Retirement benefit plans consist of the Severance Pay Plan, Defined Benefit Retirement Pension Plan, and Defined Contribution Retirement Pension Plan. These three plans are equivalent in value, and companies established since December 2005 are required to carry one or more of them.
As there is no provision on qualifying causes of retirement for entitlement to severance pay, an employer shall give severance pay in all cases of termination of the employment relationship, including due to the employee's resignation or death, the company's disorganization, completion of the work, their having reached the retirement age, or their being dismissed for disciplinary reasons.

1. Requirements for receipt of severance pay

(1) Those eligible for severance pay shall be employees under the Labor Standards Act.
① Whether to pay severance pay to an employee who was appointed as a company director
In cases where an employee was appointed as company director without terminating employment, the matters related to severance pay shall be evaluated as follows: ⓐ In cases where the director fulfills his duties with the authority of a representative director or executive director commissioned by the company by means of the Commercial Act and/or Civil Act and receives a service fee, the director cannot be deemed an employee under the Labor Standards Act. Therefore, his severance pay occurs from the time when he was appointed as director (on the date of employment termination according to the LSA). statue of limitations is also calculated from the same date. ⓑ In cases where, despite holding a director’s title, he maintains subordinate relations to the employer and is actually in an employee position, the severance pay occurs from the time the director resigned from the company. statue of limitations is also calculated from the same date. MOEL Guidelines: Wage 68200-814 2001.11.27.

② How to calculate severance pay for a person assigned to a regular position from that of a daily worker
Consecutive years of employment to calculate severance pay for an employee who worked for the company as a daily worker but was reemployed as a regular employee shall be considered collectively based on the concrete facts as follows: If a temporary employee quit his temporary position, the employer accepted it, and he followed employment procedures by applying for a regular position, his previous labor contract was terminated effectively regardless of the new employment. However, if the temporary employee was rehired to a regular position while maintaining temporary employment, this is only a transfer to a regular position from an irregular position and his employment cannot be deemed effectively terminated. MOEL Guidelines: Wage 68207-581 2000.11.14.

③ When a retired employee is rehired by the same company, the employer cannot make a special contract that excuses the employer from severance pay obligations, as this violates a compulsory law. Such agreement becomes null and void.
When rehiring a retired employee, the company shall pay severance pay to the employee with a service period of at least one year after re-employment. Even though both parties agree there will be no severance pay, this agreement violates a compulsory law and becomes null and void. MOEL Guidelines: Kungi 68207-584 1999.03.12

④ Whether a full-time lecturer at an entrance exam institute is entitled to severance pay
If a full-time lecturer registered as an individual service provider provided labor service to the employer under substantial employment relations, they can receive severance pay. Whether or not a person is an employee under the Labor Standards Act shall be determined by whether the employee provides labor service to the employer under subordinate relations for the purpose of wages in a business or workplace regardless of the contract type. Full-time lecturers at an institute worked every day (6 days per week), which was distinct from other part-time lecturers, received fixed wages, and observed service and personnel regulations such as starting time and finishing time. They are therefore employees who provide labor service under subordinate relations. Seoul District Court ruling on Nov. 10, 2006, 2004Gadan69638.

⑤ If a person has continuously maintained daily employment formally as a daily employee, the Labor Standards Act shall apply to them and the employer shall pay severance pay to the daily employee who has served at least one year.
If a person has been a daily worker formally but maintained daily employment without cessation, they shall be considered a regular employee. It is not true that the continuity of employment shall be estimated by the employee providing an average of 25 days or more of work per month, but also by the employee providing 4 to 15 days on average every month. As the daily employees in this case provided labor service for 4 or 5 days every month without exception, they shall be considered continuously employed and the Labor Standards Act shall apply to them. Seoul District Court ruling on Apr. 19, 95Gahap11509.

⑥ The Labor Standards Act also applies to illegal migrant employees, who are therefore entitled to severance pay.
The term “employee” used in Article 2 of the Labor Standards Act means a person, regardless of occupation, who offers work to a business or workplace for the purpose of earning wages. In Article 6 of the Act, an employer shall not take discriminatory action in relation to working conditions on the grounds of nationality. The Labor Standards Act is applicable to foreign migrant employees, unless there are special reasons otherwise. Accordingly, the rules of severance pay stipulated in the Labor Standards Act apply to illegal migrant employees. Supreme Court ruling on Aug. 26, 1997, 97Da18875.


