Navigating employment termination in South Korea requires a thorough understanding of the country's Labor Standards Act (LSA) and related regulations. South Korean law emphasizes job security, placing significant restrictions on employers' ability to terminate employment contracts. Employers must adhere to specific procedures, provide adequate notice, and, in many cases, pay severance to avoid legal challenges. Failing to comply with these requirements can result in costly litigation and reputational damage.
This guide provides an overview of the key aspects of termination and severance in South Korea as of 2025, covering notice periods, severance pay calculations, grounds for termination, procedural requirements, and employee protections. Understanding these elements is crucial for ensuring compliance and minimizing risks when terminating employees in South Korea.
Notice Period Requirements
The length of the required notice period depends on the employee's tenure and the reason for termination. Generally, employers must provide at least 30 days' advance notice before terminating an employee.
| Employee Category | Required Notice Period |
|---|---|
| All Employees | Minimum 30 days |
- Payment in Lieu of Notice: If an employer fails to provide the required notice, they must pay the employee an amount equal to at least 30 days' wages.
Severance Pay Calculations and Entitlements
Severance pay (퇴직금, toejikgeum) is a statutory entitlement for employees who have worked for at least one year. The purpose of severance pay is to compensate employees for their service and contribution to the company.
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Eligibility: Employees are eligible for severance pay if they have worked for a continuous period of at least one year.
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Calculation: Severance pay is calculated as follows:
Average Daily Wage x 30 days x Number of Years of Service- Average Daily Wage: This is calculated by dividing the total wages earned during the three months preceding the termination date by the number of days in those three months. Wages include base salary, overtime pay, and other allowances.
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Payment Deadline: Severance pay must be paid to the employee within 14 days of the termination date, unless otherwise agreed upon by both parties.
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Taxation: Severance pay is subject to income tax, but certain exemptions may apply.
Grounds for Termination
South Korean law distinguishes between termination for cause (disciplinary dismissal) and termination without cause (redundancy or business reasons). The requirements for each type of termination differ significantly.
Termination for Cause
Termination for cause requires a justifiable reason, such as:
- Serious misconduct
- Criminal activity
- Gross negligence that causes significant damage to the company
- Repeated violation of company rules
Employers must be able to provide substantial evidence to support a termination for cause. The burden of proof lies with the employer.
Termination Without Cause
Termination without cause, often due to redundancy or business reasons, is more strictly regulated. Employers must demonstrate:
- Urgent Managerial Needs: There must be a compelling business reason for the termination, such as financial difficulties or restructuring.
- Efforts to Avoid Termination: The employer must have made reasonable efforts to avoid termination, such as offering alternative positions or implementing cost-cutting measures.
- Fair and Reasonable Selection Criteria: The selection of employees to be terminated must be fair and objective.
- Consultation with Employee Representatives: The employer must consult with employee representatives or a labor union before implementing terminations without cause.
Procedural Requirements for Lawful Termination
To ensure a lawful termination, employers must follow specific procedural requirements:
- Written Notice: Provide the employee with a written notice of termination, stating the grounds for termination and the effective date.
- Consultation (if applicable): If the termination is without cause, consult with employee representatives or a labor union.
- Opportunity to Respond: Give the employee an opportunity to respond to the allegations or reasons for termination.
- Internal Investigation (if necessary): Conduct an internal investigation to gather evidence and ensure fairness.
- Record Keeping: Maintain thorough records of all communication, investigations, and decisions related to the termination.
Employee Protections Against Wrongful Dismissal
South Korean law provides significant protections for employees against wrongful dismissal. Employees who believe they have been unfairly terminated can file a claim with the National Labor Relations Commission (NLRC) or pursue legal action in court.
- Remedies for Wrongful Dismissal: If a termination is found to be unlawful, the employee may be entitled to:
- Reinstatement to their former position
- Back pay for lost wages
- Compensation for emotional distress
- Burden of Proof: In wrongful dismissal cases, the burden of proof generally lies with the employer to demonstrate that the termination was justified and followed proper procedures.
- Statute of Limitations: Employees typically have three months from the date of termination to file a claim with the NLRC.
By understanding and adhering to these termination procedures and employee protections, employers can minimize the risk of legal challenges and ensure compliance with South Korean labor law.
