South Korea — Termination & Severance

South Korea's law on termination and severance for employees is principally set by the Labor Standards Act (LSA, 근로기준법) and the Retirement Benefits Security Act (RBSA, 근로자퇴직급여보장법).

Statutory applicability and scope

• The Labor Standards Act applies to all businesses or workplaces employing five or more people (LSA, Art. 11(1)). Certain core protection provisions (such as those on wage payment and working hours) also extend, in part, to smaller workplaces, but many key rules do not. Employee classification matters: domestic workers, family-only businesses, maritime/shipboard and high-level executives may be excluded from some LSA protections (LSA, Art. 11(2), 63).
• The RBSA, Article 4, obligates virtually all employers to maintain a retirement (severance) benefits system; Article 8 requires severance pay for workers with at least one year of continuous service. Exceptions apply to government, agricultural, and domestic workers, narrowly defined in the statute (RBSA, Art. 2(1), 3).

Key enforcement agencies and processes

• The Ministry of Employment and Labor (MOEL) is the primary regulator and enforcer. Workers alleging wrongful (unjust) dismissal may file a relief claim with their regional Labor Relations Commission within three months of termination (LSA, Art. 28).

Collective agreements and company work rules

• Workplaces may have collective bargaining agreements (CBAs) or written internal rules, but these can only provide rights and protections in excess of the LSA minimums—never less (LSA, Art. 11(4)). All work rules must be provided to staff in writing (LSA, Art. 93).

Foreign-invested or globally headquartered employers are fully subject to these core statutory obligations when employing staff in Korea—there are no carve-outs for foreign entities.

Source: Labor Standards Act (근로기준법) Source: Retirement Benefits Security Act (근로자퇴직급여보장법) Source: MOEL Q&A on LSA Art. 11 applicability Source: MOEL Q&A on RBSA coverage and severance Source: MOEL Q&A on dismissal relief under LSA Art. 28

Under the South Korean Retirement Benefits Security Act (RBSA, 근로자퇴직급여보장법) Article 8, any employee with at least one year of continuous service is entitled to statutory severance pay (퇴직금) upon termination, regardless of reason (including resignation). Article 4 of the Act requires almost all employers to operate a retirement system covering regular employees, with limited, enumerated exceptions.

Calculation Method (Statutory Formula) According to RBSA Article 8(1), the minimum severance pay is equal to at least 30 days’ average wage for each year of continuous service. “Average wage” (평균임금) is defined by Article 2(1)(6) of the Labor Standards Act (LSA, 근로기준법) as the total wages paid to the worker during the three months immediately preceding termination, divided by the total number of calendar days in that period. Severance pay is therefore calculated as:

> (Average daily wage over past 3 months) × 30 × (years of continuous service)

where partial years are calculated proportionally. If a worker has worked, for example, 27 months, the entitlement would be (average daily wage) × 30 × (27/12). Employers may provide a more generous formula under a collective agreement, but never less than the statutory minimum (RBSA Art. 4, LSA Art. 11(4)).

Timeframe for Payment RBSA Article 9 requires payment of severance pay within 14 days from the day the employment relationship ends, unless otherwise agreed. Delays can result in statutory interest penalties (RBSA Art. 9(2)).

Summary Table:

• Minimum statutory eligibility: 1 year continuous service (RBSA Art. 8)
• Formula: (Average daily wage over prior 3 months) × 30 × (years of service)
• Payment deadline: 14 days from termination (RBSA Art. 9)

Severance obligations apply whether the dismissal is voluntary, involuntary, or due to retirement. All figures are calculated by exact service, including fractions of a year.

Source: Retirement Benefits Security Act (근로자퇴직급여보장법) Source: Labor Standards Act (근로기준법) Art. 2, definition of average wage Source: MOEL Q&A: Severance calculation and deadline

South Korea’s Labor Standards Act (LSA, 근로기준법) imposes strict procedural requirements when an employer carries out a mass layoff or workforce reduction. Dismissals above a certain threshold (“mass layoff,” 정리해고) trigger not only collective consultation duties but also obligations to notify the Ministry of Employment and Labor (MOEL) and to grant preferential rehire rights to affected employees.

Trigger Threshold (Presidential Decree): Article 24(4) LSA specifies that if an employer intends to dismiss a number of workers exceeding thresholds set by Presidential Decree—ordinarily 10% of the workforce or 30 or more employees in a single month, whichever is smaller—the employer must notify the MOEL in writing. Article 19 of the Enforcement Decree of the LSA (근로기준법 시행령) provides the exact figures: mass layoffs mean termination of at least 10% of regularly employed workers (for employers with 100 or more employees) or 10+ workers (for employers with 30–99 employees) within one month.

