What Severance Pay Rules Must Employers Follow in South Korea?

Which Employees Qualify for Severance Pay?

• Employees with at least one year of continuous service with your company generally qualify for statutory severance.
• Both full-time and qualifying part-time employees are covered if they meet the minimum service and working-hours thresholds.
• Employees who resign voluntarily after one year of service are usually still entitled to severance, unless a narrow exception applies.
• Employees terminated for business reasons, redundancy, or individual performance (where lawful) remain eligible for severance.
• Fixed-term employees who have worked at least one year continuously are typically entitled to severance at contract end.
• Certain very short-term or low-hour workers below statutory thresholds may fall outside mandatory severance coverage.

What Are the Legal Timelines for Paying Severance?

In South Korea, you are expected to pay severance promptly when the employment relationship ends, and in practice this usually means within 14 days of the employee’s final working day. The law allows this period to be extended only if there is a clear, mutual agreement with the employee and a justifiable reason. Your HR and payroll teams should plan ahead for resignations, retirements, and dismissals so that severance calculations are completed before the last day of work. Keep accurate records of average wages and service periods so you can process payments without delay. Late payment can trigger interest, disputes, and potential administrative or criminal exposure.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly or on time, you risk labor office investigations, employee claims, and potential criminal sanctions. Under Korean law, non-payment or underpayment of statutory retirement benefits can lead to fines, imprisonment of responsible officers, and orders to pay arrears with interest. These issues can also damage your reputation with regulators and future hires.

• Labor authorities may order you to pay outstanding severance plus statutory interest.
• Administrative fines and, in serious cases, criminal penalties (including possible imprisonment) can apply to responsible managers.
• Employees can file civil claims for unpaid severance and related damages.
• Non-compliance can trigger labor inspections and closer scrutiny of your wider HR practices.
• Reputational harm can affect your brand and ability to attract skilled talent in Korea.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as https://www.playroll.com/employer-of-record does not remove the underlying requirement to comply with South Korea’s severance rules. In a compliant EOR model, the EOR is the legal employer on paper and is responsible for administering statutory severance, but your company typically funds the cost. Korean authorities may still look at the substance of the relationship, especially if you direct and control the worker’s day-to-day activities. You should ensure your EOR contract clearly allocates severance obligations, calculation methods, and funding responsibilities. Regular audits and data sharing with the EOR help you confirm that employees receive the correct benefits on time.

Be 100 Percent Compliant in Offering Severance with Playroll

South Korea’s severance framework is strict, and employees are well informed about their rights, so your company needs a disciplined process. Playroll helps you map each worker’s eligibility, track length of service, and calculate the statutory 30-days-average-wage-per-year-of-service benefit accurately. Your team can centralize documentation, from employment contracts to wage records, so that severance decisions are defensible in the event of a dispute or audit.

With Playroll, you can also manage Korean employees through a compliant EOR structure, while still honoring local severance rules. Our platform standardizes workflows for terminations, resignations, and retirements, and ensures that payment timelines and documentation match Korean legal expectations. That means fewer surprises, smoother exits for employees, and lower legal and reputational risk for your business.