Guide to Claims for Wages and Severance Pay and Their Calculation

Based on 138 consultation cases · Updated October 4, 2026 · Translated from the Korean original.

As a general rule, the right to severance pay arises when employment ends, and an agreement stating that severance pay is included in wages does not, by itself, eliminate the obligation to pay it. Severance pay and overtime, night-work, and holiday-work pay are calculated according to the substance of the employment relationship and wages and the applicable rules, so you should review your contract and pay records together.

Worker and employer → Worker → Employer → Employment ends and pay is disputed → Is the person an employee in substance? → Has employment ended under a severance-pay system? → Further severance is not established or employee status needs review → Was advance severance a valid interim settlement? → Severance is generally due if no valid interim settlement → Check minimum and average wage 30 days per service year; 3-month wages divided by days → Check regular, required payments regardless of label; review pay records → Check continuous service and extra-pay facts Review rehire, standby work, contract and workplace size

Key points

Where a severance-pay system has been established, the statutory minimum is at least 30 days' average wages for each year of continuous service (Employee Retirement Benefit Security Act, Article 8(1) (근로자퇴직급여 보장법 제8조 제1항)).
An agreement to pay in advance, as part of monthly wages, money described as severance pay is not effective as payment of severance pay unless it qualifies as a valid interim settlement (Supreme Court en banc Decision, May 20, 2010, Case No. 2007Da90760).
Average wage is calculated by dividing the total wages paid during the three months before the event giving rise to the calculation, such as separation from employment, by the total number of days in that period. Payments made continuously and regularly that the employer is obligated to pay may be included regardless of their label (Labor Standards Act, Article 2(1)(6) (근로기준법 제2조 제1항 제6호)).
Even during standby duty, pay may be due for work performed if regular duties continued or the work was similar to ordinary work. The actual nature and intensity of the work must be considered (Supreme Court Decision, January 12, 1995, Case No. 93Da46254).
Overtime, night-work, and holiday-work pay may depend on the size of the workplace, the form of work, and the terms of the contract. Whether an inclusive wage agreement applies is determined by examining the wage components and calculation method in the contract, the nature of the work, and other relevant factors.
Even if there was a formal resignation and rehire, the period of continuous service may not be interrupted if this was done under company policy and the employment relationship continued in substance (Supreme Court Decision, May 10, 1988, Case No. 87Daka2578).
As a general rule, an employer may not unilaterally deduct a loan or other debt from wages. An exception may be at issue where the employee's consent was given of their own free will, among other circumstances (Labor Standards Act, Article 43 (근로기준법 제43조)).
Whether someone is an employee is not determined solely by the label “freelance contract.” The actual relationship must be assessed as a whole, including the employer's direction and supervision of the work, the nature of the compensation, and the continuity of the relationship (Supreme Court Decision, February 9, 1999, Case No. 97Da56235).

Frequently asked questions

Q. Can I claim severance pay even if my annual salary is said to include it?

An agreement stating that an amount for severance pay is included in the monthly or annual salary is generally not, by itself, recognized as payment of severance pay. However, a separate issue may arise as to the return or setoff of amounts actually paid as severance pay, so the circumstances of payment and the terms of the agreement should be reviewed together.

Case 1, Case 15, Case 22, Case 23

Q. What wages are used to calculate severance pay?

Basically, severance pay is calculated using the average wage, determined by dividing the total wages paid during the three months before the event giving rise to separation by the total number of days in that period. Meal allowances and family allowances may also be included if they are paid continuously and regularly and the employer is obligated to pay them, while discretionary and uncertain special bonuses may be excluded.

Case 2, Case 14, Case 19

Q. Can I receive additional pay for overnight standby duty or work on a holiday?

Not all hours worked while on standby duty count as overtime merely because the duty is called standby duty. If you perform your regular duties while on standby, or if the nature and intensity of the work are similar to those of ordinary work, you may claim overtime, night-work, or holiday-work pay for that work.

