Labor Law Q&A details

Chapter 3 Working hours, Recess, Off-Days and Leave

Interim Settlement of Retirement Allowances?

One of my employees wants me to pay an interim settlement of retirement allowance because he needs to buy a house. Currently, he is in 10 years of continuous service and asking me to pay retirement allowance for 5 years from the beginning of his employment. If an employee asks for an interim settlement of retirement allowance, am I allowed grant it? And can an employee decide on the interim settlement period at will?


In order to protect the purpose of the old-age security, the law provides the reason for the interim settlement of retirement allowance as follows.

1. Where a worker who is non-homeowner purchases a house in his/her own name;

2. Where a worker who is non-homeowner pays a tenancy deposit under Article 303 of the Civil Act or a security deposit under Article 3-2 of the Housing Lease Protection Act for residential purposes. In such cases, the number of such occurrences shall be limited to one time while the worker works in the same business;

3. Where a worker pays the medical care costs incurred for convalescence from illness or injury of any of the following persons, which requires at least six months of convalescence:
(a) The worker himself/herself;
(b) The spouse of the worker;
(c) The family members dependent on the worker or on the spouse of the worker;

4. Where a worker is declared bankrupt pursuant to the Debtor Rehabilitation and Bankruptcy Act within five years counted retroactively from the date he/she applies for interim settlement of a retirement allowance;

5. Where a worker receives a decision to commence individual rehabilitation procedures pursuant to the Debtor Rehabilitation and Bankruptcy Act within five years counted retroactively from the date he/she applies for interim settlement of a retirement allowance;

6. Where an employer implements a system of reducing wages based on a particular age, length of consecutive service, or amount of wage through a collective agreement, employment rules, etc. on the condition of extending or guaranteeing the current full retirement age;

However, even if a worker meets the requirements for interim settlement of retirement allowances, the employer is not obliged to make the interim settlement, and even if the interim settlement is rejected, there is no violation of the law. In the event that the employer pays the retirement allowance in advance, he/she must keep the relevant documents until the fifth year after the employee’s retirement.

If a worker requests, the employer is allowed to pay the retirement allowance for the ‘period of continuous work’ prior to the retirement of the worker. In this case, the ‘period of continuous work’ does not mean the entire period up to the time of the request. Therefore, even if you meet the demands of the worker, there will be no problem of violation of the law. The Ministry of Labor interprets that it can be agreed between the employee and the employer since there is no separate setting period for an interim settlement of retirement allowance.

For further questions, please
call (+82) 2-539-0098 or email bongsoo@k-labor.com

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