termination of employment in South Korea: laws & severance policies

Legal Grounds for Termination of Employment in South Korea

In South Korea, employers are not permitted to terminate employees at will; terminations must be justified. Acceptable justifications for compliant terminations include:

 
• Gross Misconduct: Serious violations such as theft, fraud, or workplace violence.
 
• Insubordination: Refusal to follow lawful and reasonable instructions.
 
• Chronic Absenteeism: Unjustified and frequent absences affecting business operations.
 
• Incompetence: Consistent failure to meet performance standards despite adequate training.
 
• Economic Necessity: Redundancies due to financial constraints or organizational restructuring.

Employment Laws and Severance Policies in South Korea

Understanding the legal obligations regarding severance pay and contributions is essential when terminating employment in South Korea. Below is a detailed overview of the key considerations for both employers and employees.

Notice Period in South Korea

There is no mandatory notice period in the South Korean Labour Law unless specified in the employment contract or company manual. Nevertheless, it is customary to give 1 month notice to employees.

Severance Pay in South Korea

Under the statutory severance pay system in South Korea, employees are entitled to severance pay if they have been employed for at least 1 year. This is regardless of the reason for termination, including voluntary resignation. This pay amounts to 30 days of their average wage, which includes bonus pay from the preceding 3 months, for each year of continuous service.

The average wage is determined by dividing the total wages earned during the last three months by 90. Employers must pay severance within 14 days after termination.

Probation Period in South Korea

The probationary period for permanent employees is typically three months. During this time, either party can terminate the employment with shorter notice, as specified in the employment contract. However, even during probation, terminations must be for justifiable reasons. Employers seldom terminate contracts after probation/training due to the associated unemployment costs for the company.

Process for Ending Employment in South Korea

 
• Documentation: Maintain records of performance issues or misconduct.
 
• Notice: Provide a written notice specifying the reason and date of termination.
 
• Final Compensation: Calculate and pay all outstanding wages, unused leave, and severance pay.
 
• Exit Procedures: Collect company property and conduct an exit interview if applicable.

Employee Rights During Termination in South Korea

Unfair Dismissal Protections

Employees are protected against unfair dismissal. Terminations without just cause or proper procedure can lead to reinstatement and back pay.

Grievance Procedures

Employees have the right to file grievances regarding unfair treatment or dismissal. Employers must have a clear grievance procedure in place to address such issues.

Final Pay and Benefits

Employers are obligated to settle final pay, including wages, bonuses, and unused leave, promptly after termination. Legal timelines for providing final payments are within 14 days after termination.

Termination Documentation Required by Law

Upon termination, employers must provide the following documents:

 
• Termination Letter: Stating the reason and date of dismissal.
 
• Final Payslip: Detailing the final wages and deductions.
 
• Tax Documents: Necessary for the employee's tax filings.

Employers must provide these documents within the legal timelines to ensure compliance.

How to Stay Compliant as An Employer in South Korea

Expanding your workforce across international borders is an exciting step, but it can be a logistical nightmare to hire and pay employees in different countries. And if you need to terminate employment, it’s critical to adhere to local compliance laws. That’s the advantage of using a trusted Employer of Record like Playroll. They can:‍

• ‍Handle international compliance: Different countries each have their own federal and local laws governing employee rights. An EOR helps ensure that you are compliant with the unique set of laws for any country in which your company operates. 
• ‍Run payroll for your global team: An EOR will act as your payroll provider, paying your employees on your behalf in the local currency. The company will also have in-depth knowledge of local tax codes, regulatory practices, and everything else that goes into managing global payroll.
• ‍Scale your team anywhere: Legally hire and swiftly onboard new hires in 180+ regions without the need for entity set-up by leveraging Playroll's infrastructure, so you can freely explore new markets and focus on growth.