Korean severance pay explained: calculation and payment rules
Last updated: 2026-06-25
Severance pay = average daily wage × 30 days × (total days of service ÷ 365), where the average daily wage is the total wages of the last 3 months divided by the days in that period.
Eligible workers average at least 15 hours a week with one or more years of continuous service, and the employer must pay within 14 days of departure.
What is severance pay?
Severance pay is a deferred form of wage that a worker receives on leaving after a sufficient period of employment. The Labor Standards Act and the Guarantee of Workers' Retirement Benefits Act require employers to pay at least 30 days of average wage per year of continuous service. In other words, about one month of average wage accrues as severance for each year worked.
The severance pay formula
The core formula for severance pay is as follows.
Severance pay = average daily wage × 30 × (total days of service ÷ 365)
The most important value is the average daily wage. It is the total wages actually paid in the 3 months before the departure date divided by the total number of days in those 3 months (usually 89-92 days).
| Element | How it's calculated |
|---|---|
| Average daily wage | Total wages of last 3 months ÷ days in those 3 months |
| 30 days | Average daily wage × 30 |
| Service ratio | Total days of service ÷ 365 |
| Final severance pay | Average daily wage × 30 × (total days of service ÷ 365) |
What's included in the average wage
The average wage includes not only base pay but also regularly paid allowances. Items paid on an annual basis are apportioned to reflect 3 months' worth.
- Included — base pay; regular allowances such as position allowance and meal allowance; regular bonuses (3/12 of the annual amount); unused annual leave allowance (3/12 of the annual amount)
- Excluded — one-off or incidental payments; reimbursement-type items such as travel expenses
For example, if the wages over the last 3 months are 9M KRW and the annual bonus is 4M KRW, then 1M KRW of the bonus (4M × 3/12) is added to the average wage calculation.
Worked example
Consider joining on 2021-01-01, leaving on 2024-01-01, with total wages of 9M KRW over the last 3 months (92 days).
- Average daily wage = 9,000,000 ÷ 92 ≈ 97,826 KRW
- Total days of service = 1,095 days (about 3 years)
- Severance pay = 97,826 × 30 × (1,095 ÷ 365) ≈ 8,804,000 KRW
So 3 years of work yields severance of about 3 times one month's average wage. To calculate it directly, enter your join and leave dates and 3 months of wages into the Severance Pay Calculator.
Eligibility and payment deadline
- Eligibility — Workers who average at least 15 hours a week with one or more years of continuous service. Regular, contract and part-time workers are all included.
- Deadline — The employer must pay within 14 days of departure; the date may be extended by mutual agreement.
- If unpaid — Delay interest applies, you can file a complaint or report to the Ministry of Employment and Labor, and criminal liability may follow.
Retirement income tax
Severance pay is also subject to retirement income tax and local income tax, but with deductions for years of service and a converted-income deduction, the burden is lower than ordinary income of the same amount. So the result from the Severance Pay Calculator is a pre-tax estimate, and the actual amount received is after tax.
Summary
- Severance pay = average daily wage × 30 × (total days of service ÷ 365).
- Average daily wage = total wages of last 3 months ÷ days in that period.
- Regular bonus and leave allowance are reflected at 3/12 of the annual amount.
- Eligible: 15+ hours/week, 1+ year of service; deadline: 14 days after departure.
Frequently asked questions (FAQ)
Do I get severance pay for less than one year of work?
Statutory severance pay arises only with at least one year of continuous service. Workers under one year are not entitled to statutory severance, though they may receive it if a company rule or labor contract provides for it separately.
How do average wage and ordinary wage differ?
Average wage is the total wages actually paid over the 3 months before departure divided by the days in that period, and it is the basis for severance pay. Ordinary wage is the base pay and fixed allowances paid regularly and uniformly; if the average wage is lower than the ordinary wage, the ordinary wage is used as the average wage.
Is severance pay taxed?
Severance pay is subject to retirement income tax and local income tax, but with deductions for years of service and a converted-income deduction, the tax burden is generally lower than ordinary income tax. The exact tax depends on years of service and the size of the severance.
What if I don't receive my severance pay?
The employer must pay severance within 14 days of departure; if not, you can file a complaint or report to the regional employment and labor office of the Ministry of Employment and Labor. Non-payment can result in delay interest and criminal liability.
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Last updated: 2026-06-25