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
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.
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 really mean no severance?
- Statutory severance only applies to employees with at least 1 year of continuous service AND at least 15 weekly working hours. Employers can voluntarily pay severance or a goodwill amount to short-tenure employees, but they are not legally required to.
- How exactly is the daily average wage computed?
- By dividing total wages paid in the 3 months before separation by the actual day count of that period. This calculator simplifies it to monthly average wage ÷ 30. If the ordinary wage exceeds the average wage, the ordinary wage is used instead.
- How much will retirement income tax take?
- Retirement income tax in Korea uses lower effective rates than ordinary income tax thanks to a tenure-based deduction and a converted-income deduction. This calculator outputs the pre-tax amount only. Use Hometax (NTS) or your HR team for an after-tax estimate.
- How does a DC pension differ from this calculation?
- DB (defined benefit) plans match this formula. DC (defined contribution) plans accrue at least 1/12 of annual wages each year plus investment returns. DB favors employees whose wages rise faster than the plan's investment return; DC favors the opposite.
- Really nothing for less than 1 year?
- Statutory severance requires at least 1 year of service, so less than 1 year is not payable. Some company rules pay partially even under 1 year, and DC retirement pension participants receive the amount contributed so far even if under 1 year.
- Are bonuses included in the average wage?
- Regularly and uniformly paid bonuses are pro-rated and included; one-off discretionary bonuses are excluded. Check the company's rules and payment history for accuracy.
- How much is Retirement Income Tax?
- It is lower than ordinary income tax due to years-of-service and converted-income deductions. Generally about 5–15% of the face amount, lower with longer tenure. The exact amount is withheld and notified by the company.
- How is DC pension different?
- Under DC, the company contributes 1/12 each year to your IRP and you manage the investments — final amount depends on returns. Higher returns can exceed the statutory amount; lower returns can fall short. This calculator's DB baseline is a reference only for DC participants.
Official Sources
Always verify with the official sources below