Legal information

Because the insurance is filled up month by month from a fixed share of your wage, while severance pay (퇴직금) is calculated once, at the end, from your average wage of the last three months. The two numbers only match if your pay never changed and the employer never missed a payment. Whenever the insurance total is lower, the employer, not the insurer, owes the rest. The difference (차액) falls due two weeks after your employment ends, and the right to it survives for three years, but in practice the only comfortable time to settle it is before your flight.

How does the insurance total build up?

For every month you work, your employer pays a premium into a policy in your name with the insurer that handles the Employment Permit System. The premium is a fixed percentage of your monthly wage set by regulation. The money sits in the policy and earns a small return. When you leave Korea, the insurer pays you what has accumulated.

Two things follow from this design:

• The total depends on every month of your employment, including the early months when your wage was lowest.
• It depends on the employer actually paying each month. A skipped month means a smaller policy, and nobody tells you automatically.

Why does severance come out higher?

Severance looks only at the final quarter of your employment. All pay for those months is spread over their days, and that daily figure is multiplied by 30 for each year of service. Overtime, night work and holiday premiums in those three months are included.

So the gap usually comes from one of these:

Even with no wage change and no overtime, a small gap is normal. With overtime, it can be a month of pay or more.

A worked example with invented numbers

The figures below are made up to show the method. Suppose one day of average wage, worked out as the severance article explains, is 90,000 won, and you worked exactly three years.

If the statement had shown 8,100,000 won or more, the employer would owe nothing extra. Any amount above the legal severance stays yours.

When exactly is each part paid?

The timing is the trap. The two payments follow different clocks.

• Insurance. You apply before departure. The insurer pays within 14 days after you have left Korea, or within 14 days after your application if you apply later or for another reason such as a change of visa status.
• Severance difference. The employer's deadline is two weeks from the end of employment, the same as any other final pay. Your employment usually ends days or weeks before your flight.

This means the employer's deadline often passes while you are still in Korea, but the final insurance figure is only confirmed after you have gone. Do not wait for the insurer's payment to discover the gap. Instead:

1. Ask the insurer, or the employer's HR, for a statement of the accumulated amount (적립금 조회) two or three weeks before your last day. 2. Calculate your severance from your final three payslips. 3. Subtract. If there is a difference, ask the employer in writing (a message is fine) to pay it by your last day. 4. If they refuse or delay, lodge a complaint at the labor office before departure, or sign a power of attorney so a lawyer can pursue it after you are gone.

I changed workplaces. Which employer owes what?

Each employer is responsible for the years you worked for them. If you worked more than a year at a previous company, the insurance accumulated under that employer can usually be claimed when you move, and any shortfall against severance for that period is that employer's debt, not the new one's. The three-year clock starts separately at each job's end, so the earliest employer expires first.

What if I already left and the amount was short?

The claim does not disappear at the airport. You can authorize someone in Korea to claim the difference from the employer, and the substitute payment scheme (대지급금) is available if the employer has no money. Separately, insurance money you never collected stays with the insurer for three years and is then moved to the Human Resources Development Service of Korea (한국산업인력공단), where it can still be requested, but with more paperwork.

Next step

Get your accumulated insurance figure now, run the severance calculator with your final three payslips, and compare. If the gap is more than a few tens of thousands of won, raise it with the employer before your last working day. Consultations are paid; when you contact us, a staff member will call you back and explain the fee.

법무법인 대한중앙
1533-7377

Rules applied

Act on the Employment of Foreign Workers (외국인근로자의 고용 등에 관한 법률) Article 13(1) (employer must insure and pay premiums monthly), Article 13(2) (insurance counts as the severance system), Article 13(3) (paid within 14 days after departure, or after application), Article 13(4) (3-year limit, then transfer to HRD Korea). Employee Retirement Benefit Security Act (근로자퇴직급여 보장법) Article 8(1) (30 days of average wage per year), Article 9(1) (14 days), Article 10 (3 years).

This is general information, not legal advice. Every case is different.