Recently we got a question from a gentleman asking what the exact meaning of the below, an Internet post he’d found:
“It is possible that as of 2011, what was severance pay will be vested in the country’s pension plan. This means that workers (including teachers, etc.) will no longer receive one month’s pay for every year worked at the end of their contract. The legislation is set to discuss/vote on this in 2009.”
He was worrying that he might lose his right of severance payment under Korean law. But the above article is quite misleading. The severance payment is the property right of workers. It can not be vested to anything without workers’ consents. If the article says the amended law will give the employer or any party but the workers the power to vest the severance payment to country’s pension plan (or whatever) without workers’ consents, it definitely violates constitutional law of Korea.
Actually under Korean labor law, the employer can set a “retirement pension plan” for the employees, instead of “severance payment plan” of one month’s salary for each year of employment. But in order to set that kind of pension plan or, more importantly, change the existing severance payment plan, the Korean labor law requires the employer to acquire consents from the labor union or (if there is no union) consents from the half of the employees.
In fact, last year Ministry of Labor announced that they’re trying to amend current labor law clauses on retirement pension plan. According to the government, in a newly amended law, (i) an employer who has a existing severance payment plan can ADD a retirement pension plan without the worker’s consent (because adding one more option for workers is not bad) and (ii) newly incorporated company must set a retirement pension plan after the new law is enacted. The law-making is pending now. If you can read Korean, please check this government’s announcement on this issue.
In a retirement pension plan, the financial institution shall keep and manage the fund on be behalf of the workers. So the worker’s right of severance payment shall be protected from the company or employer’s insolvency, quite an advantage to the previous severance payment plan system.
So, if you are an employee under Korean law, don’t worry about your severance payment because of the above article.
We hope this to be of assistance to you. If you have more questions related to Korean legal issues, please send an email to Mr. Wonil Chung, a Korean licensed lawyer at chungwi@nate.com.
© 2009 Wonil Chung, a Korean Labor Lawyer/Chung & Partners, a Korean Labor Law Firm. All rights reserved. Some copyrights, photos, icons, trademarks, trade dress, or other commercial symbols that appear on this post are the property of the respective owners.