(2) Consecutive years of employment: The employee shall serve continuously for at least one year.
Years of continuous employment refer to the period from the time when the employee begins working for the company to the time when the employee resigns from the company.
① The period of disciplinary ‘suspension from work’ due to an employee’s own reasons shall be included in the period of continuous employment, which is the basic data for calculating severance pay, if a person maintains subsidiary employment relations with his employer. MOEL Guidelines: Retirement Benefit Security Team-1596.

According to Article 8(1) of the Employee Retirement Benefit Security Act, an employer shall pay severance pay equivalent to the average wage for thirty days or more for each one year of continuous employment. The period of continuous employment in this Act means “the period from establishment of a labor contract to its termination.” The period in which the employee did not provide labor service, but remained under subordinate employment relations with an employer, shall be included into the period of continuous employment for calculating severance pay. Accordingly, the period of disciplinary ‘suspension from work’ due to the employee’s own reasons shall be included in the period of continuous employment as the basic data for calculating severance pay, so long as an employee has maintained subsidiary employment relations with his employer.
② The consecutive years of employment to calculate severance pay shall include the total period of employment, excluding the period of time when the employer ordinarily hired fewer than five employees. (Effective until December 2010; after this period, this shall apply to all employers.) MOEL Guidelines: Retirement Benefit Security Team-2582,2006.07.20.

The severance pay according to Article 4 and 8 of the Employee Retirement Benefit Security Act applies to all businesses or workplaces in which no fewer than five employees are ordinarily employed. In cases where the company has maintained five or more ordinary number of employees for a long period of time, but the number of employees were reduced to fewer than five employees for a certain period of time, the consecutive years of employment to calculate severance pay shall include the total period of employment, excluding the period of time when the employer ordinarily hired fewer than five employees.

2. Calculation of severance pay

Severance pay shall be 30 days or more of average wage for each year of consecutive service. The period for continuous employment shall include suspensions from work, service as a full-time labor officer of a Labor Union, labor service as a daily employee, detention periods from a criminal case, probationary periods, periods of strike, periods of absence, periods of suspension of service, suspensions from work owing to personal illness, etc. However, military service periods shall not be included in continuous employment.
① ‘Suspension period from work’ due to the employee’s personal reasons shall be included in the period for calculating average wages.
Average wage to calculate severance pay according to Article 2 of the Labor Standards Act means the amount calculated by dividing the total wages paid to a relevant employee during the three calendar months immediately before the day on which a cause for calculating his average wages occurred by the total number of calendar days during those three months. If the amount calculated in this method is lower than that of the ordinary wage of the employee concerned, the amount of the ordinary wage shall be deemed his average wages. In cases where the period of calculating average wages includes a period of time falling under any of Subparagraph 1 to 8 of Article 2(1) of the Enforcement Decree to the LSA, the period and wages paid for that period shall be deducted respectively from a basis period for the calculation of average wages and the total amount of average wage. However, the period in which the employee did not provide labor service due to his own reasons, such as absences for personal reasons, shall not be excluded from the basis period for the calculation of average wages. Accordingly, in cases where the employee did not provide labor service during the basis period to calculate severance pay due to personal reasons such as absences for personal reasons, the identical period shall be included into a basis period of average wages and calculated for severance pay MOEL Guidelines: Wages 68207-132,2003.02.27.
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② How to include bonuses paid through one year into the amount subject to the calculation of average wages.
There are no regulations stipulated in labor law about the matters concerning payment of bonuses, but bonuses shall be deemed wages as remuneration for work when they are stipulated in the rules of employment for payment conditions, amount, and payment period, or when they have been paid so habitually to all employees that the employee may have natural expectations to receive a bonus as a matter of course. On the other hand, in cases where the payment rate of bonuses was established per year-unit and paid for the period exceeding one month, the total amount of bonuses paid for a certain month shall not be included in calculation of average wages. The bonuses shall be calculated by dividing the total amount of bonuses paid to the relevant employee during the twelve calendar months before the day on which a cause for calculating his average wages occurred by the total number of calendar months, which is 3/12 times the total amount of bonuses paid per year. MOEL Guidelines: Wages 68207-120.

③ In cases where the severance pay regulation has been revised justifiably in the middle of the consecutive work period, the severance pay regulation effective at the time of retirement shall apply in calculation of severance pay. The calculation shall not be applied differently by dividing the period before or after the revision of the severance pay regulation. Supreme Court ruling on Sep. 10, 1996, 95Da15414.


3. Prohibition against systems discriminating in terms of severance pay

① Discriminating severance pay between full-time employees and part-time employees violates the principle of prohibition for different application. Seoul District Court ruling on Oct. 20, 2000, 2000Kahap8606.

