Severance Pay and Departure-Expiry Insurance for Foreign Workers

At a glance

• Severance pay is at least 30 days’ average wage for each 1 year of continuous service.
• An employer of foreign workers takes out departure-expiry insurance (or a trust) and pays the premium every month.
• You claim the payout from the insurer, attaching the certificate you receive after the notice of scheduled departure.
• If the payout is less than the legal severance pay, the employer must pay the difference (EPS and HRD Korea guidance).

Who needs to do this

• Employers must set up a retirement benefit plan. However, workers with less than 1 year of continuous service and workers whose contractual working hours, averaged per week over 4 weeks, are less than 15 hours are excluded.
• An employer of foreign workers must take out departure-expiry insurance (or a trust) with the foreign worker as the insured and pay the premium every month. Doing so counts as setting up a severance pay plan.
• The insurance applies to employers hiring foreign workers with 1 year or more of their employment period remaining. Cases such as hiring a worker with less than 1 year of the employment period remaining are excluded (HRD Korea guidance).
• When a foreign worker who has worked 1 year or more at the same workplace leaves Korea (excluding temporary departures), dies or changes status of stay, the payout goes to the worker (or the bereaved family in case of death) (EPS guidance).
• If the period of work is less than 1 year, the payout belongs to the employer (EPS guidance).

Where to apply

• Notice of scheduled departure: from 1 month before the scheduled departure date, submit the notice of scheduled departure to the Employment Center and receive a certificate of scheduled departure.
• Payout claim: attach the certificate to the insurance claim form and send it to the insurer by post, fax or in person.
• According to HRD Korea, the insurer’s payment fax is 0505-161-1421, and the call center is 1600-0266 (in Korea) or 82-2-2261-8400 (from abroad).
• You can calculate severance pay with the Ministry of Employment and Labor severance pay calculator (Ministry of Employment and Labor FAQ).
• If you are not paid severance, you can file a petition on the Ministry of Employment and Labor labor portal.
• Questions on employment and labor rules: Ministry of Employment and Labor customer counseling center 1350 (no area code).

What to bring

• When the worker claims: 1 copy of the insurance claim form (certificate of scheduled departure), 1 copy of a bankbook in the foreign worker’s own name, and 1 copy of the passport or residence card.
• If the worker has died: the bereaved family claims with a bereaved family certificate confirmed by the sending country and a copy of a bankbook in the family member’s name.
• Claim forms are available at Employment Centers and posted on the HRD Korea and insurer websites (EPS departure preparation guide).

Cost

• The employer pays the departure-expiry insurance premium every month at 8.3% of the monthly ordinary wage stated in the employment permit. It is not a premium paid by the worker (HRD Korea guidance).
• Legal severance pay is at least 30 days’ average wage for each 1 year of continuous service.
• Ministry of Employment and Labor formula: severance pay = 1-day average wage × 30 days × (days of continuous service ÷ 365).
• The average wage is the total wages for the 3 months before leaving divided by the total number of days in that period; if it is lower than the ordinary wage, the ordinary wage is used (Ministry of Employment and Labor FAQ).

Procedure

• Step 1: once your departure is set (end of employment period, end of contract, etc.), from 1 month before the scheduled departure date file the notice of scheduled departure at the Employment Center and receive the certificate of scheduled departure.
• Step 2: send the insurance claim form, with the certificate, a bankbook copy and an ID copy attached, to the insurer.
• Step 3: when applying, choose how to receive the payout: airport collection, remittance-only account service, transfer to a local account, or direct remittance to a local bank.
• Step 4: the legal payment deadline is within 14 days of departure. If you apply because of a change of status, death, etc., or apply after the departure date, it is within 14 days of the application date.
• Step 5: to check whether the payout is less than the legal severance pay, you can ask the insurer for written confirmation of the lump-sum amount (by phone or official letter, no special form). If it is less, the employer must pay the difference.
• Ordinary workers not covered by departure-expiry insurance: the employer must pay severance within 14 days of the leaving date, and the deadline can be extended by agreement between the parties.
• In principle, severance pay is paid by transfer to an individual retirement pension (IRP) account or similar designated by the worker, with exceptions for reasons set by Presidential Decree.

Common sticking points

• The notice of scheduled departure is accepted only within 1 month before the scheduled departure date. If you file earlier, it is not accepted.
• A temporary trip home for personal reasons is not a reason for payment.
• If the claim right is not exercised for 3 years from the date the payment reason arises, the limitation period expires, and the financial institution transfers the money to HRD Korea within 1 month.
• In principle, the right to the departure-expiry insurance lump sum cannot be transferred or pledged as collateral. However, if there is a reason such as medical treatment of 4 weeks or more while changing workplaces, it can be pledged up to 50% of the accumulated amount.
• An employer who does not take out departure-expiry insurance faces a fine of up to KRW 5,000,000, and late premium payment is subject to administrative fines of KRW 800,000, KRW 1,600,000 or KRW 3,200,000 (HRD Korea guidance).
• Return-cost insurance is a separate insurance taken out by the foreign worker (KRW 400,000 to KRW 600,000 depending on the country) and differs from departure-expiry insurance (EPS guidance).

This guide is general information and does not decide individual eligibility. Laws and fees can change, so check the original text through the official links and with the competent authority.