Severance Pay Delays in Korea: Your Rights and Remedies as a Foreign Worker

Severance pay (퇴직금) is a fundamental right in Korea, but many foreign workers face delays in receiving it. Understanding your legal protections and remedial options is crucial.

The 14-Day Rule

Under Korean law, employers must pay severance pay within 14 days of your last working day. Since 14 April 2022, severance pay must be paid by transfer into an Individual Retirement Pension (IRP) account designated by the worker rather than into an ordinary bank account, with exceptions such as retirement at age 55 or older or an amount of KRW 3,000,000 or less (Article 9(2) of the Act on the Guarantee of Workers' Retirement Benefits / 근로자퇴직급여 보장법 제9조 제2항, Article 3-2 of its Enforcement Decree, and Ministry of Employment and Labor Notice No. 2026-65). This applies regardless of your contract terms - even if your employment agreement states different payment schedules, Korean law takes precedence for the statutory minimum.

Important for foreign workers: International schools, foreign companies, and embassies may have separate contractual arrangements, but they cannot override this legal minimum timeframe.

Penalty Interest: 20% Annual Rate

If your employer misses the 14-day deadline, they owe you penalty interest at 20% per year from day 15 until payment. The legal basis is Article 37(1) of the Labor Standards Act (근로기준법 제37조 제1항) and Article 17 of the Enforcement Decree of the Labor Standards Act (근로기준법 시행령 제17조); since the amendment in force from 23 October 2025, it also applies to wages unpaid while still employed (for payment events arising on or after that date). It does not apply for any period in which it is recognized as appropriate for the employer to dispute the wages before a court or the Labor Relations Commission (Article 37(3) of the same Act / 같은 조 제3항; Article 18 of its Enforcement Decree / 같은 법 시행령 제18조). For example, if you're owed ₩5 million and receive it 30 days late, the penalty is approximately ₩82,000.

This interest applies automatically - you don't need to request it separately, and employers cannot avoid it by claiming financial difficulties.

Steps to Take When Severance Pay is Delayed

Step 1: Document Your Request
Send written demands via email or KakaoTalk. Keep records - these become evidence if you file a complaint.

Step 2: File a Labor Complaint (진정서)
Submit a complaint to your local Ministry of Employment and Labor office. You can file online through the Labor Portal or visit in person.

Required documents: employment contract, pay stubs, bank statements, resignation letter or termination notice.

Step 3: Labor Inspector Investigation
A labor inspector will investigate and may order your employer to pay. Non-compliance can result in criminal penalties of up to 5 years' imprisonment or a fine of up to KRW 50,000,000 (Article 43 of the Act on the Guarantee of Workers' Retirement Benefits / 근로자퇴직급여 보장법 제43조 — raised from 3 years / KRW 30,000,000 by the amendment effective 18 September 2026). Prosecution requires the victim's consent, except for employers on the wage-arrears list published under the Labor Standards Act (in force since 11 November 2025).

Key Points for Foreign Workers

Remember: Your actual contract may provide better terms than Korean legal minimums, but it cannot provide less favorable conditions regarding payment timing.

This article is for informational purposes only and does not constitute legal advice. For specific cases, consult a certified labor attorney (노무사) or lawyer.