Failing to pay severance — up to five years in prison — effective 18 September 2026 | up from three
From 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.
Conditions used in the video
- Effective date
- 2026-09-18
- Promulgated
- 2026-03-17
- Basis
- Employee Retirement Benefit Security Act Articles 43 and 44
- Now
- up to three years in prison or a fine of up to ₩30M
- Amended
- up to five years in prison or a fine of up to ₩50M
- Worker's wishes
- still bar prosecution · exception for repeat offenders on the published list
Results
- Now
- up to three years · fine up to ₩30M
- From 2026-09-18
- up to five years · fine up to ₩50M
- Conduct covered
- unpaid severance · unpaid contributions and late interest at retirement
- Unpaid wages (Labor Standards Act)
- the same five years (effective 2026-10-08)
- Gap
- severance changes 20 days earlier
Why it works this way
Today, an employer who fails to pay severance faces up to three years in prison or a fine of up to ₩30M under Article 44 of the Employee Retirement Benefit Security Act. Failing to pay retirement pension contributions sits in the same bracket. It was on a par with unpaid wages.
Employee Retirement Benefit Security Act Article 43 (effective 2026-09-18).
- Now (Article 44)up to three years · fine up to ₩30M
- Amended (Article 43)up to five years · fine up to ₩50M
- Conductunpaid severance · unpaid contributions and late interest at retirement
The rule that prosecution cannot proceed against the worker's express wishes is unchanged.
Unpaid wages under the Labor Standards Act also rise to up to five years in prison or a fine of up to ₩50M, but that takes effect on 8 October 2026. Severance moves into the five-year bracket 20 days earlier.
Two different Acts, two effective dates.
- 2026-09-18unpaid severance, five years (Retirement Benefit Act)
- 2026-10-08unpaid wages, five years (Labor Standards Act)
- Exceptionan employer on the published defaulter list who defaults again. The worker's wishes no longer bar prosecution
Decree values such as the late-interest rate are not covered here.
This video and page describe a measure that has been promulgated but has not taken effect. Details may change through a decree or notice.
In short, from 18 September 2026 unpaid severance carries up to five years in prison or a fine of up to ₩50M, changing 20 days before unpaid wages.
The legal basis
Drawn from government announcements and the statutes themselves as primary sources, covering only the relevant part.
Employee Retirement Benefit Security Act Article 43 (Penalties)
In force Effective 2026-09-18 (promulgated 2026-03-17; Addenda Article 1 proviso)
An employer who fails to pay severance, or who fails to pay benefit contributions and late interest when a worker retires, is punished by up to five years in prison or a fine of up to ₩50M. Prosecution may not proceed against the victim's express wishes, except where an employer on the published list of wage defaulters defaults again.
What this means
Unpaid severance moves into the five-year bracket before unpaid wages. Settlement can still avoid prosecution, but not for habitual defaulters.
Employee Retirement Benefit Security Act Article 44 (former penalty)
In force Until 2026-09-17
Unpaid severance and unpaid contributions: up to three years in prison or a fine of up to ₩30M.
What this means
Defaults before the effective date fall in this bracket. The penalty follows the law at the time of the act.
Run it on your own numbers
The calculator opens with these conditions already filled in. Change the figures and your own case comes straight out.
Open the Severance Pay Tax Calculator
Frequently asked
Is late severance punished immediately?
Severance not paid within 14 days of leaving counts as unpaid. But since prosecution cannot proceed against the worker's wishes, the structure where a settlement avoids prosecution remains.
Does it change on the same day as unpaid wages?
No. The five-year penalty for unpaid wages comes with the Labor Standards Act amendment effective 8 October 2026. Severance changes on 18 September 2026, 20 days earlier.
Does a company that skipped retirement pension contributions fall under this?
Yes. Failing to pay benefit contributions and late interest at retirement sits in the same five-year bracket.
What is the exception to the worker's-wishes rule?
An employer already on the published list of wage defaulters who defaults again can be prosecuted regardless of the worker's wishes.
Results are estimates based on the inputs and on the rules as at the stated date. They may differ from a lender's actual assessment, and the rules change often. Take professional advice before any decision that matters.