Can a foreigner subscribe to a retirement pension? What is the difference between severance pay and retirement pension?
Foreigners can also subscribe to a retirement pension, in accordance with retirement pension regulations, if you are a worker in Korea under the Labor Standards Act and your workplace operates a retirement pension system. This is a system in which an employer sends severance pay funds to an external financial institution during the worker’s service, which manages the funds in accordance with the instructions of the employer or the worker. When a worker retires, these funds can be paid as pension or lump-sum allowance. The Act on the Guarantee of Employees’ Retirement Benefits looks at two types of pension: a defined contribution (DC) plan and a defined benefit (DB) plan.
On the other hand, the retirement allowance system is a system that makes it possible to pay a retiring worker a prorated amount equivalent to 30 days’ average wages for each year of continuous service. The employer can establish and operate one or more DC plans or DB plans. If a company does not have a retirement pension plan, it will be subject to retirement pension provisions. Therefore, the company will have to pay severance pay when a worker retires.