The severance pay formula
Average daily wage = total pay in the 3 months before retirement ÷ total days in that period
The 3 months’ pay includes not only base pay but allowances you receive regularly every month. Bonuses and unused-leave pay received over the year are added to the 3 months’ pay at 3/12 of the total.
Example
Joined 2 March 2022, last worked 16 October 2026 (retirement date 17 October), monthly pay of ₩3.5 million over the last 3 months, no bonuses or leave pay
- Days of service: 2 March 2022 – 16 October 2026 = 1,691 days
- Average-wage period: the 3 months before the retirement date (17 July – 16 October) = 92 days
- Average daily wage: ₩3.5 million × 3 ÷ 92 days ≈ ₩114,130
- Severance pay: ₩114,130 × 30 days × 1,691 ÷ 365 ≈ ₩15,862,567
Estimated severance pay by salary and years of service
Rough amounts for the same monthly pay every month, no bonuses, and 92 days in the 3 months before retirement. An easy rule of thumb is “a little less than monthly pay × years of service”.
| Monthly pay (before tax) | 1 year | 3 years | 5 years | 10 years |
|---|---|---|---|---|
| ₩3M | about ₩2.93M | about ₩8.80M | about ₩14.67M | about ₩29.35M |
| ₩4M | about ₩3.91M | about ₩11.74M | about ₩19.57M | about ₩39.13M |
| ₩5M | about ₩4.89M | about ₩14.67M | about ₩24.46M | about ₩48.91M |
Who is entitled to severance pay
- You worked continuously at the same workplace for at least one year
- Your contractual working hours averaged 15 hours or more a week over four weeks
- Regular, contract and part-time workers alike are entitled if they meet these conditions
Severance must be paid within 14 days of the retirement date; the deadline can be extended by agreement between the parties.
What raises or lowers severance pay
- When you leave: the average wage is based on the 3 months just before you leave, so leaving right after a bonus or performance payment can work in your favor.
- Months with 31 days: with the same monthly pay, more days in the 3 months slightly lowers the average daily wage.
- Leave of absence: periods of lower pay due to parental leave or sick leave are excluded from the average-wage calculation.
Frequently asked questions
If I’m one day short of a year, do I get no severance?
Correct. If continuous service is less than one year, statutory severance pay is not due. On a one-year contract, check that your last working day is on or after the day before the one-year anniversary of your start date.
Is a retirement pension (DC type) calculated this way too?
No. A DB-type pension pays out the same way as this calculator, but with a DC type the employer contributes at least 1/12 of annual pay each year, and what you receive depends on how it is invested.
How do severance pay and retirement pensions (DB, DC, IRP) differ?
Read the retirement pension guideBasis and sources
- Average wage and severance pay: Korea Law Information Center, Labor Standards Act Article 2, Employee Retirement Benefit Security Act Article 8
- Severance pay advice: Ministry of Employment and Labor