Korea severance pay calculator
Estimate your 퇴직금 under the statutory formula: 30 days of average wage per year of service.
Severance pay calculator
Estimate your Korean severance pay (퇴직금) under the statutory formula. Based on the Employee Retirement Benefit Security Act.
Meal, housing, transport, only if written into your contract.
Total bonus paid in the 12 months before your last working day. Leave blank if none.
Statutory minimum under the Employee Retirement Benefit Security Act (근로자퇴직급여보장법). Requires 1+ year of continuous service at 15+ hours per week. Tax estimate uses simplified brackets based on years of service, actual retirement income tax (퇴직소득세) uses a graduated annual-conversion formula with its own deductions. Your employer calculates the exact amount. For informational purposes only.
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.
Worked examples by tenure
The statutory formula scales linearly with years of service, but the retirement income tax does not, the longer you work, the lower the effective tax rate on the same gross severance. The three scenarios below assume a worker earning ₩4M monthly base salary plus a ₩4M annual bonus, no extra allowances. Plug your own numbers into the calculator above for an exact figure.
2 years of service
Average daily wage with bonus pro-ration is roughly ₩155K. Statutory severance: 2 × 30 × ₩155K ≈ ₩9.3M gross. Retirement income tax at 2 years tenure runs about 6 to 8 percent effective; net to you is roughly ₩8.6M. Most foreign workers on E-7 in their second year fall in this band.
5 years of service
Same wage base, 5 years: 5 × 30 × ₩155K ≈ ₩23.3M gross. Length-of-service deductions kick in harder at 5+ years, so effective tax drops to around 3 to 5 percent, netting roughly ₩22M. This is a common payout for departing E-7 holders who completed two contract cycles.
10 years of service
10 years: 10 × 30 × ₩155K ≈ ₩46.5M gross. Retirement income tax falls under 3 percent effective at this tenure, so the net is roughly ₩45M. F-2 / F-5 holders who reach the 10-year mark with the same employer are the typical recipients. If wages climbed during the 10 years, the average daily wage uses the LAST 3 months, meaning more recent salary growth lifts the entire severance, not just the recent years.
DB vs DC vs IRP: which one are you on?
Korean retirement benefits come in three architectures. Your employment contract or HR portal will tell you which one your firm uses; if you can't find it, ask HR directly because the answer changes how your severance is calculated and where it lands.
| Type | Korean | How it works | Investment risk |
|---|---|---|---|
| DB (Defined Benefit) | 확정급여형 | Employer guarantees the statutory severance amount at separation. | Employer |
| DC (Defined Contribution) | 확정기여형 | Employer contributes 1/12 of annual wage into an investment account in your name each year. | Worker |
| IRP (Individual Retirement Pension) | 개인형퇴직연금 | Tax-advantaged account that receives DC rollovers and severance lump sums above ₩3M. | Worker |
Most Korean firms have shifted to DC over the last decade. If you are unsure, the practical default is DC, and at separation the balance rolls into an IRP account at the bank of your choice unless you elect a direct cash payout.
Severance for foreign workers leaving Korea
If you are leaving Korea permanently, you have two options. Direct lump-sum payout means the employer pays severance into your Korean bank account, you pay 퇴직소득세 retirement income tax, and the net amount is yours to remit abroad. The advantage is simplicity; the disadvantage is paying tax now rather than deferring. IRP rollover means the severance enters a tax-deferred Individual Retirement Pension account; you can leave it invested or withdraw later. The advantage is tax deferral; the disadvantage is that managing a Korean IRP account from abroad is operationally awkward (Korean ARS phone confirmations, banking app re-verification, language).
For most foreign workers leaving Korea, lump-sum payout is the practical choice. Note: severance is separate from National Pension (NPS) contributions, which are governed by your home country's Social Security Totalization Agreement with Korea. Lump-sum NPS refunds are available on departure if your country has a totalization agreement.
Need the full story?
Our severance pay guide covers DB vs DC vs IRP in depth, the de-facto employee test, and how to claim unpaid severance.
Read the severance pay guideFrequently asked questions
How is severance pay calculated in Korea?
Korean severance pay (퇴직금) follows a fixed statutory formula: 30 days of average daily wage multiplied by years of service. The average daily wage (평균임금) is the sum of all wages received in the last 3 months divided by the number of days in that period. It includes base salary, contractual allowances, and a pro-rated share of the annual bonus (bonus ÷ 12 × 3). For example, a worker earning ₩4M monthly base + ₩2M bonus over 5 years receives roughly 5 × 30 × ₩133K = ₩20M gross severance.
Do foreign workers in Korea get severance pay?
Yes. The Employee Retirement Benefit Security Act (근로자퇴직급여보장법) applies regardless of nationality, visa type, or contract language. Any worker with 1+ year of continuous employment at 15+ hours per week qualifies. E-9, E-7, F-2, F-4, F-5, F-6, D-8, D-10 and any other employment-permitting visa is covered. Misclassified contractors paid 3.3 percent withholding may still qualify if the de-facto employee test is met.
When does my Korean employer have to pay severance?
Within 14 days of your last working day. Delays beyond 14 days accrue 20 percent 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. If your employer refuses or delays, file a complaint with the Ministry of Employment and Labor (고용노동부), the process is free and accepts foreign-language complaints in major languages.
What is the difference between DB, DC, and IRP for Korean retirement benefits?
DB (Defined Benefit, 확정급여형) is the legacy default: the employer guarantees the statutory severance amount regardless of fund performance. DC (Defined Contribution, 확정기여형) requires the employer to contribute 1/12 of annual wage each year into an investment account in your name, and the worker bears investment risk. IRP (Individual Retirement Pension, 개인형퇴직연금) is a tax-advantaged account that receives DC rollovers and any severance lump sum above ₩3M. Most Korean firms have moved to DC; foreign workers leaving Korea typically roll DC and IRP balances into a domestic-bank IRP and elect a lump-sum withdrawal.
How is severance pay taxed in Korea?
Severance is not taxed at your regular income bracket. Korea uses a special retirement income tax (퇴직소득세) with its own graduated formula based on years of service. Longer service significantly reduces the effective tax rate via length-of-service deductions. A worker with 10+ years of service typically sees an effective rate under 5 percent on a normal severance payout. Your employer or the receiving IRP provider calculates the exact figure at the time of distribution.
Can my employer say my salary already includes severance?
No, this has been illegal in Korea since 2010. Any clause stating that monthly salary includes severance pay is void. The employer still owes the statutory severance amount on top of what they paid you each month. If you find this clause in your contract, document it but do not let it stop you from claiming severance at separation.
What about severance for foreign workers leaving Korea permanently?
You receive severance the same way as any other separation. The complication is what happens to the lump sum. If you elect direct cash payout, you pay 퇴직소득세 retirement income tax in Korea before the funds leave the country. If you roll into an IRP, you can defer tax until withdrawal, but most foreign workers leaving permanently take the lump sum because IRP funds become hard to manage from abroad. Pension contributions (NPS, separate from severance) can be lump-sum refunded if your home country has a Social Security Totalization Agreement with Korea.