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Severance Pay Calculator

Enter your monthly average wage and tenure (years/months/days) to estimate the statutory pre-tax Korean severance pay.

Average gross monthly pay over the 3 months before separation, including bonuses and accrued leave. Use ordinary wage if it is higher.

Estimated severance (pre-tax)

15,000,000KRW

Daily average wage
100,000KRW
Total tenure days
1825 days
Eligibility
Eligible (1+ year)
  • Calculated using 1825 total tenure days

What is Korean severance pay?

Severance pay (Toejikgeum) is a lump-sum amount paid by the employer upon retirement to workers who have continuously worked for at least one year, under the Employee Retirement Benefit Security Act. It applies to all workplaces in Korea regardless of size, and is not payable to those with less than one year of service. The basic formula is: average daily wage × 30 days × (days of service ÷ 365). Average daily wage is calculated by dividing total wages over the three months prior to retirement (including pro-rated bonuses and annual leave allowance) by the total days in that period. If wages in the last three months are unusually low or include unpaid leave, the average drops and so does the severance. Severance is operated as either a 'Severance Pay system (DB-type)' or 'Retirement Pension (DC/DB/IRP)'. DB (Defined Benefit) means the employer manages the fund and guarantees a fixed amount; DC (Defined Contribution) means 1/12 is deposited each year into an IRP account, and the final amount depends on investment performance. This calculator uses the DB (statutory) standard. Severance is subject to a separate Retirement Income Tax, with several deductions (years-of-service deduction, converted-income deduction, 15-year graded deduction) producing an effective rate lower than ordinary income tax. This calculator shows the pre-tax face amount; actual deposits are after Retirement Income Tax.

When is this calculator useful?

  • Estimating before deciding to leave

    Estimate the lump sum you will receive on leaving. Factor it into life decisions such as the start date at a new job or a sabbatical.

  • Long service vs. early departure

    As tenure grows, both average wage and service days increase, accelerating the severance amount. Compare the difference of 1–2 additional years.

  • Impact of salary peak or unpaid leave

    Low wages or unpaid leave in the last 3 months reduce the average and the severance. Be careful when planning retirement right after a salary peak or leave.

  • DB vs. DC baseline

    If your company runs a DC retirement pension, the final amount equals annual contributions × investment returns. Use this DB (statutory) calculation as a baseline for comparison.

Formula

Severance = Daily average wage × 30 × (Total tenure days / 365)

How to read the result

The result is composed of: • Average daily wage: total wages over the last 3 months ÷ total days in that period. • Days of service: from the date of hire to the date of retirement. • Severance (face amount): average daily wage × 30 × (days of service ÷ 365). The actual deposit is the face amount minus Retirement Income Tax. The effective tax rate decreases with longer tenure and is not reflected here. DC retirement pension participants should treat this as a baseline only — the actual IRP balance depends on annual contributions and investment performance.

Worked examples

  • KRW 3M monthly average wage, exactly 5 years of service

    Assume a monthly average wage of KRW 3M, with exactly 5 years of service. ① Daily average wage = 3M / 30 = KRW 100K ② Total days of service = 5 × 365 = 1,825 days ③ Severance = daily average wage × 30 × (days/365) = 100K × 30 × (1825/365) = 100K × 30 × 5 = KRW 15M

  • KRW 4M monthly average wage, 10 years 6 months of service

    Assume a monthly average wage of KRW 4M, with 10 years and 6 months of service (6 months converted to 180 days). ① Daily average wage = 4M / 30 ≈ KRW 133,333 ② Total days of service = 10×365 + 6×30 = 3,650 + 180 = 3,830 days ③ Severance = 133,333 × 30 × (3830/365) ≈ KRW 41,972,498 As years of service grow, the days/365 ratio scales proportionally — so even at the same average wage, severance can differ hugely depending on tenure.

Things to keep in mind

  • Severance is not payable to those with less than one year of service. Part-time workers averaging less than 15 hours per week over four weeks are also excluded.
  • If average wage is lower than ordinary wage, ordinary wage is used instead. They are similar for regular salaried workers, but average wage can be higher when bonuses are large.
  • Periods of unpaid leave, workers' compensation leave, or childcare leave during the 3-month window are excluded from the calculation. Verify yourself.
  • Severance must be paid within 14 days of retirement; if not, it can be reported as wage arrears (to the Ministry of Employment and Labor).
  • DC retirement pension contributions are deposited to your IRP at 1/12 per year. The statutory amount from this calculator and the actual IRP balance can diverge based on investment returns.
  • Executives (directors, auditors, etc.) are not workers under labor law, so their severance is governed by individual contract — this calculator does not apply.

Frequently asked questions

Does less than 1 year of service really mean no severance?
Under the Labor Standards Act, severance is only mandatory after 1+ year of continuous employment at 15+ hours/week. There's no legal obligation below 1 year, but company policy or a DC pension plan may still pay out what's been accrued.
How exactly is the daily average wage computed?
It's the total wages paid over the 3 months before retirement, divided by the number of days in that period. This calculator simplifies to monthly average wage ÷ 30, so results may differ slightly from the official method. If ordinary wage exceeds average wage, ordinary wage is used instead.
How much will retirement income tax take?
Retirement income tax applies a years-of-service deduction plus a converted-wage deduction, making the effective rate much lower than regular wage income tax — roughly 5-15% of the face amount, lower with more years of service. This calculator only computes the pre-tax amount; check with HR or the Hometax retirement tax simulator for the exact net payout.
How does a DC pension plan differ from this calculation?
A DB plan (defined benefit, what this calculator assumes) pays average wage at retirement × years of service. A DC plan (defined contribution) has the employer deposit at least 1/12 of annual wages into an IRP account each year, which the employee invests — so DB is better if wage growth outpaces investment returns, and DC is better if the reverse is true. This calculator's result is a DB-based baseline for reference.
Are bonuses included in the average wage?
Regular, uniformly-paid bonuses are prorated into average wage; one-off, discretionary bonuses are excluded. Check your company's policy and payment pattern for an accurate figure.
Does parental leave count toward years of service?
Yes. Parental leave counts toward continuous years of service for severance eligibility. However, when calculating average wage, the leave period's (typically reduced) pay is excluded — the wage from the period just before leave is used instead.
What happens if I take a mid-career severance payout?
You can request an interim payout for legally recognized reasons — buying a home, 6+ months of medical treatment for yourself or family, personal rehabilitation/bankruptcy, etc. After that, your years of service restart counting from the payout date.
What if my employer doesn't pay severance on time?
Payment is due within 14 days of your last day. Missing this deadline adds a 20% annual late-payment interest charge. If payment is still delayed, you can file an unpaid-wage complaint with the Ministry of Employment and Labor or your regional labor office.

Official Sources

Always verify with the official sources below