1. Termination in South Korea

Legal Framework

• The Labor Standards Act (LSA) governs termination and ensures that employees are treated fairly.
• Termination can only occur under specific conditions, and employers must follow due process to avoid legal disputes.

Grounds for Termination

• Justifiable Reasons: Employers can terminate employees for valid reasons, such as:
  • Serious misconduct
  • Poor performance (with documented evidence)
  • Violation of company policies
  • Economic difficulties (e.g., restructuring or downsizing)
• Prohibited Termination: Employers cannot terminate employees for discriminatory reasons (e.g., gender, religion, or union membership) or during protected periods, such as:
  • Maternity leave or within 30 days after returning from maternity leave
  • While an employee is on medical leave due to a work-related injury or illness

Notice Period

• Employers must provide at least 30 days' notice before termination.
• If notice is not given, the employer must pay 30 days' wages in lieu of notice (known as "notice pay").
• Exceptions: Notice is not required for employees who have worked less than 3 months or in cases of serious misconduct.

Documentation

• Employers must provide a written notice of termination that clearly states the reasons for dismissal.
• Employees can request a certificate of employment upon termination, which the employer is legally obligated to provide.

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2. Severance Pay in South Korea

Eligibility

• Employees are entitled to severance pay if they have worked for the company for at least one year and have worked an average of 15 hours or more per week.
• Severance pay is required regardless of whether the termination is voluntary (resignation) or involuntary (dismissal).

Calculation of Severance Pay

• Severance pay is calculated as one month’s average wages for each year of continuous service.
  • Average wages: The average of the employee’s total wages (including bonuses and allowances) over the last 3 months of employment.
  • Example: If an employee earns KRW 3,000,000 per month and has worked for 5 years, the severance pay would be:
    • KRW 3,000,000 × 5 = KRW 15,000,000

Payment Deadline

• Severance pay must be paid within 14 days of the termination date, though this can be extended if both parties agree.

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3. Standard Procedures for Termination

For Employers

1. Document the Reason for Termination:
   • Maintain records of performance reviews, warnings, or other evidence to justify the termination.
2. Provide Written Notice:
   • Issue a written termination notice at least 30 days in advance.
3. Calculate Final Payments:
   • Include unpaid wages, unused annual leave, severance pay, and any other entitlements.
4. Issue a Certificate of Employment:
   • Provide this document if requested by the employee.
5. Comply with Labor Office Requirements:
   • If the termination involves mass layoffs (e.g., restructuring), notify the Ministry of Employment and Labor (MOEL) in advance.

For Employees

• Employees who believe they were unfairly dismissed can file a complaint with the Labor Relations Commission within 3 months of the termination date.

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4. Costs Associated with Termination

Employer Costs

• Severance Pay: As calculated above, based on the employee’s tenure and average wages.
• Notice Pay: If 30 days’ notice is not provided, the employer must pay one month’s wages in lieu of notice.
• Unused Annual Leave: Employers must compensate employees for any unused paid leave.

Employee Costs

• Employees generally do not incur direct costs during termination. However, if they file a legal complaint, they may need to cover legal fees unless they qualify for free legal aid.

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5. Country-Specific Considerations

Cultural Nuances

• Respect and Communication: In South Korea, termination is often handled with a high degree of formality and respect. Employers are expected to communicate clearly and empathetically to avoid damaging their reputation.
• Face-Saving: Employers may offer voluntary resignation as an alternative to dismissal to help the employee "save face."
• Group Layoffs: Mass layoffs are culturally sensitive and may attract public criticism. Employers are encouraged to provide additional support, such as outplacement services or counseling.

Legal Risks for Employers

• Unfair Dismissal Claims: South Korea has strict labor laws, and employees can challenge dismissals they believe are unjust. Employers must ensure they have documented evidence to support their decision.
• Labor Inspections: The Ministry of Employment and Labor (MOEL) may investigate termination practices, especially in cases of mass layoffs or employee complaints.

Employee Protections

• Labor Unions: Unionized employees have additional protections, and employers must consult with unions before implementing layoffs.
• Employment Insurance: Terminated employees may be eligible for unemployment benefits under the Employment Insurance System (EIS), provided they meet the eligibility criteria.

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6. Practical Tips for Employers and Employees

For Employers

• Familiarize yourself with the Labor Standards Act to ensure compliance.
• Maintain clear and consistent documentation of employee performance and disciplinary actions.
• Consider offering additional support, such as severance packages above the legal minimum, to maintain goodwill.

For Employees

• Understand your rights under the Labor Standards Act, including notice periods and severance pay.
• If you suspect unfair dismissal, consult the Labor Relations Commission or seek legal advice.
• Register for unemployment benefits promptly if eligible.

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7. Key Resources

• Ministry of Employment and Labor (MOEL): www.moel.go.kr
• Labor Relations Commission: Handles disputes related to unfair dismissal.
• Employment Insurance System (EIS): Provides unemployment benefits and job-seeking support.

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By understanding the legal framework, costs, and cultural nuances of termination and severance in South Korea, both employers and employees can navigate this process more effectively and avoid potential disputes.