Severance Pay in Korea

Severance pay (Twae Ji Kum) in Korea has emanated from Korean workers wanting some form of security in the event of unexpected layoffs. Today it is a form of saving that all employers are obliged to conduct on behalf of their employees. This saving must be forwarded when the worker leaves the organization in accordance with the following conditions –

The employee must have been employed for a minimum of 365 days (continuous) after which one month’s severance pay (calculated on the average salary of the previous 3 months) must be paid.

For each month above 365 days employment the employee is entitled to a pro rata severance pay. That is, severance pay accrues on a monthly basis after one year.

The organization must have a minimum of six employees (Korean and/or foreign) for severance pay to apply.

Severance pay cannot be waived via a contractual clause.

The employer is not obliged to pay the severance pay until fourteen days after the expiration of the contract.

This final condition is the one that causes the greatest headache for foreign employees in Korea. If you are staying in the country there are certain steps that can be taken to retrieve what is legally yours.

If, after the fourteen days have elapsed, you don’t receive your severance pay you should then contact the Ministry of Labor and file a complaint against the employer. In doing so you should have a copy of your contract and at least the last three months’ pay slips.

While the Ministry of Labor has no legal authority to force the employer to pay they can, and will, fine the employer an amount usually greater than the severance pay would have been.

If the Ministry of Labor orders the employer to pay, and the employer still proves recalcitrant, the final step is to contact the Ministry of Justice and file a civil complaint at a fee of 30000 won. The employer and you will be required to attend a hearing and the court has the right to seize the employer’s assets in order to ensure that the severance monies get paid.

For those leaving Korea these steps can be undertaken through a lawyer, although this will incur the necessary legal costs.

The severance pay can be deposited directly into a nominated bank account without the recipient having to be present to collect it. In this case it is wise to designate an account with an international bank in Korea, so that funds can be withdrawn from overseas.

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