Recently I got an email question from a foreign teacher working for a Korean private university.  He’s wondering why the university is insisting on a retirement pension plan instead of the severance payment.

There is an act called Pension for Private Teachers and Staff Act(PPTSA) in Korea, which regulates severance payment issues in private schools.  As a matter of law, PPTSA is applied prior to the GWRBA(Guarantee of Workers’ Retirement Benefits Act) and it allows the private schools to set a retirement pension plan for its employees instead of the severance payment.

With respect to the relationship between the employment contract and the pension plan under PPTSA, Private Universities usually, pursuant to the PPTSA, put the retirement pension clauses, instead of severance payment, in the Rules of Employment(RE) of its own.  As a matter of law, the RE is applied to all the workers in the workplace.  That means, if there exists a RE which includes retirement pension scheme when you’re entering into an employment agreement with the private university, both parties are bound to the RE, even though you’re not a member of a labor union or you didn’t agree to the RE, i. e. the retirement pension clauses (not a severance payment) in the RE shall be applied to you.

It should be noted that the amount credited to the employee’s account under the retirement pension scheme can be different from the amount of severance pay (please click here if you are curious about how the severance pay under Korean law is calculated).  That is because the PPTSA sets different methods in calculating the pension amount.  Per the employee’s request, the private school and the Korea Teachers Pension Foundation (the official administrator of the pension under PPTSA) must provide the breakdown of the retirement pension to him or her.

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, a Korean Labor Lawyer/Chung & Partners, a Korean Labor Law Firm.  All rights reserved. Some copyrights, photos, icons, trademarks, trade dress, or other commercial symbols that appear on this post are the property of the respective owners.

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.