Severance pay in Korea: how 퇴직금 works, and what changes if you're leaving the country

You hand in notice, work your last day, and a payslip is not the only thing that should show up afterward. If you were an employee — not a freelancer, not on a service-fee contract — for a year or more, Korean law owes you a second payment on the way out: 퇴직금, severance pay. Most foreign residents in Korea have heard the word. Fewer know it applies to them by default, how it is actually calculated, or that the payment method itself changes if you are leaving the country for good.

• 1 year+Continuous service to qualify, any visa
• 14 daysDeadline to pay after your last day
• 8.3%Of wages an EPS employer sets aside monthly, if you're on E-9 or H-2

Who actually qualifies

The test has nothing to do with nationality or visa type. Under Article 4 of the Employee Retirement Benefit Security Act (근로자퇴직급여 보장법), anyone who worked continuously for one year or more, averaging 15 or more contracted hours a week, is entitled to severance pay from that employer — full stop.

Two things trip people up. First, it is contracted hours (소정근로시간) that get measured, not hours you happened to work — a schedule written at 16 hours a week counts, even in a slow week. Second, "continuous" tolerates real employment, not a technicality: if your weekly hours drift above and below 15 across the year, the weeks under 15 simply get excluded from the count rather than resetting your clock to zero.

How much it actually is

The formula is fixed by law, not negotiated: 30 days of your average wage for every year of service. Average wage (평균임금) is your total pay over the three calendar months before your last day — base salary, regular allowances, and a share of any bonus — divided by the number of calendar days in that period.

Under Article 9(1) of the same law, your employer has to pay it within 14 days of your last day, unless the two of you agree in writing to extend it. Miss that window without agreement, and the unpaid amount starts accruing 20% annual interest — the same penalty that applies to unpaid wages generally.

The part most guides skip: where the money actually lands

Since 2022, severance is not simply wired to your bank account by default. Article 9(2) of the Act requires your employer to pay it into an individual retirement pension account (IRP) you designate, where it sits as a retirement fund rather than cash you can spend immediately.

That surprises people who are used to a wire transfer and nothing more — and it matters more for foreign residents than the law's drafters were probably picturing, because the exceptions carve out exactly this situation.

If you are permanently leaving Korea, the IRP requirement does not apply to you. Article 9(2)'s proviso, together with Article 3-2 of the Enforcement Decree, exempts a worker who held a visa status permitting employment activity under Article 23(1) of the Immigration Act's enforcement decree and departed after retiring — you can be paid your severance directly, in cash, with no IRP account required.

If you came through the Employment Permit System

Workers on E-9 or H-2 visas sit outside this system entirely. Their severance equivalent is 출국만기보험, Departure Guarantee Insurance — a forced-savings policy their employer is legally required to fund at 8.3% of monthly wages, from the start of employment, administered separately from a regular IRP. It pays out as a lump sum within 14 days of the worker's departure from Korea, after a year or more of service — the same underlying idea as 퇴직금, running through a different pipe built for a workforce the system assumes is temporary. It sits alongside three other required policies — return-home cost, wage guarantee, and accident insurance — covered in more detail in our guide to unpaid wages in Korea.

What Soo House sees, running campaigns with creators who move between the two

Soo House runs paid campaigns and classes for expats and foreign residents in Korea, and one confusion comes up constantly among the creators, models and part-time talent we work with: freelance income and employee income are not the same track, and only one of them ever builds toward severance.

A campaign fee paid with 3.3% withheld — the standard rate for a service-fee contract — is freelance income, not wages from an employment relationship. It does not count toward the one-year clock, no matter how many campaigns you run with the same company. Only an actual employment contract does. We ran a Smart Income Tips session for members earlier this year specifically because this line trips people up: someone who spent a year doing regular paid content work for one brand often assumes it is functionally a job, and is surprised to learn severance never applied because nothing on paper said "employee."

If you are weighing an offer that mixes both — a part-time role with occasional freelance add-ons — ask which parts are actually on an employment contract. That answer is the one that determines whether a year from now, severance is even on the table.

Getting help if it doesn't arrive

A missed severance payment follows the same complaint path as unpaid wages: message your employer in writing first, then file with the Ministry of Employment and Labor through the 1350 hotline or the Labor Portal if that goes nowhere. Our guide to unpaid wages in Korea walks through that process, including the 대지급금 advance-payment fund for employers who genuinely cannot pay.

Checked in August 2026 against the Employee Retirement Benefit Security Act (근로자퇴직급여 보장법), Articles 4 and 9, via the National Law Information Center, its Enforcement Decree, via easylaw.go.kr's plain-language summary, the EPS insurance guide from HRD Korea, and the Ministry of Employment and Labor's Q&A on contracted-hours eligibility. Thresholds, deadlines and the IRP exception conditions can change — confirm your own case with the 1350 hotline or a labor consultant before relying on any figure here.