Understanding Severance Pay in Korea (2026 Guide)
Leaving a job in South Korea can be a complex process, but understanding your Toijikgeum (퇴직금) is the most critical financial step. Whether you are an English teacher finishing a contract or a corporate expat moving on, the law guarantees you a specific payout if you have worked more than one year.
1. Who is Eligible for Severance Pay?
Under the Employee Retirement Benefit Security Act, you are legally entitled to severance pay if you meet both of the following criteria:
- Continuous Service: You have worked for the same employer for at least 365 consecutive days.
- Work Hours: You worked an average of 15 hours or more per week over any 4-week period.
Are foreigners eligible? Yes, nationality is irrelevant. Foreign workers on E-2, F-4, F-2, E-7, and even D-10 visas are fully protected by Korean Labor Law regarding severance.
2. How to Calculate Your Average Daily Wage
The "Average Daily Wage" is the most important variable. It is calculated by taking the total wages paid during the 3 months immediately preceding your last day of work and dividing it by the total number of calendar days in those 3 months (usually 89-92 days).
Your "total wages" include your base salary, regular allowances, and a portion of your annual bonus (Bonus ÷ 12 × 3).
The Formula
3. Common Pitfalls for Expats
- Departure Overseas: Some employers may try to claim they don't owe severance if you are leaving the country. This is illegal.
- Housing Allowance: If your housing is paid directly by the company, it is typically excluded from the severance calculation. If it is paid as a cash allowance on your payslip, it may be included.
- Severance Assurance Insurance: Many employers pay into a "Samsung Fire" or similar severance insurance policy. You must apply for a refund from the insurance carrier after your last day.
Frequently Asked Questions
When should I receive my severance pay after leaving?
The employer must pay your severance within 14 days of your last day of work. If the payment is delayed beyond 14 days without a prior agreement, the employer may be liable for a 20% annual interest penalty on the delayed amount.
Is severance pay taxable in Korea?
Yes, severance pay is subject to 'Retirement Income Tax' (퇴직소득세). However, the tax rate for retirement income is significantly lower than regular income tax because the income is averaged over your years of service to prevent hitting high tax brackets.
What happens if I work only 11 months?
If you work less than 365 days, you are legally entitled to ₩0 in severance pay. Even if you work 360 days, the law does not require the employer to pay a pro-rated amount. Always try to stay beyond the 1-year mark.