The rules on severance pay in detail
An employee with at least one year of service is entitled to statutory severance benefits. This is owed regardless of the reason for termination, whether voluntary or involuntary. Employers can use a qualifying severance-pension plan to satisfy this obligation. Unless employees are subject to a qualified severance pension plan, they must be paid statutory severance pay within 14 days of termination.
Statutory severance pay is calculated as the number of years of continuous service (pro-rated) x 30 days’ average daily wage. (The average daily wage is the total wages paid to the employee over three months prior to termination divided by the total number of days during this period, subject to certain adjustments.)
In addition, within 14 days of termination, employees must be paid any unpaid wages, allowances, and other benefits.
Because at-will employment virtually does not exist in Korea, as a practical matter, many employers make an additional, ex gratia payment to employees in return for their voluntary resignation.
Author: Yulchon LLC
Date: December 2018