Korea Severance Pay (Toijikgeum) 2026: The Ultimate Expat Guide
Leaving a job in South Korea is rarely just about saying goodbye. For most expatriates, the final "goodbye" is tied to a significant financial payout known as Severance Pay (Toijikgeum, 퇴직금). As of 2026, Korean labor laws remain some of the most protective in the world, ensuring that even if you're not a citizen, your years of hard work translate into a mandatory cash benefit.
How is Severance Pay Calculated in Korea?
The direct answer is at least 30 days of average salary for each year of service. The official 2026 MOEL formula is: (Average Daily Wage × 30 days) × (Total Days Worked ÷ 365). To be eligible, you must work for 365+ consecutive days.
The calculation isn't as simple as just multiplying your last month's salary. The Korean Ministry of Employment and Labor (MOEL) uses a specific "Average Daily Wage" metric that accounts for your earnings over the last 90 days, including bonuses and even unused vacation days.
"The goal of Toijikgeum is to provide a safety net for workers transitioning between jobs. It is essentially a deferred wage that you have 'earned' throughout your tenure." — 2026 Labor Policy Reform Paper.
The Eligibility Check: The 1-Year Rule
The most common heartbreak for expats is missing the one-year threshold. If you work for 364 days, you legally receive ₩0 in severance. If you work for 366 days, you receive the full year's worth. Here is exactly what you need to qualify:
Calculating the Average Daily Wage (ADW)
As of March 2026, the ADW remains the cornerstone of your payout. You calculate this by taking the total wages of the last 3 months and dividing by the actual number of days in those months (usually 90, 91, or 92).
| Salary Component | Inclusion Status |
|---|---|
| Base Salary | Included (100%) |
| Regular Allowances | Included (Meal, Position, etc.) |
| Annual Bonus | Prorated (Bonus ÷ 4) |
| Unused Leave Pay | Prorated (Leave Pay ÷ 4) |
| Housing (Direct Pay) | Excluded |
Crucial Calculation Note: If your calculated ADW is lower than your "Ordinary Wage" (your standard hourly/daily rate for basic work), the employer must use the higher Ordinary Wage by law. This prevents employers from forcing you to take unpaid leave right before resigning to lower your severance payout.
Retirement Pension Plans (DC vs DB)
Many modern Korean companies have transitioned to retirement pension plans. It is essential to know which one you are on:
- Defined Benefit (DB): This is the traditional severance model. Your final payout is determined by your salary at the time of exit.
- Defined Contribution (DC): The company deposits 1/12th of your annual salary into a separate bank account every year. You are responsible for the investment of that money.
What to do if your employer won't pay?
By law, your severance must be paid within 14 days of your last day. If they refuse or delay, your first stop is the Ministry of Employment and Labor (고용노동부). You can file a petition online or visit a local labor office. Most cases are resolved through mediation once an official government letter is received by the company.
Frequently Asked Questions
Can I receive severance if I quit voluntarily?
Yes, absolutely. Voluntary resignation does not affect your legal right to severance pay. As long as you meet the 1-year/15-hour service thresholds, the reason for leaving (unless it's for criminal gross misconduct proven in court) is irrelevant.
Is severance pay taxable in Korea?
Yes, but it uses a different tax scale called Retirement Income Tax. This is much lower than regular income tax because the income is spread out over your total years of service. For a typical 1-year contract, the tax is minimal (usually under 3-5%).
What if I worked 1 year and 6 months?
You receive a pro-rated amount. You don't have to work in full-year increments. For 1.5 years, you would receive roughly 45 days worth of average wage.