Severance Pay for Foreigners in Korea: Who Qualifies and…

Your last day at work came and went.

The severance pay didn’t. Or it arrived, and the number looks wrong. Either way, you’re in an awkward spot. The job is over, your visa clock is ticking, and nobody has explained what your employer owes you.

That money has a name. In Korean it’s toejikgeum (퇴직금, severance pay). It’s a legal right, not a gift. Your passport doesn’t change it. foreign worker labor rights Korea

This guide covers who qualifies, how to check the math, how E-9 workers get paid, and what to do when nothing arrives. Every rule here comes from Korean statutes and official portals, so you can verify it yourself.

Why your visa type doesn’t decide whether you get paid

Severance eligibility rests on one-year employment, not nationality. Under the Employee Retirement Benefit Security Act, any worker who stays with the same employer for at least one year, working an average of 15 hours or more per week, is owed severance. That covers E-9, H-2, E-7, E-2, F-2, F-4, F-5 and F-6 holders, plus D-2 students in permitted part-time jobs.

The two tests that actually matter

The law has two core tests. Both must be true.

1. Continuous service of 1 year or more with the same employer.
2. An average of 15 hours or more per week, measured over four-week periods.

That’s it. Your nationality, your visa code and the size of the company don’t change the answer. The Act now applies to every workplace with at least one employee, including small shops and restaurants. You can read the English text of the statute through MOLEG and the current Korean text on the Korea Law Information Center.

What counts toward your year

Your probation period counts. So do renewed contracts, as long as there’s no real break between them.

Some employers end a contract at 11 months and rehire you a few weeks later. Labor inspectors look at the actual working relationship, not just the paperwork. A short, artificial gap may not reset your clock.

Here’s the catch. A contract labeled “freelancer” with 3.3% tax withheld can hide an ordinary job. If the company sets your hours, directs your work and pays you a fixed wage, you may still be an employee under the Labor Standards Act. That status brings severance with it.

Who is covered in practice? Common cases include:

• E-9 and H-2 workers hired through the Employment Permit System (EPS)
• E-7 professionals and E-2 language teachers
• F-2, F-4, F-5 and F-6 residents in any job
• D-2 students whose permitted part-time job meets both tests

Labor offices handle wage complaints based on the work you did. Your stay status is a separate question for immigration.

Qualifying is the easy part. The number itself is where things get slippery.

The severance pay calculation your employer hopes you won’t check

Severance pay calculation follows one formula: average daily wage × 30 × (days employed ÷ 365). Average daily wage equals all wages paid in the three calendar months before your last day, divided by the number of days in that period. Overtime, night pay and regular allowances all count. That’s why the correct figure is often higher than one month of base salary per year.

The legal floor comes straight from the statute:

“An employer who intends to establish a severance pay system shall establish a system to pay retiring employees a lump sum of not less than 30 days’ average wages for each year of continuous service.” (Employee Retirement Benefit Security Act, Article 8, via MOLEG)

A worked example

Say you earned 2,500,000 won a month for exactly two years (730 days). Your last three months covered 92 calendar days.

1. Wages for the last three months: 2,500,000 × 3 = 7,500,000 won.
2. Average daily wage: 7,500,000 ÷ 92 = about 81,522 won.
3. Thirty days’ pay: 81,522 × 30 = about 2,445,652 won.
4. Adjust for service: 2,445,652 × (730 ÷ 365) = about 4,891,304 won.

So you’d be owed about 4.89 million won before tax. Partial years count too. Leave after 1 year and 6 months, and the multiplier becomes roughly 1.5.

What goes into “average wage”

Base salary is only the start. Average wage also includes:

• Overtime, night work and holiday work pay
• Allowances paid regularly to all workers, such as fixed meal or transport money
• Three-twelfths of any annual bonus paid in the past year
• In some cases, a share of unused annual leave pay

Two protections stop the number from being dragged down. First, certain periods are removed from the three-month window under the Labor Standards Act Enforcement Decree. These include maternity leave, childcare leave and leave for a work injury. Second, if your average wage ends up lower than your ordinary wage, the ordinary wage is used instead.

Are you checking a pay slip that only shows base salary? Ask for the full breakdown in writing.

Tax and the IRP account

Severance is taxed as retirement income. The rate is usually far lower than tax on regular salary, and the employer withholds it. The National Tax Service explains how retirement income tax is calculated.

Korean law now generally requires severance to be paid into an Individual Retirement Pension (IRP) account. The Enforcement Decree lists exceptions. These include workers aged 55 or older, payouts of 3 million won or less, and foreign workers who have left Korea. Ask your employer which route applies before your final week.

For E-9 workers, though, most of this money doesn’t come from the boss’s bank account at all.

Where E-9 severance really comes from, and why it waits for your flight

E-9 departure guarantee insurance (chulguk manggi boheom, 출국만기보험) is how most Employment Permit System workers receive severance. Employers must enroll within 15 days of the contract taking effect. They pay monthly premiums of 8.3% of ordinary monthly wages. The insurer pays you after you leave Korea. If the payout falls short of legal severance, your employer owes the difference.

