Severance Pay Calculator

Complete Guide to Severance Pay in Korea

Severance pay is an important entitlement for workers leaving their job, providing crucial financial support during career transitions. This guide explains how severance pay is calculated under Korean labor law and what you need to know.

1. Who qualifies for severance pay?

Two conditions must be met: at least 1 year of continuous employment, and an average of 15+ working hours per week. This applies to all workers regardless of employment type.

2. How is severance pay calculated?

The formula is: Average Daily Wage x 30 days x (Total Service Days / 365). The average daily wage is calculated from total wages paid in the last 3 months before departure, including base salary, regular allowances, bonuses (3/12 of annual total), and unused leave pay.

3. Important considerations

Probation periods count toward the service period. Maternity and parental leave are also included. However, unpaid personal leave may be excluded depending on company policy.

4. Retirement pension: DB vs DC

• Defined Benefit (DB): Payout is based on final average salary at retirement — beneficial when salary rises steadily.
• Defined Contribution (DC): Employer deposits 1/12 of monthly salary into your account to invest yourself — beneficial if investment returns exceed salary growth.

5. When must severance be paid?

Employers must pay within 14 days of the employee's departure. After that, late-payment interest applies.