Before You Accept Your Severance Pay — A Settlement Checklist

As of October 2, 2026. With severance pay, the amount changes less because of the formula than because of what was put in and what was left out. Before trusting the settlement sheet your company sent, check it in this order.

This post summarizes the general rules. Your own settlement may differ if your company has its own employment rules, a collective agreement, or a retirement plan document — those always take precedence. If anything is unclear, check the latest guidance again with the Ministry of Employment and Labor call center or the Korea Workers' Compensation and Welfare Service.

1. Start by checking the formula

The basic formula for severance pay is:

Severance pay = average monthly wage × 30 days × (days employed ÷ 365)

Check the amount on the settlement sheet against this formula once. If the numbers are far apart, the difference is in how the average wage was calculated or in the number of days counted.

Days employed runs from your hire date to your termination date. Whether a probationary period is included, and how a leave of absence in the middle was treated, depend on your company's rules.

2. What went into the average wage

The average wage is the total wages paid in the three months before termination, divided by the total number of days in that period. Several things can differ here:

• Base pay is always included.
• Fixed allowances (job-duty allowances, position allowances, and the like) are generally included as well.
• Bonuses are treated differently depending on how often they are paid and what the company's rules say. If the company left bonuses out of the average wage, you can ask what the basis for that was.
• Unused annual leave pay: check how unused leave days were reflected. That part is covered separately in the post on annual leave pay.
• Performance pay such as overtime allowances varies with actual work, so whether it is included is often disputed.

If the sheet only says "average wage: ○○○ won", it is worth asking for a breakdown of which items were added together. Workers are entitled to request a copy of the wage ledger from their employer.

3. Was there an interim payment?

If severance was paid partway through your employment, the final payment is reduced by that amount. Interim severance payments are only valid for reasons set out in the law (buying a home, long-term care, bankruptcy, and similar); interim payments for other reasons can be challenged as legally invalid.

If you joined and left more than once, check whether each period was calculated separately. If you worked at an affiliated company, what matters is whether the period counts as continuous employment.

4. Check the payment deadline

Severance pay is in principle due within 14 days of the date you left. Even if the company says it is delayed for internal reasons, it becomes a late payment if the worker did not agree to it.

• If 14 days have passed and you have not been paid → get the reason for the delay in writing
• If the company only says "it'll go out on next month's payroll" → check whether that promise exists in writing

5. Check where the money goes

If the company has a retirement pension (DB or DC), the severance is transferred to your personal IRP account.

• DB type: the company accrues a defined benefit → check whether the amount transferred to your IRP matches the settlement sheet
• DC type: the company contributes at least 1/12 of your annual pay each year → the final amount depends on investment results. In this case the figure on the sheet may be an estimate.
• If you have no IRP account: the money can get stuck, so open one before you leave.

If the employer has no retirement pension at all, you receive it as a lump sum.

6. Know how it is taxed

Severance pay is not taxed as earned income. It is taxed separately as retirement income. The deduction grows with years of service, so the longer you worked, the less tax you pay.

Check how much tax was withheld, and whether you applied for deferred taxation (paying the tax later).

Checklist — in this order before you accept

#	Item	How to check
1	Check the formula (average wage × 30 × days ÷ 365)	Compare with the settlement sheet
2	Average wage breakdown	Check item by item on the wage ledger or payslip
3	Whether bonuses and allowances are included	Ask the company for the basis
4	Any interim severance payment	Check whether you received one during employment
5	Payment deadline (14 days after leaving)	Count from your termination date
6	Retirement pension type (DB / DC / none)	Confirm enrollment; open an IRP account
7	Tax and deferred taxation	Check the tax amount on the sheet

If the settlement does not make sense to you, the right order is: do not sign yet, and request a breakdown. Your right to claim severance survives termination, so you can go back to it later.

If there is one thing to do today, it is this: find the single line showing how the average wage was calculated on the settlement sheet your company gave you. Half of this post is contained in that one line.