Under the Employee Retirement Benefit Security Law (ERBSL), an employee with one (1) full year of service or more with a company is entitled to receive severance pay from the company in the amount of at least thirty (30) days’ average salary for each year of service, upon resignation or termination of employment (regardless of reasons of such termination). The “average salary” means the average of the remuneration (defined) received by an employee during the most recent 3 months before the termination date.
The above severance pay is a minimum legal requirement in Korea. Certain companies maintain internal severance pay rules or the employment contract may contain severance pay provisions, which are more favorable to the employees than the minimum legal requirement.
Officers, such as representative directors, directors, or statutory auditors of a company may not be entitled to receive severance pay under the ERBSL. A company intending to pay severance pay to its officers must specify the criteria/formula for calculating the amount of severance pay for its officers in the company’s Articles of Incorporation (AOI) or by a resolution of the shareholders’ meeting if delegated by the AOI.
Under the ERBSL, an employer shall be allowed to convert the current retirement allowance system (lump-sum severance pay system) to retirement pension system with external financial institutions, where an employee may receive retirement benefits in the form of pension. Under the retirement pension system, employees will receive pension benefits when they reach the age of 55 and certain amount of contribution has been deposited in a financial institution for 10 or more years. From July 26, 2012, a newly established company is required to adopt only retirement pension system as its retirement benefit scheme.
The Korean Labor Standards Act (LSA) permits employees not to work more than eight hours a day and 40 hours a week excluding hours of recess regardless of the type of the business. Overtime work (maximum 12 hours per week) is permissible when the concerned parties have reached a mutual agreement. If such agreement is reached, the workers should be paid an additional allowance of 50% or more of the ordinary wages per hour for overtime work in addition to 100% of ordinary wages per hour.
Employer is obligated to allow a weekly day-off, once a week on average usually on Sunday. The LSA requires that the weekly day-off be a paid day and 150% (200% for work over 8 hours) of the normal hourly rate should be paid if workers are asked to work on such day.
(a) Annual leave
15 days of annual leave will be given as annual leave provided that an employee satisfies at least 80% attendance. For an employee who has worked for a company for more than 3 years, 1 additional day of paid leave for every 2 years will be vested, but not to exceed 25 days in aggregate.
(b) Sick leave
Sick leave is required by the statute only in connection with any occupational injuries or diseases. Employee on such leave is entitled to receive at least 70 percent of his average wage during such leave. The prevailing practice is to grant some period of leave to employees suffering from non-occupational injuries and disease. Where an employer specifies the amount of such leave available, entitlement is usually based on length of service with the company.
(c) Maternity leave
For the pregnant female employee, 90 days of maternity leave (120 days of maternity leave, if she gives birth to at least two children at a time) must be granted around the date of childbirth. In such cases, at least 45 days (60 days, if she is gives birth to two or more children at a time) of the leave period after childbirth shall be allowed.
The male employees are given minimum three days and up to 5 days of paternity leave when their spouse gives birth, and the minimum 3 days of paternity leave should be the paid leave under the Sexual Equality Employment Act of Korea.
(d) Childcare leave
For both male and female employees with six months of service or more with a company, a maximum of one year of unpaid childcare leave is allowed until their child reaches eight years of age or second grade of elementary school. Employees can split their leave in two, but the period of their childcare leave should not exceed one year in total. Also, instead of applying for childcare leave, employees may be allowed to apply for reduced working hours (15 to 30 hours per week) for up to one year. Employees can combine childcare leave and reduced working hours, but the period can not exceed one year in total (e.g. taking six months of childcare leave and six months of reduced working hours).
(e) Other leave
Special leave must be granted for military reserve training requirements and other civil duties, including voting. Special leave is generally given in connection with certain family events such as the birth, death or marriage of members of an employee’s family.