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Understanding Dismissal Notice Pay Under Korean Labor Law
  • Date2025/05/03 03:24
  • Read 42
1. Legal Basis for Dismissal Notice Pay
 
According to Article 26 of the Labor Standards Act, an employer intending to dismiss a worker (including dismissal for managerial reasons) must give at least 30 days’ advance notice. If such notice is not given, the employer must pay dismissal notice pay equivalent to 30 days or more of the employee’s ordinary wages.
Dismissal notice pay is mandatory unless the employee falls under one of the following exceptions:
  • The employee's continuous service period is less than three months;
  • The business is unable to continue operations due to a natural disaster or other unavoidable reasons;
  • The employee caused serious damage to the business intentionally, meeting criteria stipulated by the Ministry of Employment and Labor.
It is also important to note that this obligation applies even to workplaces with fewer than five employees. However, if an employee voluntarily resigns (e.g., accepts a resignation offer), dismissal notice pay is not required, as this does not constitute a dismissal.
 
 
2. How to Calculate Dismissal Notice Pay (1): What is Ordinary Wage?
 
Dismissal notice pay must be at least 30 days’ worth of the employee’s ordinary wages. Thus, it is critical to determine the employee's ordinary wage correctly.
The ordinary wage refers to regular, uniform payments made to the employee as compensation for scheduled work. For example, a fixed base salary qualifies as ordinary wage, but allowances like overtime pay (which compensate for work beyond normal hours) are excluded.
 
 
3. How to Calculate Dismissal Notice Pay (2): Calculating the Amount
 
For monthly salaried employees, the hourly ordinary wage is calculated using the following formula:
Monthly ordinary wage ÷ Monthly standard working hours
“Monthly standard working hours” refers to the hours that are considered paid, including statutory paid holidays. For employees working 40 hours per week, the calculation would be:
(40 hours + 8 hours of weekly paid holiday) × 4.345 weeks ≈ 209 hours
Example:
If an employee earns 3,000,000 KRW per month and works 40 hours per week:
  • Hourly ordinary wage = 3,000,000 ÷ 209 = approx. 14,354 KRW
  • Daily wage = 14,354 × 8 = approx. 114,832 KRW
  • 30 days’ dismissal notice pay = 114,832 × 30 = approx. 3,444,960 KRW
As illustrated above, dismissal notice pay is not simply equivalent to one month’s salary. If the employee works fewer than 5 days per week or has different contractual hours, the standard working hours used in the calculation will vary accordingly.
 

 

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