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Even if a foreign worker is enrolled in both departure maturity insurance and defined contribution (DC) retirement pension, if the total amount finally received by the worker is less than the legally calculated severance pay amount, the responsibility to pay the difference lies with the employer (business owner).
1. Causes of the Difference
The legal severance pay is calculated based on the average wage over the three months prior to retirement, whereas departure maturity insurance accumulates 8.3% of the regular monthly wage. As a result, differences arise in the following cases.
Wage Increase: When the length of service is long and the average wage at the time of retirement is higher than at the time of enrollment
Annual Leave Allowance and Overtime Allowance: When allowances paid before retirement are included in the average wage, making the total legal severance pay larger than the insurance accumulation
2. Party Responsible for Payment and Legal Basis
Party Responsible: The employer (business owner) who employed the foreign worker
Legal Basis: Article 13 and Enforcement Decree Article 21 of the «Act on the Employment of Foreign Workers, etc.»: It specifies that if the departure maturity insurance amount, etc., is less than the severance pay amount under the «Worker Retirement Benefits Security Act», the employer must pay the difference.
Supreme Court Precedents and Administrative Interpretations: Even if enrolled in a retirement pension (DC type), if the combined amount of departure maturity insurance falls short of the legal severance pay, the employer must directly pay the difference to avoid 'wage arrears' under the Labor Standards Act.
3. Difference Calculation and Payment Procedures
The business owner must follow the following process when the worker retires or changes workplaces.
4. Precautions (Latest Information)
Issue of Double Burden: When the employer pays the contribution for DC-type retirement pension, it is common practice to pay only the difference after deducting the already paid departure maturity insurance premium. However, calculation errors often result in accumulation less than the legal standard, so caution is needed.
Payment Timing: Departure maturity insurance is in principle paid at the time of 'departure', but the severance pay difference must be paid within 14 days after the end of the employment relationship. Violation of this may constitute wage arrears.
In summary: Regardless of the type of retirement benefits system the foreign worker is enrolled in, if it fails to meet the minimum legal severance pay amount guaranteed by the state, the employer must unconditionally cover the shortfall.