Korean Severance Pay & Retirement Income Tax Calculator
Works out your severance pay from average wage and years of service, then the retirement income tax that comes off it.
The same severance is taxed very differently by length of service
Your situation
Result
Severance pay
₩39.56M
Daily average wage ₩131,868
Retirement income tax
₩472,396
1.19% effective · local tax included
Take-home
₩39.09M
After tax
From severance of ₩39.56M the length-of-service deduction of ₩15M comes off, and dividing by your years of service gives a converted one-year figure of ₩29.47M. The converted-wage deduction of ₩20.88M then leaves a tax base of ₩8.59M, the ordinary rates apply to that, and the result is multiplied back by your years of service. The longer you stayed, the less tax you pay.
| Severance pay | ₩39.56M |
|---|---|
| Length-of-service deduction | − ₩15M |
| Converted one-year wage | ₩29.47M |
| Converted-wage deduction | − ₩20.88M |
| Tax base | ₩8.59M |
| Tax on the converted wage | ₩515,341 |
| Retirement income tax | ₩429,451 |
| Local income tax | ₩42,945 |
| Total tax | ₩472,396 |
| Take-home | ₩39.09M |
Severance is 30 days of average wage for each year of continuous service (근로자퇴직급여 보장법 제8조제1항). The average wage is the pay of your last three months divided by the number of days in that period, which lands anywhere between 89 and 92 days depending on your leaving date. This calculator uses 91. Defined-contribution (DC) pensions work differently: what you get is what the company paid in each year plus investment returns. For executives, severance above the statutory ceiling is taxed as ordinary employment income instead.
How this works
What it calculates
Leaving a job in Korea raises two questions: how much severance you get, and how much tax comes off it. This calculator first works out the statutory severance from your last three months' pay and your years of service, then computes retirement income tax and local income tax on that amount to show what you actually receive. If your employer has already told you the severance figure, enter it directly and look at the tax alone.
Retirement income tax is built differently from the tax on monthly pay. Because you receive years of accrued money in one lump, applying the progressive rates straight to it would produce an outsized bill, so the law converts the severance into a one-year equivalent, taxes that, and multiplies back by the years of service. The longer you stayed, the lower the tax.
Who uses it and when
Anyone who has decided to move or retire, before they leave. Severance is set by the last three months of pay, so bringing the leaving date forward or pushing it back a little can change the amount. If you receive bonuses or annual leave pay, they need to go in for the average wage to come out right.
It also helps when checking the severance statement your employer gives you. If the tax on the statement differs widely from this calculation, the years of service may have been miscounted or a bonus left out. Anyone weighing a lump sum against taking severance as a pension can establish the lump-sum tax here first and compare.
Legal basis and how the maths runs
Under 근로자퇴직급여 보장법 제8조제1항, severance is at least 30 days of average wage for each year of continuous service. The average wage is the daily figure obtained by dividing the wages of the final three months by the number of days in that period, and three twelfths of annual bonuses and annual leave pay are added to the three months' wages. This calculator treats the three months as 91 days, so the real figure may differ by a few days depending on your leaving date.
The tax is set by 소득세법 제48조 and 제55조. First, a service-years deduction comes off the severance: ₩1,000,000 per year for service up to 5 years; ₩5,000,000 plus ₩2,000,000 per year beyond 5 for up to 10 years; ₩15,000,000 plus ₩2,500,000 per year beyond 10 for up to 20 years; and ₩40,000,000 plus ₩3,000,000 per year beyond 20 for longer service. The remainder is divided by the years of service and multiplied by 12 to give the converted salary.
A converted-salary deduction then comes off. Up to ₩8,000,000 is deducted in full; up to ₩70,000,000 the deduction is ₩8,000,000 plus 60% of the excess over ₩8,000,000; and the percentage falls with each higher band down to 35% in the top band. The progressive comprehensive income tax rates are applied to what remains to give the converted tax, which is divided by 12 and multiplied by the years of service to give the retirement income tax. Local income tax is 10% of that.
A worked example
Say your pay in the last three months was ₩4,000,000 a month with no bonus or leave pay, and you served 10 years. The daily average wage is ₩12,000,000 over 91 days, ₩131,868, and multiplying by 30 days and 10 years gives severance of ₩39,560,440. The service-years deduction for 10 years is ₩15,000,000; subtracting it, dividing by 10 and multiplying by 12 gives a converted salary of ₩29,472,527.
Taking off the converted-salary deduction of ₩20,883,516 leaves a taxable base of ₩8,589,011, and the progressive rates give a converted tax of ₩515,341. Divided by 12 and multiplied by 10 years, the retirement income tax is ₩429,451; with ₩42,945 local income tax the total is ₩472,396, only 1.2% of the severance. On the same pay after 3 years, severance would be ₩11,868,132 and tax ₩181,319: a smaller amount, but a higher effective rate of 1.5%.
Common mistakes
The most common is applying salary tax rates straight to the severance. Skip the divide-by-12-and-multiply-by-years step and the tax looks several times too large. The second is leaving bonuses and leave pay out of the average wage. Three twelfths of the annual amounts are added to the three months' wages, so at companies with large bonuses the severance changes noticeably.
