Can I cash out early?

Only for legal reasons such as a first home purchase or a six-month-plus medical leave.

Yes, as retirement income, at favorable rates.

Severance pay in Korea

⚖️ Law By CampusDown Wiki Editorial Team Last updated October 26, 2026

In Korea, severance pay is mandatory: employers must pay at least 30 days of average wages for each year worked to employees who leave after a year or more.

Contents

1. Eligibility and formula
2. Deadline and pensions
3. FAQ
4. References

Eligibility and formula

Anyone with a year or more of continuous service averaging 15+ hours a week qualifies, whether full-time, contract, or part-time. The formula is daily average wage × 30 × days employed ÷ 365; the average wage is total pay over the last three months divided by days in that period. At ₩3 million a month for three years, severance is roughly ₩9 million. Unlike the U.S., where severance is usually optional, it's a legal right in Korea.

Deadline and pensions

Employers must pay within 14 days, with 20% annual late interest, and workers can file complaints with the Ministry of Employment and Labor. Under retirement pension plans, DB plans put investment risk on the employer and DC plans on the worker, roughly like a 401(k). Payouts usually go into an IRP; taking them as an annuity after 55 reduces tax, and compounding helps. See unfair dismissal for firing disputes. General information only.

FAQ

Can I cash out early?: Only for legal reasons such as a first home purchase or a six-month-plus medical leave.
Is it taxable?: Yes, as retirement income, at favorable rates.

Sources reviewed: 2026-10-26

References

「근로자퇴직급여 보장법」 제4조·제8조·제9조.
「근로기준법」 제2조(평균임금)·제36조(금품청산).
고용노동부. 『퇴직금 계산기·퇴직급여제도 안내』.

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This article was last updated on October 26, 2026. It is based on widely recognized original works and textbooks; when citing it in a paper, please check the original sources listed in the references.