Korean Job Discussion Forums

[panda_bear1982]

Hi i just would like to know if taxes will be deducted from the end of contract severance money?

My contract states this

Taxes and deductions in compliance with Korean Law shall be withheld automatically from the Employee��s monthly salary. The deductions will be income tax, residence tax, and medical insurance (50%) and so forth if any, from monthly and severance payment.

Should i be worried or is this standard?

any comments would be really appreciated.

[Big Mac]

I paid significantly more tax on my last pay because of the severence payment. It puts you into a different tax bracket for that pay...so if you usually pay 1.6 per cent tax it's a little bit more. It's still not bad though. Not worth complaining about.

[Grotto]

Unfortuneately you do have to pay tax on your severance as well.

One way to avoid paying higher taxes on it is ask them to give it to your seperately from you normal pay. That way you end up paying tax on 2 mil twice instead of 4 mil once.

[jacl]

There's a different tax on the severence though. What is it?

[IwalkAlone]

you are correct jacl....there is no "higher" tax bracket because it's not included in your final income, but is treated as a bonus completely separate.

I haven't looked into how its taxed for 2005, however, in 2004, it was taxed as follows:

2,000,000 won (Sev.)
-300,000 won (exempt amount)
----------------------------------
1,700,000 * 9% = 153,000 (This is your tax on the bonus)
----------------------------------

Final sev. pay = 1,847,000

[thaitom]

This is the correct calculation from the NTS,

- Basic Deduction for Retirement Income
․50% of retirement pay
- Additional Deduction by the Length of Service

Up to 5 years 300,000 per service year
5－10 years 1,500,000+500,000�(No. of service years－5)
10－20 years 4,000,000+800,000�(No. of service years－10)
Over 20 years 12,000,000+1,200,000�(No. of service years－20)

So, first you deduct 50% then you deduct 300,000. if you worked under 5 years.

[jacl]

So, on 2.2 million, I knock that down to 700,000. 9% of that is 63,000. Is that right?