Korea severance pay calculator

How Korean severance pay works

Any worker in Korea with 1+ year of continuous employment at 15+ hours per week is legally entitled to severance pay (퇴직금), regardless of nationality, visa type, or contract language. This is set by the Employee Retirement Benefit Security Act (근로자퇴직급여보장법).

The statutory formula

Severance = 30 × (average daily wage over last 3 months) × (years of service). The average daily wage (평균임금) includes your base salary, contractual allowances, and a pro-rated share of the annual bonus (bonus ÷ 12 × 3). Sum the 3-month wages and divide by the number of days in that period.

The 14-day rule

Severance must be paid within 14 days of your last working day. Delays beyond 14 days accrue 20% annual interest. Non-payment is a criminal offence under Article 44 of the Act, punishable by up to 3 years prison or a ₩30M fine.

DB, DC, and IRP

Korean retirement benefits come in three forms: Defined Benefit (DB, 확정급여형) where the employer guarantees the statutory amount; Defined Contribution (DC, 확정기여형) where the employer contributes 1/12 of annual wage each year and the worker bears investment risk; and IRP (Individual Retirement Pension, 개인형퇴직연금) which receives DC rollovers and severance lump sums above ₩3M.

Retirement income tax (퇴직소득세)

Severance is not taxed at your regular income bracket. Korea uses a special retirement income tax with its own graduated formula based on years of service. Longer service significantly reduces effective tax. This calculator gives a rough estimate, your employer and NTS calculate the exact figure.