Case 3, Case 12, Case 13

Q. How long do I have to claim overtime pay?

According to the case described, you may claim overtime pay that is not time-barred; the period given is three years. To determine whether this applies and calculate the amount, it is advisable to review your working hours, pay statements, employment contract, and other relevant records.

Case 13

Q. What happens to my separation date and severance pay calculation if my employer delays accepting my resignation?

The separation date may depend on whether the resignation was accepted and on any special provisions in the employment contract or work rules. The case explains that, in certain circumstances, the resignation takes effect after the notice period under the Civil Act has elapsed. However, in exceptional cases where unpaid time immediately before separation or similar circumstances have caused the average wage to fall substantially below the ordinary wage for living expenses, the average wage may be calculated using another reasonable method.

Case 10

Q. Does my period of service continue if I was rehired immediately after resigning or transferred to an affiliate?

If you formally resigned and were rehired in accordance with company policy, and the employment relationship did not actually break, your period of service may continue without interruption. By contrast, if you freely consented to a transfer and there is no agreement or rule providing that your service period will be aggregated, your period of service with the former company may not be counted toward the total.

Case 5, Case 11, Case 18

Q. If I have a freelance contract and have not been paid, can I make a claim under labor law?

Even if a contract describes you as a freelancer, you may be recognized as an employee under the Labor Standards Act if, in reality, you worked in a subordinate relationship for the purpose of earning wages. The overall circumstances must be considered, including direction and supervision, the way the work was performed, the nature of the compensation, and the continuity of the working relationship. If you are not recognized as an employee, a civil claim under the contract may be at issue.

Case 20

Q. Can my employer deduct money it lent me from my wages or severance pay?

As a general rule, an employer may not unilaterally deduct wages to recover a debt owed to the employer, such as a loan. An exception may apply if the employee consented to the setoff of their own free will, but whether the consent was voluntary must be examined strictly.

Case 4, Case 23, Case 25

Relevant laws

Labor Standards Act, Article 2(1)(6) (근로기준법 제2조 제1항 제6호)
Labor Standards Act, Article 11 (근로기준법 제11조)
Labor Standards Act, Article 21 (근로기준법 제21조)
Labor Standards Act, Article 34 (근로기준법 제34조)
Labor Standards Act, Article 36 (근로기준법 제36조)
Labor Standards Act, Article 38 (근로기준법 제38조)
Labor Standards Act, Article 43 (근로기준법 제43조)
Labor Standards Act, Article 49 (근로기준법 제49조)
Labor Standards Act, Article 50 (근로기준법 제50조)
Labor Standards Act, Article 53 (근로기준법 제53조)
Labor Standards Act, Article 56 (근로기준법 제56조)
Labor Standards Act, Article 94 (근로기준법 제94조)
Employee Retirement Benefit Security Act, Article 4 (근로자퇴직급여 보장법 제4조)
Employee Retirement Benefit Security Act, Article 8 (근로자퇴직급여 보장법 제8조)
Employee Retirement Benefit Security Act, Article 10 (근로자퇴직급여 보장법 제10조)

Watch out for

The cases give a three-year period for claims for severance pay and overtime pay, running from the separation date or in connection with the wage claim, respectively. It is advisable not to delay making a claim.
Whether severance pay applies and the period used in calculating it may depend on factors such as the period of continuous service, the prescribed weekly working hours, the number of employees at the workplace, and the applicable dates.
Amounts already received as severance pay may raise issues of repayment or setoff depending on the substance of the agreement; you should also consider the extent to which setoff against a severance-pay claim is restricted.
A company's severance-pay rules may be more favorable than the statutory standard, so compare the statutory minimum with the amount payable under the work rules or collective agreement.

Source cases

This guide was compiled by AI from the following Korea Legal Aid Corporation consultation cases (in Korean).

This guide is general legal information about Korean law, not legal advice for your situation. For a specific case, consult a lawyer or the Korea Legal Aid Corporation (call 132 in Korea).