Korea Severance Pay: The One-Year Rule, the Real Math, and…

One year. That’s the line most people miss.

You’ve worked for a Korean company for a while. Now you’re thinking about quitting, switching jobs, or flying home. A coworker mentions toejikgeum (퇴직금, severance pay). Is it yours? How much is it? And what happens if your boss never pays?

Korea’s severance rules are clear on paper. They’re also strict. A few days on the calendar can decide whether you get nothing or a month’s pay for every year you worked. Your visa type doesn’t change the rules. Your exit plans, though, change how you collect. foreign worker rights Korea

Why one extra week can be worth a month’s salary

Under the Employee Retirement Benefit Security Act, you qualify for severance if you worked for the same employer for at least one continuous year and averaged 15 or more hours a week. Company size doesn’t matter. Even a shop with one employee must pay. Your nationality and visa (E-7, F-2, F-6, F-5, F-4, or D-2) don’t change eligibility.

The law sets two tests. You must pass both.

An employer shall establish at least one retirement benefit plan for retiring workers. This shall not apply to a worker whose continuous period of employment is less than one year, or whose contractual working hours per week, averaged over four weeks, are less than 15 hours. (Employee Retirement Benefit Security Act, Article 4, English translation published via MOLEG)

So what counts toward the year? The severance pay eligibility one year rule is measured by continuous employment, not by days you physically showed up.

• Probation counts. Your first three months of probation are part of your service.
• Paid leave counts. Annual leave and other paid days off don’t break the chain.
• Back-to-back contracts count. Renewing a one-year contract with the same employer, with no real gap, is generally treated as one continuous period.
• Hours are averaged. The 15-hour test looks at your contracted hours over four-week periods, not one slow week.

Here’s the catch. There is no pro-rata payment below one year. Leave at 11 months and 3 weeks, and the law gives you zero. Count from your first working day to your last working day. If your final day falls one day short of a full year, the entire first year produces nothing.

That’s why your last working day matters more than the day you hand in your notice. If you’re close to the line, check the start date on your geullo gyeyakseo (근로계약서, employment contract) before you pick a final day.

Students on D-2 visas often assume part-time work never qualifies. It can. If you averaged 15 or more hours a week for a full year at the same café or academy, severance applies just like it does for full-time staff. D-2 part-time work permit

Once you’re past a year, the next question is the amount. And that amount isn’t simply your monthly salary.

The ‘average wage’ math that shrinks or grows your payout

Severance is at least 30 days of average wage for each year you worked, and partial years are counted by days. Average wage means the total wages paid in the three calendar months before you left, divided by the calendar days in that period. If the result is lower than your ordinary daily wage, the ordinary wage is used instead.

The formula looks like this:

Severance = (average daily wage × 30) × (days of service ÷ 365)

The key word is pyeonggyun imgeum (평균임금, average wage). It’s defined in Article 2 of the Labor Standards Act. It looks backward at what you were actually paid, not at your contract salary.

Let’s run a severance pay calculation average wage example. Say your last day was in early October, and you earned 3,000,000 won a month with no bonuses.

Notice the partial year. You don’t lose the extra months after your second anniversary. They’re counted by the day.

What goes into those three months of wages? More than your base pay.

• Base salary and fixed monthly allowances
• Overtime, night work, and holiday work pay you actually received
• Annual bonuses, added in at 3/12 of the yearly total

Some periods are taken out of the calculation entirely. The Enforcement Decree of the Labor Standards Act excludes probation, maternity leave, childcare leave, leave for a work-related injury, and suspension caused by the employer. If one of those falls inside your last three months, those days and wages are removed. That stops a low-paid stretch from dragging your average down.

Your employer withholds toejik sodeukse (퇴직소득세, retirement income tax) before paying you. The tax uses separate rates and a deduction that grows with your years of service. You can check the rules with the National Tax Service.

You know how to check the number now. But what happens to it if you switch jobs?

What happens to your severance when you change employers

Severance belongs to each job separately. When you leave an employer after a year or more, that employer owes your severance within 14 days. Your new job starts a fresh count from day one. Years never stack across different companies, so 11 months at your second job adds nothing, even if you spent five years at the first.

The 14-day deadline comes from Article 9 of the Employee Retirement Benefit Security Act. You and your employer can agree to push it back when there are special circumstances. Your employer can’t extend it alone. Get any extension in writing, with a specific payment date.

The severance pay when changing employer rules play out differently by situation.

1. You resign and join a new company. Your old employer pays. Your new employer’s clock starts at zero.
2. Your company is merged or the business is transferred. Your employment usually carries over to the new owner. No severance is paid at that point. Your service keeps counting.
3. Your company already runs a retirement pension. Under a DC (defined contribution) plan, your employer has been paying into an account at a bank or insurer all along. Under a DB (defined benefit) plan, the payout is calculated at the end, much like severance.