Notification Process: Under LSA Art. 24(4), employers must submit details of the planned dismissal—including reasons, scope, and relevant dates—to the head of the local MOEL office before proceeding. Failure to notify can render the dismissals legally defective and lead to administrative penalties.

Priority Rehire: Per LSA Article 25(1), employers who have implemented mass layoffs must—unless they have agreed otherwise with the workforce—give priority to reemploy dismissed workers for three years after the date of dismissal, if new roles become available. Rehire offers must be made in good faith and documented. Violation exposes the company to enforcement action or labor commission claims.

Consultation Requirements: Alongside notification, Article 24(2)–(3) obliges “sincere consultation” with employee representatives regarding alternatives and mitigation, lasting at least 50 days if agreement on the mass layoff is not reached sooner.

These statutory procedures are strictly policed and foreign employers cannot contract around them. Always verify threshold headcount under the latest language of the Enforcement Decree and submit all required notices to the MOEL before effecting a reduction in force.

Source: Labor Standards Act (근로기준법), Articles 24–25 Source: Labor Standards Act Enforcement Decree Art. 19

South Korea’s Labor Standards Act (LSA, 근로기준법) sets a high bar for employee dismissal: Article 23(1) prohibits an employer from dismissing a worker without “just cause” (정당한 이유). The LSA itself does not exhaustively define what constitutes just cause. Instead, the concept has been shaped by accumulated case law and guidance from the Ministry of Employment and Labor (MOEL). According to MOEL's official guidance, “just cause” may be recognized for grave misconduct (for example, theft or violence at the workplace) or for repeated and serious performance failures, but only after the employer has given the employee fair opportunity to improve and proper warning. Routine poor performance or minor infractions do not generally suffice. Employers are expected to document cases thoroughly and ensure procedural fairness, including giving the employee an opportunity to respond prior to a final dismissal decision. Source: MOEL Q&A on just cause for dismissal

Dismissal based on management needs, such as workforce reduction or business closure, is possible but triggers separate mass layoff procedures under LSA Articles 24–25, in addition to the just cause requirement. Those procedures require collective consultation, MOEL notification, and priority rehire obligations for dismissed workers. See the section on Mass Layoffs for these rules. Source: Labor Standards Act (근로기준법), Articles 24–25

Certain dismissals are explicitly barred regardless of cause:

• During an employee’s medical treatment period after a work-related accident or disease, and for 30 days thereafter (LSA Art. 23(2)).
• On grounds of gender, union activity, maternity, or other discrimination (LSA, Art. 2).

Employees alleging wrongful dismissal for lack of just cause have the right to file for relief with the Labor Relations Commission within three months of termination (LSA Art. 28). Possible remedies include reinstatement and back pay, based on Commission or court order. Source: Labor Standards Act (근로기준법), Articles 23, 28

Source: Labor Standards Act (근로기준법), Article 23 Source: MOEL Q&A on just cause for dismissal

Article 26 of South Korea’s Labor Standards Act (근로기준법) establishes that, as a baseline, an employer must provide an employee with at least 30 days’ advance written notice before dismissal, or make a payment in lieu equivalent to 30 days’ "ordinary wages" (통상임금) if notice is not given. The legislative aim is to provide either job-security continuity or an economic bridge to departing employees.

Notice or Pay In Lieu—Core Rule (Art. 26)

• Employers must either give at least 30 days’ prior notice of dismissal or pay not less than 30 days’ ordinary wages instead of notice.
• "Ordinary wage" has a specific statutory definition (LSA Art. 2(1)(5)), generally representing fixed, regular wages paid for normal working hours. Pay-in-lieu must be rendered at the time of separation if notice is not provided.

Statutory Exceptions (Art. 26, Art. 27) Employers are not required to give notice or pay in lieu when:

• The worker has been employed for less than 3 months;
• The worker is dismissed for a reason attributable to the worker deliberated by criminal law (e.g., embezzlement) with supporting evidence;
• The worker is a daily worker whose period of employment does not exceed three consecutive months;
• The worker is under a contract of fixed duration and dismissed at the end of that term;
• Cases otherwise specified by law (per Article 11(2)—for example, family employees and certain excluded categories).

All other dismissals—including those for just cause—require compliance with Art. 26. For mass layoffs under Articles 24–25, the notice-period obligation remains in addition to requirements for consultation and MOEL notification.

Contractual and Collective Agreement Flexibility Employers and employees may agree to notice periods longer than 30 days, either individually or through collective bargaining, but never to shorter periods than the statutory baseline.

Compliance and Enforcement Failure to provide notice or pay-in-lieu exposes the employer to administrative fines as prescribed by statute (but not an automatic penalty of extra pay). Disputes over notice may be brought to the Ministry of Employment and Labor for investigation and remedial order.

Source: Labor Standards Act (근로기준법), Article 26