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What is Severance Pay in Lieu of Notice? It refers to compensation in the form of ordinary wages that an employer must pay instead when they do not observe the statutory notice period when dismissing an employee.
1. Basic Principle of the Notice System
According to Article 26 of the Labor Standards Act, an employer must give at least 30 days' notice before dismissing an employee. This is to prevent the employee from suddenly losing their job and facing financial hardship, and to give them at least a minimum amount of time to find another job.
When 30 days' notice is given : There is no obligation to pay severance pay in lieu of notice.
When 30 days' notice is not given : Immediate dismissal is possible, but instead, ordinary wages for at least 30 days (severance pay in lieu of notice) must be paid.
※ If dismissal is notified 10 days in advance, it is not calculated based on the 20 days missing from the 30-day benchmark, but the entire 30 days' ordinary wages must be paid as a lump sum.
2. Exceptions Where the Notice Obligation Does Not Apply (Cases Where Payment is Not Required)
Not all dismissals require severance pay in lieu of notice. If any of the following exceptions under the Labor Standards Act and its enforcement rules apply, immediate dismissal without notice is allowed and payment of the allowance is not required.
① When the employee's continuous service period is less than 3 months
Notice obligation does not apply to new employees or others who have not completed three months of service.
② When continuing the business is impossible due to natural disasters, calamities, or other unavoidable circumstances
It must be an objective situation where the workplace itself has been destroyed, for example by an earthquake or fire, and business can no longer be carried out, rather than simple management deterioration or losses.
③ When an employee intentionally causes major disruption to the business or causes property damage
It is a case where the employee's fault is clear and falls under grounds specified by the Ministry of Employment and Labor's decree (e.g., kidnapping·embezzlement, confidential information leak, long-term unauthorized absence causing production disruption, etc.).
3. Things to Note (Separate from the Justification of Dismissal)
One of the most misunderstood parts is thinking "If you pay severance pay in lieu of notice, the dismissal is automatically justified."
Notice Pay : It is only a monetary compensation for failure to comply with the 'procedural obligation' of dismissal.
Justification of Dismissal : For workplaces with five or more regular employees, dismissal requires a 'just cause' regardless of notice status, and notice of the dismissal reason and timing must be given in writing for it to be effective.
Thus, even if notice pay is paid, if there is no proper cause for dismissal, the employee can file a 'unfair dismissal relief application' with the Labor Relations Commission.