Here’s what actually happens to the money. Since April 14, 2022, severance is generally paid into an IRP (Individual Retirement Pension) account in your name, not straight into your salary account. Exceptions include workers aged 55 or older, benefits of 3 million won or less, and foreign workers leaving Korea. If you’re staying in Korea and switching jobs, expect your employer to ask for your IRP account number. You can usually close the IRP and withdraw the cash, with tax applied at that point.

Severance and visa status are separate tracks. If you hold an E-7 visa, changing workplaces needs its own approval from the Korea Immigration Service. Getting paid doesn’t fix your visa, and fixing your visa doesn’t get you paid. E-7 visa change of employer

Now the hard part. What if day 14 passes and nothing arrives?

When day 14 passes and your account is still empty

File a petition (jinjeong, 진정) with the Ministry of Employment and Labor. You can file online or at the regional labor office covering your workplace. A labor inspector investigates for free. Unpaid severance carries 20% annual delay interest. An employer who refuses to pay faces up to 3 years in prison or a fine of up to 30 million won.

An unpaid severance complaint follows a fairly fixed path. Most cases end before step 5.

1. Ask in writing first. Send a text or email stating your last day, the amount you expect, and the date it was due. This creates a record.
2. Call 1350. This is the MOEL Customer Counseling Center. Consultation is free. Ask about interpretation support if you need it.
3. File the petition. Submit it on the MOEL civil petition portal or in person at the regional labor office. Bring your ARC, employment contract, payslips, and bank statements showing salary deposits.
4. Attend the inspector interview. The inspector calls you and your employer in. Many employers pay at this stage.
5. Escalate if needed. If the employer still refuses, the case can be referred for criminal prosecution. You can also request a written confirmation of the unpaid amount. That document supports a civil claim or a government substitute payment.

But it gets worse if the company is out of money. Then a payment order alone won’t help. That’s where the Wage Claim Guarantee Act steps in. The Korea Workers’ Compensation & Welfare Service (COMWEL) pays daejigeupgeum (대지급금, substitute payment) from the Wage Claim Guarantee Fund. It can cover severance for up to your last 3 years of service, subject to caps. A simplified version is available even when the company hasn’t gone bankrupt, once the unpaid amount is confirmed.

Need a lawyer? The Korea Legal Aid Corporation offers free legal help to workers with unpaid wages who fall under its income limits.

One more number to remember. Under Article 10 of the Act, your right to claim severance expires after 3 years. So what if you’ve already booked a flight home?

Collecting severance pay after leaving Korea

Your right to severance doesn’t expire at the airport. The claim lasts 3 years from the date it became payable. Collecting from abroad is much slower, though, so settle everything before you fly. Keep a Korean bank account open, confirm your final day in writing, and file any petition while you can still attend an interview in person.

Severance pay after leaving Korea usually fails on logistics, not on law. Some banks restrict accounts once your registered stay period ends. Ask your bank before departure whether your account will still receive transfers. An inspector also needs to reach you, and a petition with no one to interview stalls.

The IRP rule works in your favor here. Foreign workers leaving Korea are an exception to the IRP requirement. That means your employer can pay severance directly as a lump sum.

Workers on E-9 or H-2 visas have a different setup. Under the Act on the Employment of Foreign Workers, employers pay into chulguk mangi boheom (출국만기보험, Departure Guarantee Insurance). That insurance pays out after you leave Korea. If the insurance payout is smaller than your legal severance, the employer still owes you the difference.

Don’t mix this up with your pension. A National Pension lump-sum refund is a separate claim through the National Pension Service. Whether you qualify depends on your nationality and your country’s agreement with Korea. national pension refund leaving Korea

Before your flight, run through this list:

• Get a written severance calculation from your employer
• Confirm the payment date, no later than 14 days after your last day
• Confirm your bank account will stay open for incoming transfers
• Save copies of your contract, payslips, ARC, and bank statements
• Check departure and ARC return rules on HiKorea

So where does all this leave you today?

Your next step depends on where you are on the calendar

If you haven’t hit one year, check your start date before choosing a last day. If you’re past a year, calculate your average wage from your last three months of payslips. If you’ve left and nothing arrived after 14 days, call 1350 and file a petition. If you’re leaving Korea, settle everything before departure. Keep every document.

Severance isn’t a bonus your employer chooses to give. It’s a legal debt. Treat the 14-day deadline like a bill that’s due, because the law does.

Start with one document: your employment contract. The start date on it tells you which of the four situations above is yours.