Unfair Dismissal Settlement Amount in Korea: Calculation Criteria and Negotiation Strategy

Unfair Dismissal Settlement Amount in Korea: How Much Is Appropriate?

After receiving a sudden dismissal notice, it is not uncommon for the employer to propose "settling things quietly." At that point, most people's first question is: how much should I accept? Because there is no legally fixed amount for a settlement, not knowing the criteria can lead you to sign under unfavorable terms.

What Is Unfair Dismissal?

Article 23 of the Labor Standards Act (근로기준법 제23조) requires that an employer have just cause to dismiss a worker. Even if the employer cites reasons such as poor job performance or business necessity, the dismissal may be ruled an unfair dismissal (부당해고) if procedural requirements are not met — such as written notice, 30 days' advance notice, or payment of advance-notice allowance — or if there is no substantive reason. If unfair dismissal is recognized, the Labor Relations Commission (노동위원회) may order reinstatement to the original position and payment of wages equivalent to the period of dismissal under Article 30 of the Labor Standards Act (근로기준법 제30조).

The Core Benchmark for Settlement: Back Pay

The starting point for settlement negotiations is the total wages not received during the period of dismissal — i.e., back pay. Because the employer must pay this amount if the Labor Relations Commission upholds the unfair dismissal claim, the settlement amount is typically determined with reference to this figure.

For example, if a worker with a monthly ordinary wage (통상임금) of KRW 3,000,000 has been disputing the dismissal for three months, the back pay alone amounts to KRW 9,000,000. The following factors also influence the settlement level:

• Likelihood of the relief application being upheld: The clearer the evidence, the higher the settlement amount.
• Cost savings from avoiding litigation and administrative proceedings: Both parties can save on procedural costs, creating room for negotiation.
• Whether severance pay (퇴직금) and unpaid allowances are included: If severance pay, annual leave allowance (연차수당), or advance-notice allowance (해고예고수당) remain outstanding, they must be added to the total.
• Emotional distress / consolation damages: Not legally mandated, but can be raised as an additional element during negotiations.

Relationship Between a Labor Relations Commission Relief Application and Settlement

A relief application for unfair dismissal must be filed with the Regional Labor Relations Commission within 3 months of the date of dismissal under Article 28 of the Labor Standards Act (근로기준법 제28조). Missing this deadline makes filing a relief application impossible, so even if settlement negotiations are ongoing, it is safer to file within the deadline first. If a settlement is reached during the subsequent mediation or conciliation process, the application can be withdrawn.

When signing a settlement agreement, always check whether it contains a broad waiver clause stating that no civil or criminal objections of any kind will be raised. If such a clause is present, pursuing additional claims afterward becomes very difficult.

Note for foreign workers: The statutory rights described above apply regardless of nationality or visa status. However, check whether your employment contract specifies terms that differ from the statutory minimums, and factor those into your negotiation.

Checklist to Verify Before Agreeing to a Settlement

1. Has severance pay been paid in full?
2. Have unused annual leave allowances been settled?
3. Is the advance-notice allowance (30 days' ordinary wage) included?
4. Will the loss-of-employment report for the four major social insurances (4대 보험) be processed correctly?
5. Is the separation reason code — which affects eligibility for unemployment benefits (실업급여) — appropriate?

Check Quickly with Bylaw (바이로)

If you want to understand the scale of your severance pay before entering settlement negotiations, use the Bylaw (바이로) severance pay calculator at workbylaw.com. Enter your period of employment and average wage to instantly calculate your statutory severance pay. You can also use the AI search feature to quickly find labor law interpretations relevant to your situation.

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