Severance Pay: Why There Is None Under One Year

As of September 24, 2026. This is about statutory severance. If the company's employment rules, a collective agreement or the employment contract are more favorable than the law, those take precedence. For individual settlement, look at the retirement plan rules and the wage ledger.

Who it applies to

Workers with one year or more of continuous employment, whose scheduled working time averages 15 hours or more a week over a four-week period. If you do not complete the year, no severance arises under the Act on Stabilization of Employment of Elderly Workers. The same goes for anyone under 15 hours a week. Fixed-term workers count too, if the periods add up to more than a year and are treated as continuous employment.

The formula

Severance pay = average daily wage × 30 days × (days of continuous employment ÷ 365)

Average daily wage = total wages received in the three months before termination ÷ total days in that three-month period

The three-month figure includes monthly pay and amounts such as regular bonuses that count toward the average wage. It does not include severance pay itself. If the average wage is lower than the ordinary wage (통상임금), the ordinary wage is treated as the average wage.

Examples

If the three months before leaving total 91 days and the wages in that period were 9,100,000 won, the average daily wage is 100,000 won. With 730 days employed (2 years):

100,000 × 30 × (730 ÷ 365) = 6,000,000 won

With 200 days employed (under one year), statutory severance under this formula is 0 won. If the company pays something as a separate commitment, that amount is not severance — it is the committed payment.

Sources

Articles 4 and 8 of the Act on Stabilization of Employment of Elderly Workers. The comparison between average wage and ordinary wage is in Article 2 of the Labor Standards Act.