Not Paying Korean Statutory Severance to an Employee in Korea is a Crime

Korean Labor & Employment Law has strict and specific rules imposed on employers, running afoul of these rules can place a representative director/sole director or the individual employee responsible for the violation of law to face criminal and civil sanctions. The criminal sanctions can include a sentence of time in prison or large fines. For an article on severance obligations after a merger please see: Korean Statutory Severance Obligations After a Merger in Korea.

Korean Statutory Severance

For example, the Employee Retirement Benefit Security Act, Art. 9(1) notes that “when an employee separates, the employer shall pay statutory severance within 14 calendar days from the date on which the reason for the payment occurs, provided that under special circumstances, the payment date may be extended by an agreement between the parties concerned.” This law on Korean Severance has few exceptions, in most cases even if the employee has funds owed to the employer, this statutory severance must be paid by the employer within 14 days of the separation of the employee from employment. This law applies equally to Korean and foreign employees under the Labor Standards Act. Please note that, in most cases, non-Korean employers also are required to pay severance to Korean-based employees.

In the changing legal landscape in Korea, it is essential for all companies doing business in Korea to do a complete, nuanced, and professional outside-managed legal and compliance audit to remain ahead of changes in law, practices, and best procedures. We advise most of our Clients to perform this audit every three years, and for clients in highly regulated, monitored, or inherently dangerous industries to perform the audit every year.

For employees of companies doing business in Korea, never sign a separation agreement without consulting with a Korean Law Firm with significant experience with non-Korean expat employment matters in Korea. The reality is few Korean law firms have significant experience handling matters for foreigners.

To learn more about IPG Legal please see: IPG Legal’s Labor & Employment Law Practice. We handle matters for expat employees of companies doing business in South Korea and foreign capital-invested companies doing business in South Korea. We are one of the only non-conflicted law firms working in the Korean market, since we work nearly exclusively with non-Korean companies and individuals.

If you would like to consult with an attorney experienced in Korea’s Labor & Employment Law, please schedule a call with an attorney in Korea here.

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