The third is entering a rough number of years. Years of service are used four times, in the severance itself, the service-years deduction, the converted salary and the final multiplication, so an error of one year moves the result a long way. Count precisely from your start date to your leaving date and enter the decimal. The fourth is forgetting that this calculation is for a DB pension or severance paid directly by the employer. Under a DC plan the benefit is whatever the employer's annual contributions have grown to, so the severance formula here does not apply; only the tax computation is the same. Service of less than a year earns no statutory severance at all.
Length-of-service deduction
| Years of service | Deduction |
|---|---|
| Up to 5 years | ₩1M × years of service |
| Over 5 years, up to 10 years | ₩5M + ₩2M × (years − 5) |
| Over 10 years, up to 20 years | ₩15M + ₩2.5M × (years − 10) |
| Over 20 years | ₩40M + ₩3M × (years − 20) |
Converted-wage deduction
| Converted wage | Deduction |
|---|---|
| Up to ₩8M | All of it |
| Over ₩8M, up to ₩70M | ₩8M + 60% of the excess |
| Over ₩70M, up to ₩100M | ₩45.2M + 55% of the excess |
| Over ₩100M, up to ₩300M | ₩61.7M + 45% of the excess |
| Over ₩300M | ₩151.7M + 35% of the excess |
The deductions come from 소득세법 제48조제1항 and the tax structure from 제55조제2항. Statute names are left in Korean so you can search them on law.go.kr.
About this calculator
When to use it
Use this when you leave a Korean job. It works out the retirement payment from your average wage and years of service, then the Korea severance pay tax withheld from it. Severance pay in Korea is taxed separately from salary, at a lower effective rate for long service.
What it calculates
Tax on a lump-sum severance payment, softened by years of service.
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Common questions
- How is severance pay calculated in Korea?
- Thirty days of average wage for each year of continuous service. The average wage is everything you were paid over your last three months divided by the number of days in that period; an annual bonus and unused leave pay count only 3/12 toward it. The rule is in 근로자퇴직급여 보장법 제8조제1항.
- Why is the tax lower the longer I stayed?
- Because the tax divides your severance by your years of service to get a one-year figure, applies the rates to that, and then multiplies back. The same ₩100M spread over 20 years produces a small converted wage that lands in a low bracket; over 3 years the converted wage is much larger and meets a high rate.
- Do I get severance if I worked less than a year?
- No. There is no obligation to pay severance if your continuous service is under one year. Workers averaging fewer than 15 hours a week over four weeks are also outside the scheme.
- Does a DC retirement pension work the same way?
- No. A defined-benefit (DB) plan follows the same structure as this calculation, but under a defined-contribution (DC) plan your benefit is whatever the company paid in each year plus the investment return on it. Since that depends on performance, this calculator can only give you a rough idea.
- Is it cheaper to take severance as a pension?
- Taking it as a pension is taxed as pension income at roughly 60% to 70% of the retirement income tax. Because the burden differs by how you receive it, it is worth checking before you commit to a lump sum.
- Do foreign workers get severance pay?
- Yes. 근로기준법 제6조 forbids discriminating on working conditions by nationality, and the severance act attaches no nationality condition either. If you worked continuously for a year or more and averaged 15 hours a week or more, you qualify. Note that many people on an E-9 visa are covered instead by departure guarantee insurance, paid out when they leave the country, so check which one applies to you.
- What if I leave Korea before I am paid?
- The right to claim severance lapses after three years if you do not exercise it (근로자퇴직급여 보장법 제10조). You can file a complaint with the labour office through a representative after leaving, and departure guarantee insurance can be claimed from abroad. It is far easier if you leave a bank account and contact details with both your employer and the insurer before you go.
Paying down a loan with your severance? Check your DSR
Explainers that cover this
The assumptions and the statutes behind them, written out.
- Severance tax is set by years served, not by the amount — how the same ₩100M severance became ₩264K or ₩10.36MRetirement income is taxed separately from other income. A service-years deduction comes off first; the remainder is divided by years of service and multiplied by 12 to restore a one-year figure, the tax rate is applied, and the result is divided by 12 and multiplied by years of service again. Because of that conversion, the same ₩100M costs ₩10,360,625 after 5 years of service and ₩264,000 after 30.
- SME retirement pension fund opens to workplaces under 100 employees — 1 January 2027 | under 50 until thenThe SME retirement pension fund is a pooled fund in which the Korea Workers' Compensation and Welfare Service invests the contributions of many small companies together. Before the amendment it was open to workplaces of 30 or fewer; under the addenda it is under 50 for the second half of 2026 and under 100 from 1 January 2027. Members may receive State support for part of the employer contribution and operating costs within the budget.
- Failing to pay severance — up to five years in prison — effective 18 September 2026 | up from threeFrom 18 September 2026, an employer who fails to pay severance, or who fails to pay retirement benefit contributions and late interest when a worker leaves, faces up to five years in prison or a fine of up to ₩50M. Today it is up to three years or ₩30M. Prosecution still cannot proceed against the worker's express wishes, except where an employer already on the published list of wage defaulters defaults again.
- ₩50M severance pay and the tax is ₩730,000 — 1.5%On ₩5M a month for ten years, severance pay is ₩49.45M and the retirement income tax, including local tax, is ₩733,494, an effective 1.48%. Severance gets two deductions, for years of service and on the annualised amount, and the rate is applied after dividing by years of service. The same pay for one year is taxed at 2.04%, a higher rate.
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