[Updated: May 6, 2020]
There was a news report that more than half of the foreign workers in South Korea are not aware of the fact that they can claim for the severance pay. Yes, Korean labor law recognizes severance pay. It is being regulated by the Guarantee of Workers’ Retirement Benefits Act(“GWRBA”). In this article, we will provide you a guide to the general ideas of how severance pay works, who gets it, and how much in Korea.
Question) I am an American expat working in South Korea. Originally I was working for a U.S. company incorporated in the state of New York, but 3 years ago I was seconded to the Korean branch of my U.S. company, and have been working for the branch until now. When I was seconded, my new employment contract provided that the New York state law shall apply to my employment relation in Korea. Now, my employment contract is expiring and I would like to know whether I am entitled to the severance pay under the Korean labor law. I know my employment contract and my company’s policy do not provide the right to severance pay. But, as I have been working in Korea for 3 years, I am wondering if the statutory rights of severance pay under the Korean labor law could be given to me.
Answer) The answer is Yes. Expats are entitled to severance pay under the Korean labor laws. (check here as to how the severance pay under Korean law is recognized and operates)
This answer could sound quite surprising considering the fact that the parties had previously agreed (i) the Korean labor should not apply and (ii) the severance pay should not be awarded. How come the Korean labor law intervenes in the parties’ employment relation? The answer lies in the provisions of the Private International Act of Korea which provides the general principles for the choice of law in Korea.
When a legal relation has certain foreign elements, the court must decide which jurisdiction’s law shall apply to interpret that legal relation. In Korea, the Private International Act provides the general rules and principles for the governing laws of the various types of legal relations. Specifically, the Act provides that if the employer and employee agree, the employment contract is governed by the law chosen by the parties. But, this does not mean the parties can freely determine which law and regulations apply to their employment relation. It is true in Korea that the party autonomy is a general principle of governing laws, but party autonomy is subject to limits imposed by the overriding public policy and mandatory rules.
Q) I am on an F2 visa and teaching for 28 months at the same Hagwon. The contract between myself and the owner is basically a few written lines, just mention salary and final teaching date. There is no mentioning of the severance payment. According to the labor law, am I entitled to severance payment even though it is not mentioned in a short contract?
A) If and to the extent that you are legally regarded as an employee under Korean labor law, you are entitled to a severance pay under Korean labor law.
The term employee under the Korean labor law is someone who provides labor pursuant to his or her employer’s instructions or directions in exchange for wage compensation. The important factors for classifying someone as an employee are, (more…)
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 (more…)
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 (more…)