the below, an Internet post he’d found:
“It is possible that as of 2011, what was severance pay will be vested in the country’s pension plan. This means that workers (including teachers, etc.) will no longer receive one month’s pay for every year worked at the end of their contract. The legislation is set to discuss/vote on this in 2009.”
He was worrying that he might lose his right to severance payment under Korean law. But the above article is quite misleading. The severance payment is the property right of workers. It can not be vested to anything without workers’ consent. If the article says the amended law will give the employer or any party but the workers the power to vest the severance payment to the country’s pension plan (or whatever) without workers’ consents, it definitely violates constitutional law of Korea.
Actually, under Korean labor law, the employer can set a “retirement pension plan” for the employees, instead of “severance payment plan” of one month’s salary for each year of employment. But in order to set that kind of pension plan or, more importantly, change the existing severance payment plan, the Korean labor law requires the employer to acquire consents from the labor union or (if there is no union) half of the employees.
In fact, last year Ministry of Labor announced that they’re trying to amend current labor law clauses on the retirement pension plans. According to the government, in a newly amended law, (i) an employer who has an existing severance payment plan can add a retirement pension plan without the worker’s consent (because just adding one more option for workers would be no problem) and (ii) newly incorporated company must set a retirement pension plan after the new law is enacted. The law-making is pending now. If you can read Korean, please check this government’s announcement on this issue.
In a retirement pension plan, the financial institution shall keep and manage the fund on be behalf of the workers. So the worker’s right of severance payment shall be protected from the company or employer’s insolvency, quite an advantage to the previous severance payment plan system.
So, if you are an employee under Korean law, don’t worry about your severance payment because of the above article.
We hope this 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 clicking here or visit Legal Consultation page. Our Korean licensed labor lawyers, not a U.S. lawyer residing in Korea, will answer your inquiry.
Also, you can find a stack of competent legal information and articles on Korean labor law, written by a Korean licensed lawyer, by clicking here.
© 2009 Wonil Chung. 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.