How Foreign Workers Can Receive Severance Pay and Strategic response
Can Foreign Workers Receive Severance Pay?
Retirement benefits are governed by Article 8(1) of the Act on the Guarantee of Employees’ Retirement Benefits.
The Supreme Court has held that foreign workers are equally subject to the provisions of the Labor Standards Act regarding severance pay and the Minimum Wage Act regarding wage guarantees (Supreme Court Decision 2006Da53627, Dec. 7, 2006).
Therefore, foreign workers are entitled to severance pay under the same standards as Korean nationals if the following conditions are met:
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Continuous employment of at least one year
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Average weekly prescribed working hours of at least 15 hours over a four-week period
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Qualification as a “worker” under the Labor Standards Act
Regardless of visa type—such as E-9 (non-professional employment), E-7 (specific activities), or F-series visas—if the individual worked under the direction and supervision of an employer, severance pay entitlement applies.
Despite this, some employers argue that “foreigners are excluded” or “fixed-term contract workers are not entitled.”
In most cases, such claims lack legal basis.
Severance pay for foreign workers is not optional; it is a mandatory statutory right that cannot be arbitrarily excluded.
Common Disputes Involving Foreign Workers’ Severance Pay
In practice, the following dispute types frequently arise:
1. Non-payment after departure from Korea
A worker’s departure from Korea does not eliminate the employer’s obligation to pay severance.
Under Article 9(1) of the Act on the Guarantee of Employees’ Retirement Benefits, an employer must pay severance within 14 days from the date the cause for payment arises. Violation may result in criminal penalties (Article 44(1)).
2. Settlement disputes involving E-9 workers under the Employment Permit System
Some employers claim that payment through the “departure guarantee insurance” (mandatory departure insurance) constitutes full settlement.
However, merely asserting that the matter was settled through departure insurance does not extinguish the severance obligation. The actual insurance payout must be compared with the statutory severance calculation to determine whether any shortfall exists.
3. Disputes over disguised subcontracting or freelancer status
Some employers deny worker status based on the absence of social insurance enrollment.
In such cases, worker status is determined based on substance over form, considering factors such as supervision and control, working structure, and wage payment methods.
These issues should not be treated lightly. Delayed 대응 may make recovery of rights significantly more difficult.
Legal Procedures When Severance Pay Is Unpaid
If severance pay is not paid, the following steps may be taken:
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Filing a complaint with the Ministry of Employment and Labor
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Determination of unpaid wages
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Applying for a payment order or filing a civil lawsuit
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Simultaneously filing a criminal complaint, if appropriate
Employers must pay severance within 14 days of the occurrence of the payment obligation (Article 9(1)).
Failure to do so is punishable by up to three years of imprisonment or a fine of up to KRW 30 million (Article 44(1)).
For workers planning to leave Korea, it is particularly important to secure evidence and file a complaint before departure. Missing the appropriate timing may significantly hinder actual recovery.
For those facing unpaid severance as foreign workers, understanding these procedures can provide meaningful practical assistance.
