Worker Retirement Benefits Act §8

Severance Pay Calculator

Average daily wage × 30 × (service days ÷ 365). Higher of average or ordinary daily wage applies. Optional 3/12 portion of annual bonus and unused-leave pay.

Result

Enter dates and wages.

What this tool does

The severance pay calculator precisely applies the formula 'daily average wage × 30 × (service days ÷ 365)' under Article 8 of the Korean Employee Retirement Benefit Security Act. It computes the average wage from the total wages of the three months before departure (base pay + fixed allowances) and supports pro-rata inclusion of 3/12 of regular bonuses and annual leave pay. It also automatically handles the rule that applies the ordinary wage when the average wage is lower than the ordinary wage.

Who uses this

Departing employees: pre-calculate the expected total severance to plan re-employment
HR staff: pre-compute severance provisions from each employee's service period and wage data
Contract enders: check whether fixed-term workers qualify for severance after one year or more
Bonus-inclusive calculation: understand the effect of annual regular bonuses on the average wage
DC-type retirement pension members: estimate the annual settlement amount to review funding adequacy

How to use (4 steps)

1Enter the hire date and resignation date. Service days are calculated automatically, and if under 365 days (1 year) it immediately notes that no severance accrues.
2Enter total wages for the three months before departure. This is three months of base pay plus fixed allowances paid in the same period (position allowance, family allowance, etc.).
3Optionally enter regular bonus (annual total) and annual leave pay (accrued in the prior year). Each is multiplied by 3/12 and included pro-rata in the average wage.
4If you need the ordinary wage comparison, also enter the monthly ordinary wage. If it is higher than the average wage, the ordinary wage is applied automatically so severance is computed on the more favorable amount.

Formula (Employee Retirement Benefit Security Act Article 8)

Severance = daily average wage × 30 × (service days ÷ 365) Daily average wage = (3-month total wages + bonus × 3/12 + leave pay × 3/12) ÷ 90 days But if daily average wage < daily ordinary wage, the ordinary wage applies Daily ordinary wage = monthly ordinary wage ÷ 209 × 8 e.g., 3-month wages KRW 9M, annual bonus KRW 2M, leave pay KRW 0.5M: = (9,000,000 + 500,000 + 125,000) ÷ 90 = 9,625,000 ÷ 90 ≈ KRW 106,944 / day Basis: Employee Retirement Benefit Security Act Article 8, Labor Standards Act Article 2 (definitions of average wage and ordinary wage)

Real examples

Example 1: 2 years of service, monthly salary KRW 3M (no bonus or leave pay)

3-month total wages = KRW 9,000,000. Daily average wage = 9,000,000 ÷ 90 = KRW 100,000. Service days = 730. Severance = 100,000 × 30 × (730 ÷ 365) = 100,000 × 30 × 2 = KRW 6,000,000.

Example 2: 3 years 6 months, monthly salary KRW 3.5M + annual bonus KRW 7M

3-month total wages = KRW 10,500,000. Bonus 3/12 = KRW 1,750,000. Daily average wage = (10,500,000 + 1,750,000) ÷ 90 ≈ KRW 136,111. Service days = 1,278. Severance = 136,111 × 30 × (1,278 ÷ 365) ≈ KRW 14,290,000.

Example 3: Ordinary wage applied because average wage < ordinary wage

Unpaid sick leave in the three months before departure reduced wages → average wage KRW 80,000 / day. Monthly ordinary wage KRW 2,090,000 → daily ordinary wage = 2,090,000 ÷ 209 × 8 ≈ KRW 80,000. The two values are equal, so the ordinary wage is used. In practice, when the ordinary wage exceeds the average wage, the ordinary wage must be applied automatically.

Frequently asked questions

Is there really no severance for under one year of continuous service?

Correct. Article 8 of the Employee Retirement Benefit Security Act specifies one year or more of continuous service as the condition for severance. If you leave after 364 days, no severance accrues. However, if short contracts under one year are repeated, whether the service is continuous must be assessed separately.

How are bonuses included in the average wage?

For regularly paid bonuses, 3/12 (25%) of the annual total is added to the three-month wages of the average wage period. Irregular or one-off special bonuses are excluded from the average wage calculation.

If I have a DC-type (defined contribution) pension, is there separate severance?

A DC-type retirement pension is one where the employer contributes at least 1/12 of annual wages to the worker's account each year. For DC members, the amount accumulated in the personal account is the retirement benefit, so they do not separately claim severance from the employer upon departure.

Do parental leave and sick leave count toward service days?

Parental leave counts toward the service period (Equal Employment Act Article 19). However, the parental leave period is excluded from the average wage calculation, and the average wage period is extended by that duration. For sick leave (non-work injury or illness), treatment varies by workplace, so confirmation is needed.

When must severance be paid?

As a rule it must be paid within 14 days of the departure date (Employee Retirement Benefit Security Act Article 9). The payment deadline can be extended by agreement, but delays without agreement incur 20% annual delay interest.

Is severance taxed?

Severance is subject to retirement income tax. After applying the years-of-service deduction and the converted-wage deduction, it is taxed separately at progressive rates of 6 to 45%. Transferring it to a retirement pension (IRP) defers taxation until withdrawal, providing a tax-saving effect.

Cautions

•This calculator uses a fixed 90-day average wage period. If the exact number of days in the actual three months before departure (89 to 92) differs, the result may slightly differ from the actual payment.
•For DC-type pension members, the actual amount received may vary with investment results and may differ from this calculator's result.
•If there is a history of abnormal wage payment such as wage arrears, the average wage period must be adjusted, so a labor attorney's confirmation is needed.
•If interim severance settlement was made, calculation starts from after the interim settlement, so it may differ from the total service days.
•Results are for reference only; confirm precise severance settlement with your employer or a labor attorney.

Last reviewed: 2026-06-17

Eligibility

1+ year continuous service AND average 15+ hours per week (4-week avg). Triggered regardless of voluntary or involuntary termination. Applies to workplaces under 5 too (since 2010-12-01).

Average wage

Last 3 months' total wage ÷ days in that period (typically 90). Regular bonus = 1/4 of annual; unused-leave pay = 1/4 of last year's, both added in.

DC vs DB

DC (defined contribution): 1/12 monthly wage accumulated each year. This calculator assumes DB (defined benefit). DC final amount depends on investment returns.