Korea Severance Pay 2027 Calculator (퇴직금)
Korean Labor Standards Act requires employers to pay severance (퇴직금) equal to 1 month's average wage per year of service. Employees with 1+ year tenure are eligible. Some employers convert to defined-contribution retirement plan (확정기여형 퇴직연금). Source: moel.go.kr.
Korea 퇴직금 Formula and Eligibility
Severance = (Average daily wage of last 3 months) × 30 × Years of service. Average daily wage includes base pay, regular bonuses, allowances, overtime — divided by days in the calculation period. Minimum 1 year tenure required. Part-time workers (15+ hours/week) also eligible. Source: Labor Standards Act Article 34.
DB vs DC Retirement Plan
Many employers shift from statutory 퇴직금 to corporate retirement plan: (1) Defined Benefit (DB) — same as 퇴직금 formula, paid at retirement. (2) Defined Contribution (DC) — employer contributes 1/12 of annual salary monthly to employee's individual retirement account (IRP). Employee can invest. DC is portable across jobs. Source: 근로자퇴직급여보장법.
Tax Treatment of Korea Severance Pay
Severance is taxed as 'severance income' (퇴직소득) with favorable lump-sum tax rates, not as regular income. Rate increases with severance amount but generally lower than top marginal income tax. Years of service multiplier provides deduction. Pension rollover to IRP avoids immediate tax. Source: Income Tax Act §22.
Pension Rollover Strategy — Defer Tax
Severance can be rolled into IRP (Individual Retirement Pension) — defers tax until withdrawal. Compound growth is tax-free until distribution. At withdrawal (age 55+), tax rate is typically lower. Roll-over within 60 days of receipt. Source: 퇴직연금감독규정.
Frequently Asked Questions
How is Korean 퇴직금 calculated?
30 days of average wage (last 3 months) × years of service. Average wage includes base + regular bonuses + allowances. Source: Labor Standards Act.
What's the minimum tenure for severance?
1 year of continuous service. Part-time workers (15+ hours/week) also eligible. Less than 1 year = no statutory severance.
Is severance pay taxed?
Yes, as 'severance income' (퇴직소득) at favorable lump-sum rates. Multi-year deduction applies. Rollover to IRP defers tax.
What is the difference between DB and DC retirement?
DB (defined benefit) = same 퇴직금 formula, paid at exit. DC (defined contribution) = employer puts 1/12 of annual salary into your IRP monthly. DC is portable, DB is not.
Can I withdraw 퇴직금 early?
No, only on separation from employment. Exception: when shifting to DC plan or critical illness. IRP withdrawal requires retirement (55+) for tax preference.