Korea Severance Pay Calculator

About Korea Severance Pay Calculator

This calculator applies South Korea's statutory severance formula. It is a Korean system: if you work in Korea under a Korean employment contract, the Employee Retirement Benefit Security Act requires the employer to pay at least 30 days of average wage for every year of continuous service. The Ministry of Employment and Labor writes it as average daily wage × 30 × (days employed ÷ 365). You enter your hire date, last date, pay for the final three months, and yearly bonus and leave pay; the tool runs that formula and can estimate Korean retirement income tax.

Most of the variation between two people with the same salary comes from the average wage, not the length of service. The average wage is the total wage paid in the three calendar months before the leaving date divided by the number of calendar days in that window, which is anywhere from 89 to 92. What lands inside those three months, and what is legally excluded from them, can move the result by hundreds of thousands of won.

Foreign nationals are covered on the same terms as Korean nationals, since the Act applies to every workplace that employs workers (households employing domestic workers and businesses employing only live-in relatives are excluded). Amounts are in Korean won.

Who qualifies: one year and 15 hours a week

Article 4 of the Act excludes two groups: workers with less than one year of continuous service, and workers whose contractual hours average under 15 per week over four weeks. Job titles do not matter. A part-timer contracted for 16 hours a week who stays more than a year qualifies; someone contracted for 14 hours does not, however many years they stay. The test uses contracted hours, not the overtime you happened to work in a busy week.

The one-year line is counted in days. If you were hired on 2 September 2025 and your leaving date is recorded as 1 September 2026, that is 364 days and there is no statutory entitlement. If the date is 2 September 2026, it is 365 days and you qualify. The calculator flags anything under 365 days.

An employer that never set up a retirement pension plan is treated by Article 11 as having a severance pay plan. "Our company doesn't do severance" is not a legal position in Korea.

What counts in the three-month total

Base pay, monthly allowances and overtime or night-work pay count for the months in which they were paid. Bonuses paid on an annual cycle are handled differently: 3/12 of the total bonus received in the year before leaving is added. This smooths out the accident of a bonus falling inside or outside the three-month window. The Ministry's own calculator shows the same treatment, adding ₩1,000,000 for a ₩4,000,000 annual bonus.

Unused annual leave pay needs care. The Ministry's administrative interpretation (Wage and Working Hours Division-2861, December 2021) includes 3/12 of the pay for leave that arose in the year before your leaving year and went unused. Pay for leave that arose in your final year and becomes payable only because you are leaving is not included. Entering the whole leave payout you receive on your last day overstates severance.

Article 2 of the Labor Standards Act Enforcement Decree removes certain periods, together with the wages paid during them, from both the numerator and the denominator. The point is to stop a stretch of reduced pay from dragging the average down:

• The first three months of probation
• Business suspension caused by the employer
• Maternity leave and miscarriage/stillbirth leave
• Time off for treatment of a work-related injury or illness
• Parental (childcare) leave
• Periods of industrial action
• Military, reserve or civil defense duty (unless you were paid during it)
• Employer-approved leave for a non-work injury, illness or similar reason

Same salary, different severance

Because the divisor is calendar days, a window containing February produces a higher daily average. On ₩3,000,000 a month, leaving on 1 September gives a window of 1 June to 1 September, 92 days, so 30 days of average wage is ₩2,934,783. Leaving on 2 May gives 2 February to 2 May, 89 days, and ₩3,033,708, a difference of roughly ₩99,000 for each year of service.

A raise just before leaving flows through to every past year, since the final average wage is multiplied by total service. The reverse also holds: unpaid leave or a pay cut in the last months lowers the average unless it falls into one of the excluded periods above. To cap the damage, Article 2(2) of the Labor Standards Act says that if the average wage comes out lower than the worker's ordinary wage, the ordinary wage is used instead.

Enter the days of any excluded period inside the three months and the pay received during them, and the tool removes both from the day count and the wage total. Enter your ordinary daily wage and it compares the two, uses the higher one and shows which it applied. If the entire three months is excluded, the average has to be taken from the three months before that, which this tool cannot do.

If you are in a retirement pension plan

In a defined benefit (DB) plan, the lump sum at retirement must be at least 30 days of final average wage per year of service (Article 15), so the arithmetic matches this calculator. In a defined contribution (DC) plan, the employer pays at least 1/12 of your annual wages into your account each year (Article 20) and your benefit is whatever that account holds after investment. This formula does not apply to DC members; check the balance statement from your pension provider.

Severance is in principle paid by transfer to an Individual Retirement Pension (IRP) account in your name (Article 9(2)). Exceptions in the Enforcement Decree include leaving at age 55 or older, a benefit below the amount set by Ministry notice, and a foreign worker who leaves Korea after the job ends. Money moved to an IRP is not taxed at transfer; tax applies on withdrawal. The after-tax figure here assumes a direct lump-sum payment, and a note under the result says so.

How the retirement income tax estimate works

The tool follows Articles 48 and 55 of the Income Tax Act. It subtracts a service-years deduction (₩1 million per year up to five years; ₩5 million plus ₩2 million per year for 6–10 years; ₩15 million plus ₩2.5 million per year for 11–20; ₩40 million plus ₩3 million per year beyond 20), divides by years of service and multiplies by 12 to turn the lump sum into an annual equivalent. It then subtracts the converted-pay deduction, applies the ordinary income tax brackets, divides by 12 and multiplies by years of service again. Local income tax at 10% of that amount is added.

For tax, any part-year counts as a full year (Article 48(1)). Five and a half years of work is six years for tax, so the service deduction is ₩7 million rather than ₩5 million. The severance amount itself still uses days ÷ 365 with decimals. The effect of all this is that a lump sum earned over many years is taxed at a far lower effective rate than the same amount paid as salary in one year.

Worked examples

How to use it

1. Enter your hire date and leaving date.
2. Enter the total gross pay for the three months before leaving. If an excluded period (parental or maternity leave, work-injury recovery, etc.) falls inside, enter its days and the pay received during it; add your ordinary daily wage if you know it.
3. Enter last year's total bonus and unused leave pay from the prior year; the tool includes 3/12 of each.
4. Switch on the tax estimate to see retirement income tax and the net amount.

Frequently asked questions

Notes

Legal texts checked on the Korea Law Information Center in September 2026. Tax brackets and deductions change when the Income Tax Act is amended.

Related guides

• How Korean Severance Pay Works: Average Wage, DB vs DC Pensions, Interim Settlement and the 14-Day Deadline