Complete Guide to Worker Pay Rights: From Average Wage to Dismissal & Shutdown Pay

Many workers are unaware of the pay protections available to them during sudden dismissal or company shutdowns. Korea's Labor Standards Act provides various safeguards including dismissal notice pay and shutdown pay. This guide covers the difference between average wage and ordinary wage, and explains how to calculate each type of compensation.

Average Wage vs Ordinary Wage

Korean labor law uses two wage concepts for calculating various allowances. Average wage is the total wages paid over the 3 months prior to the triggering event divided by the total number of calendar days. Ordinary wage includes only fixed, regular, and uniform payments like base pay and position allowances.

For dismissal notice pay, the amount more favorable to the worker between average wage and ordinary wage is applied.

Dismissal Notice Pay (Article 26)

Employers must give at least 30 days advance notice before dismissal. If notice is shorter, the employer must pay dismissal notice pay equal to 30 days of wages (or the shortfall). For example, if the daily average wage is 100,000 won and no notice was given, the dismissal pay is 3,000,000 won.

Shutdown Pay (Article 46)

When an employer shuts down operations due to employer-attributable reasons (financial difficulties, equipment failure, lack of materials), they must pay at least 70% of the average wage during the shutdown period. If 70% of average wage is less than the ordinary wage, the full ordinary wage must be paid instead. Violation carries penalties of up to 3 years imprisonment or 30M won fine.

Unfair Dismissal Remedies

Workers dismissed without just cause can file a remedy request with the Labor Relations Commission within 3 months of dismissal (free of charge). If the dismissal is found unfair, the worker may be reinstated with back pay, or may choose monetary compensation instead.

Worker Rights Checklist

When facing dismissal or shutdown: (1) Demand written notice stating dismissal reasons (dismissal without written notice is void), (2) Confirm severance pay eligibility (1+ year of service), (3) Apply for unemployment benefits for involuntary separation, (4) Claim any unpaid wages within the 3-year statute of limitations.