How severance is calculated
Under the Employee Retirement Benefit Security Act, an employer must pay severance (퇴직금, toejikgeum) to anyone who leaves after working for at least one year. The formula is short:
Severance = average daily wage × 30 days × (days employed ÷ 365)
In other words, about one month's pay for every year you worked: roughly three months' pay after three years, five after five. The part that needs care is the average daily wage.
What goes into the average wage
The average daily wage is all the wages paid in the three months before your leaving date, divided by the number of days in those three months. "All the wages" covers more than base pay:
- Base pay and regular allowances — position, qualification and meal allowances, and anything else paid every month.
- Overtime, night and holiday pay actually received in those three months. A busy final quarter raises your severance.
- 3/12 of regular bonuses paid in the year before you leave.
- 3/12 of unused annual leave pay received in that year.
One-off payments that aren't pay for work — congratulatory gifts, travel expense reimbursements — are left out.
A floor: ordinary wage
If you had unpaid leave or sick leave just before leaving, the three-month average can come out unusually low. The Labor Standards Act protects you here: if the average wage is lower than your ordinary wage, the ordinary wage is used instead. The calculator checks this for you.
Counting the days
Count from your first day of work to your leaving date, which is the day after your last working day. If you worked from 2 March 2021 to 28 February 2026, your leaving date is 1 March 2026 and you were employed for 1,825 days. Probation and internship periods count, and so does parental leave (though it is left out of the three-month average).
Who qualifies — including foreign workers
- You worked for the same employer for at least one year.
- You worked 15 hours a week or more on average over four-week periods.
That's all. Nationality, visa type and contract type don't matter: full-time, contract and part-time workers all qualify, and Korean labor law protects foreign employees in the same way. A clause in your contract saying you give up severance is void. Short contracts that were renewed back to back usually count as one continuous period of employment.
On an E-9 (EPS) visa? Your employer pays into Departure Guarantee Insurance (출국만기보험) for you, and that insurance pays out after you leave Korea. If the payout is less than your legal severance, the employer owes you the difference. Check the rules for your own visa before you leave.
Tax on severance
Severance is taxed separately as retirement income, not as salary. After deductions for years of service, the tax is much lower than on the same amount of salary, and the longer you worked the lower the effective rate. If the money goes into an IRP retirement account, the tax is deferred until you withdraw it. This calculator shows severance before tax.
When it must be paid — and what to do if it isn't
Severance must be paid within 14 days of your leaving date. The deadline can be extended only if you agree. Late payment carries interest of 20% a year.
If you are not paid, you can file a wage complaint with the Ministry of Employment and Labor online or at your local labor office (call 1350 for help). If your employer has gone out of business, the government's wage guarantee fund can pay part of what you are owed.
What this calculator doesn't include
- Retirement income tax — the result is before tax.
- Company pension plans — a defined-contribution (DC) plan pays whatever the account is worth, which can be more or less than the legal amount.
- Leave periods in the last three months — by law, periods such as parental leave are left out of the three-month average. If that applies to you, enter your normal monthly pay.
- Departure Guarantee Insurance payouts for E-9 workers.