The four EPS insurances

The Act on the Foreign Workers’ Employment, etc. sets up four insurances for E-9 and H-2 workers. Only one of them replaces severance.

The designated insurer is currently Samsung Fire & Marine Insurance. HRD Korea manages EPS worker support, and the EPS portal lists the current insurance rules in several languages.

Why the payout waits

After a 2014 amendment to the Act, the insurer pays within 14 days after you depart Korea. It no longer pays on your last working day. The goal was to discourage overstaying.

That timing matters. You can’t use this money for rent or travel inside Korea. Plan for that gap.

The shortfall your employer still owes

Premiums are based on ordinary monthly wage. Legal severance uses average wage, which includes overtime. In factories with heavy overtime, the gap can be large.

Here’s what actually happens. The insurer pays its amount. Your employer must then pay the remaining difference directly. Many workers never ask for it.

One more rule. If you leave before completing one year, the premiums go back to the employer, because no severance is owed.

But what if you’ve already gone home?

Severance pay claim after leaving Korea: is it already too late?

No. Your right to claim severance lasts three years from your last day of work, and leaving Korea doesn’t cancel it. You can collect from abroad through a bank transfer, a representative holding your power of attorney, or the insurer’s claim process. It’s much easier, though, if you prepare documents and contact details before you board the plane.

Before you fly

The deadline is 3 years, but evidence disappears faster than that. Gather these while you still have access:

• Your employment contract, in Korean and your language
• Pay slips and bank statements showing each salary deposit
• Attendance records, shift photos or work messages
• A certificate of employment (gyeongnyeok jeungmyeongseo, 경력증명서)
• A copy of your ARC (Alien Registration Card)

Give your employer written bank details, including SWIFT code if the account is overseas. Ask your Korean bank whether the account stays usable after your ARC expires. Many banks restrict accounts once your stay ends. You can check your stay expiry date on HiKorea.

If the money is already late, file a complaint before you leave. Being in Korea for the first interview helps a lot.

From abroad

You still have options once you’re home.

• Power of attorney: a trusted person or lawyer in Korea can file and attend on your behalf.
• Free legal help: the Korea Legal Aid Corporation supports low-income workers, including foreigners, in wage claims.
• Unclaimed insurance: departure guarantee money that goes unclaimed is moved to HRD Korea, which runs a lookup service for former EPS workers.

Severance is separate from your National Pension refund. You may be owed both. national pension lump-sum refund foreigner

And if the employer simply refuses to pay?

When the employer goes silent: filing an unpaid severance complaint

An unpaid severance complaint goes to the Ministry of Employment and Labor. Employers must pay within 14 days of your departure from the job unless you agree in writing to extend. After that, file a petition (jinjeong, 진정) online or at the regional labor office. A labor inspector investigates. Nonpayment can bring up to 3 years in prison or a 30 million won fine.

Step by step

1. Ask in writing. Send a text or KakaoTalk message requesting payment and the amount. Screenshot it.
2. File the petition. Use the Ministry of Employment and Labor website or visit the labor office covering your workplace. You can request an interpreter.
3. Attend the interview. The inspector hears both sides. Bring your pay records and the calculation from earlier in this guide.
4. Get the confirmation. If the inspector finds unpaid money, ask for an official confirmation of the unpaid amount. You’ll need it for the next steps.
5. Escalate if needed. Go to court with legal aid, or apply for substitute payment if the employer can’t pay.

Late money also grows. Severance paid after the 14-day deadline carries delay interest of 20% per year under the Labor Standards Act.

When the company has no money

Some employers go bankrupt or simply vanish. In that case, the Korea Workers’ Compensation and Welfare Service (COMWEL) runs a substitute payment program (daejigeupgeum, 대지급금). The state pays part of your unpaid wages and severance, then collects from the employer later. Amounts are capped, so check COMWEL for current limits.

Watch the settlement offer

Unpaid severance is a crime that ends if the worker withdraws the complaint. Employers know this. Some offer a quick, smaller payment in exchange for your signature.

Read the number before you sign. Compare it with your own calculation. Once you withdraw, restarting the case is hard.

Need help in your language? Call 1350 for the Ministry of Employment and Labor helpline, or 1577-0071 for HRD Korea’s foreign worker counseling center.

Most of these disputes, though, are won or lost before the job even ends.

Your last two weeks at work decide most of this

Your strongest move is preparation before your final day. Confirm your start date, check your average hours, and calculate your own number. Ask your employer, in writing, when and how severance will be paid. E-9 workers should confirm departure insurance enrollment and the shortfall amount. Records you collect now are hard to rebuild from another country.

Use this short checklist in your final two weeks:

• Confirm your first working day from your contract or first pay slip
• Pull three months of pay slips and run the formula yourself
• Send your bank details to the employer in writing
• E-9 or H-2: confirm the claim process for departure guarantee insurance
• Save contact numbers for your manager and HR outside company apps

If you’re switching jobs instead of leaving Korea, check how your visa change affects your timing. E-9 workplace change rules

The law is on your side here. The employer owes the money whether you ask or not. Asking early, with numbers in hand, is what gets it paid on time.