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Is It Legal to Omit Severance Pay in Exchange for a Higher Salary Offer at the Time of Hiring?
- Date2025/05/17 03:55
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1. Agreement to Waive Severance Pay Is Invalid
It is not uncommon for employers and prospective employees to agree during hiring that severance pay will not be provided, with the understanding that the base salary will be set higher than what was posted in the job listing. While this may appear to be a fair compensation arrangement, such an agreement to waive severance pay is legally invalid in principle.
It is not uncommon for employers and prospective employees to agree during hiring that severance pay will not be provided, with the understanding that the base salary will be set higher than what was posted in the job listing. While this may appear to be a fair compensation arrangement, such an agreement to waive severance pay is legally invalid in principle.
Under Article 4 of the Act on the Guarantee of Employees’ Retirement Benefits, employers are obligated to pay severance to employees who have worked continuously for at least one year. This obligation is a mandatory provision of law, meaning that even a mutual agreement to exclude severance pay has no legal effect.
In other words, even if the employment contract includes phrases such as "no severance will be paid" or "severance is included in the annual salary," the employer is still legally required to calculate and pay severance separately.
2. Why Is It Invalid Even If the Employee Consents?
The severance pay system is designed not merely as a private arrangement between employer and employee, but as part of a social security mechanism to promote long-term employment and provide post-retirement financial security to workers. Therefore, it falls under public policy and cannot be waived by mutual consent.
The severance pay system is designed not merely as a private arrangement between employer and employee, but as part of a social security mechanism to promote long-term employment and provide post-retirement financial security to workers. Therefore, it falls under public policy and cannot be waived by mutual consent.
Courts in Korea have consistently ruled that severance pay rights are protected regardless of whether an employee has agreed to forgo them during employment.
3. Post-Termination Waiver of Severance May Be Valid
However, the legal position may differ after the employment relationship has ended. If a former employee voluntarily agrees to waive severance pay after termination—whether to resolve a dispute or due to other circumstances—such an agreement may be recognized as valid.
However, the legal position may differ after the employment relationship has ended. If a former employee voluntarily agrees to waive severance pay after termination—whether to resolve a dispute or due to other circumstances—such an agreement may be recognized as valid.
This is because there is no longer an employer-employee relationship, and the individual is presumed to be in a position to make an informed and voluntary decision regarding their rights. Still, courts will carefully examine whether the waiver was truly voluntary or made under pressure or coercion.
In Summary: Severance pay is not a negotiable component of compensation during employment. It is a statutory right and must be paid separately regardless of any prior agreement to exclude it. Employers are legally obligated to comply with this requirement.
If you require further assistance on severance pay obligations or would like to review employment terms, we recommend consulting with a labor law professional.
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