Article 34(2) of the Labor Standards Act prohibits establishment of different severance pay systems according to job classification, title, business classification, etc. in one workplace and requires one severance pay system. If a company differs in application of severance pay between full-time employees and part-time employees, this violates the principle of prohibition against discrimination. Even though the company hired full-time employees and part-time employees differently and applied them differently in hiring procedures, job characteristics, promotion/transfer, etc., discrimination in severance pay shall not be justified without reasonable cause.
② That the company included the amount equivalent to severance pay into the monthly wage for foreign pilots amounted to establishment of a different application between foreign employees and native employees. Supreme Court ruling on Mar. 27, 1998, 97Da19725.

If a company agreed to include the amount equivalent to severance pay into the monthly wage for foreign pilots, it means that the company will not pay severance pay at the time of retirement to those foreign pilots. This is a different system of severance pay, prohibited by Article 28(2) of the previous Labor Standards Act, from that applied to native pilots who receive severance pay upon quitting. Therefore, foreign pilots can apply for severance pay by the rules of employment applying to the majority of employees.
③ If there are two different applications of severance pay, such as the rules of employment regulating a cumulative severance pay system for native employees and individual employment contracts regulating a singular severance pay system for foreign workers, this violates the regulation prohibiting different application of severance pay. Supreme Court ruling on Nov. 28, 1997, 97Da24511.


4. How to pay severance pay

Interim severance pay is implemented only in cases where the employee demands it, but the employer does not have a duty to agree to the employee's demand. Even if there are relevant regulations regarding the interim severance pay system in the rules of employment or the collective bargaining agreement, individual employees must request it concretely and then it can be handled as an adjustment of interim severance pay.
① Whether it is possible to pay interim severance pay for all employees with the consent of the majority of employees MOEL Guidelines: Wages 68200-111, 2002.02.20.


Enforcement Decree (Article 3) of the Employee Retirement Pension Security Act (Reasons for Interim Severance Pay)
1. Where an employee who has not owned a house has purchased a house in their own name;
2. Where an employee who has not owned a house makes a key money deposit (according to Article 303 of the Civil Act) or a security deposit (according to Article 3-2 of the Housing Lease Protection Act) for the purpose of moving into a residence. In this case the employee can only apply for the retirement pension one time during employment in a company or business;
3. Where an employee, employee's spouse according to Article 50 (Paragraph 1) of the Income Tax Act, or their dependent family member has received medical care for six months or more;
4. Where an employee has been declared bankrupt under the Debtor Rehabilitation and Bankruptcy Act within five years from the time of providing the retirement reserve as collateral;
5. Where an employee has received a decision for commencement of a rehabilitation proceeding under the Debtor Rehabilitation and Bankruptcy Act within five years from the time of providing the retirement reserve as collateral;
6. Where wages are decreasing due to the Wage Peak System according to rules from Paragraph 1 ~ 3 of Article 28 (1) of the Enforcement Decree to the Employment Insurance Act; and
7. Where other reasons and conditions prescribed by Ordinance of the Ministry of Employment and Labor, such as natural disasters, etc., are met.


According to Article 34 (3) of the Labor Standards Act, an employer may, upon request by an employee, even before his retirement, pay a severance pay calculated on the basis of consecutive years of employment. In this case, the number of consecutive years of employment for the calculation of a severance pay after such advance payment shall be reckoned anew from the moment of the latest adjustment of balances. The Employee Retirement Benefit Security Act, revised July 26, 2012, strengthened the Retirement Benefit Plan to ensure the retirement benefit is used as income during old age, rather than extra income before retirement. Interim severance payments are now restricted, and one of only seven reasons must exist.
② Even though the company has paid some amount as severance pay in the wages paid every month, it cannot be accepted as payment of severance pay. Supreme Court ruling on Mar. 11, 2005, 2005Do467.

The severance pay stipulated in Article 34(1) of the Labor Standards Act occurs on the condition of termination of employment relations, and, in principle, will not occur during the middle of the labor contract. Even if the employer agreed with an employee on payment of a certain amount of money as severance pay inside wages paid every month, this cannot be valid as payment of severance pay stipulated in Article 34(1) of the Labor Standards Act.
③ A special contract giving up the right to request severance pay or not to launch a civil suit is null and void due to violation of the Labor Standards Act, even if signed by an employee. Supreme Court ruling on Aug. 23, 2002, 2001Da41568.

Severance pay is the remuneration characteristic of deferred wages to be paid in return for continuous employment to an employee who retires after serving a certain period of time. The concrete right to request severance pay occurs on condition of the fact of termination of continuous employment. If an employee previously signed a special contract giving up the employee's right to request severance pay at the time of retirement or to launch a civil suit, this is null and void due to violation of the Labor Standards Act's compulsory regulation.