Severance Pay Calculator
Calculate severance pay based on employment period and salary.
Overview
The Severance Pay Calculator computes statutory severance pay under Korea's Labor Standards Act (Article 34). Employees who have worked continuously for one year or more are entitled to severance pay based on the average wage of the last three months of employment. This tool accurately calculates total service days from your start and end dates, and incorporates base salary, fixed allowances, bonuses, and unused annual leave pay into the 3-month average wage computation. Whether you are on a DB (defined benefit) or DC (defined contribution) retirement pension plan affects how your severance benefits are calculated, so it is advisable to confirm your plan type beforehand. The calculator is useful for both employees planning their departure and employers verifying statutory obligations.
Formula
Severance Pay = Daily Average Wage × 30 days × (Total Service Days ÷ 365) • Daily Average Wage = Total wages for last 3 months ÷ Total calendar days in that period • 3-month total wages = Base salary + Fixed allowances + (Annual bonus × 3/12) + (Annual leave pay × 3/12) • If average wage is lower than ordinary wage, ordinary wage applies
How to Use
- 1Enter the start date and end date of employment.
- 2Enter the base salary and fixed allowances for the last 3 months before resignation.
- 3Enter total annual bonus and annual leave pay if applicable.
- 4Click 'Calculate' to see the total severance pay amount.
Examples
3-Year Office Worker Severance
Monthly base salary KRW 3M, fixed allowances KRW 500K, annual bonus KRW 4M — retiring after 3 years
10-Year Long-Tenure Employee
Monthly base KRW 4.5M, allowances KRW 1M, annual bonus KRW 10M, annual leave pay KRW 2M — retiring after 10 years
Part-Time Worker (1 Year 1 Month)
Monthly pay KRW 2.09M (minimum wage level), working full-time for 1 year and 1 month
Background
Korea's severance pay system was established in 1961 with the Labor Standards Act, spanning over 60 years of history. Initially applicable only to workplaces with 30+ employees, it has expanded to cover all workplaces with 1+ employees. In 2005, retirement pension plans (DB and DC types) were introduced alongside the statutory severance system, and since 2022, all workplaces are required to establish a retirement pension plan. Severance pay is protected under the Employee Retirement Benefit Security Act, and employers who fail to pay within 14 days face penalty interest of 20% per annum.
Tips
- ✔Employees with less than one year of service are not legally entitled to severance pay.
- ✔Bonuses and unused annual leave pay must be proportionally included in the 3-month average wage.
- ✔Severance must be paid within 14 days of the resignation date.
- ✔Severance income tax is calculated separately with service-year deductions.
FAQ
Q. Can I receive severance pay if I worked less than one year?
Under the Labor Standards Act, severance pay is only mandatory for employees with one or more years of continuous service. However, company policy or individual contracts may provide for earlier payment.
Q. Are bonuses included in severance pay calculation?
Yes, regular and uniform bonuses are included in the average wage. The annual bonus is divided by 12 and 3 months' worth is added to the 3-month wage total.
Q. Is severance pay taxed?
Yes, severance income tax applies. Deductions for years of service reduce the tax burden, and longer tenure results in lower effective tax rates.
Q. What is the difference between DB retirement pension and statutory severance pay?
DB (Defined Benefit) pensions use the same formula as statutory severance (3-month average wage × years of service) but are paid from externally managed funds. DC (Defined Contribution) pensions require the employer to deposit at least 1/12 of annual salary, and the final benefit depends on investment returns.
Q. Can I receive interim (mid-service) severance pay?
Since 2012, interim severance payments are generally prohibited. Exceptions are allowed for legally specified reasons such as purchasing a home, paying jeonse deposit, extended medical treatment (6+ months), or natural disasters.
Q. Are contract and part-time workers eligible for severance pay?
Yes, regardless of employment type, any worker who has worked continuously for one year or more and at least 15 hours per week is entitled to severance pay — including full-time, contract, and part-time employees.
Q. What are the benefits of transferring severance pay to an IRP?
Transferring severance to an IRP (Individual Retirement Pension) defers severance income tax. When withdrawn as an annuity, only 60–70% of the original severance income tax rate applies, significantly reducing the tax burden.
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