Terminating employees in Korea turns on one number: your ordinary headcount. At five or more employees the Labor Standards Act requires just cause, written notice of the grounds, and 30 days of advance notice, and the employee can challenge the dismissal at the Labor Relations Commission within three months. Below five, most of that machinery never reaches you.
Termination cost belongs inside a Korean market entry strategy, because it prices the reversal of a hiring decision before the hiring decision is made. The statutory floor under the hire itself, covering social insurance, working hours, and the paid holiday calendar, sits in the guide to hiring employees in Korea. This guide starts where that one stops, at the exit. Every instrument below was read on law.go.kr in September 2026 and is cited by the version in force.
Which Rules on Terminating Employees in Korea Apply to Your Company?
Headcount decides, and Korean law computes it rather than reading it off your org chart.
Article 11(1) of the Labor Standards Act (근로기준법, Act No. 21373, in force 20 August 2026) applies the Act to any business ordinarily using five or more employees, excluding a business that uses only cohabiting relatives, and domestic workers. Article 11(2) lets a Presidential Decree extend parts of the Act below that line, and Article 7 of the Enforcement Decree (in force 23 October 2025) points to its Annex 1 for the list.
Read Annex 1 before you read anything else, because it is the provision that decides which post you are reading. For a workplace of four or fewer, the Chapter 2 provisions that apply are Articles 15, 17, 18, 19(1), 20 to 22, 23(2), 26, and 35 to 42, the annex having last been amended on 29 June 2018, before Article 35 itself was deleted from the Act on 15 January 2019. Article 23(1), the just cause requirement, is absent. Article 24, managerial dismissal, is absent. Article 27, written notice, is absent. Articles 28 to 33, the whole Labor Relations Commission remedy including reinstatement and enforcement fines, are absent.
So a genuine four-person Korean operation ends an indefinite contract under Article 660 of the Civil Act (민법, in force 17 March 2026), which lets either party terminate at any time, effective one month after notice, or at the end of the wage period following the one in which notice was given where pay is set by wage period. What still binds that employer is the 30 days of advance notice in Article 26, the prohibited dismissal windows in Article 23(2), the 14-day settlement of all money in Article 36, and severance under a separate statute covered further down.
Article 7-2 of the Enforcement Decree is where foreign employers get the threshold wrong. You divide the total employee-days used in the month before the event by the number of operating days in that month. Two overrides sit on top of the average. A workplace whose average falls below five is still treated as in scope if the days on which it fell short were fewer than half the operating days, and a workplace whose average reaches five is treated as out of scope if it fell short on half or more of those days. All employment forms count, including fixed-term and part-time staff, dispatched workers under the Worker Dispatch Act do not, and cohabiting relatives start counting once there is at least one other employee. A company hovering at four and a half is not safely outside anything.
At ten employees Article 93 adds rules of employment (취업규칙) filed with the Ministry of Employment and Labor, which must cover matters concerning retirement under subparagraph 4 and commendation and sanctions under subparagraph 12, and Article 94 requires the consent of a majority of employees for any change unfavourable to them. That document matters more than executives expect, because it becomes the procedure your own dismissal is later tested against.
What Counts as Just Cause for Dismissal in Korea?
Article 23(1) prohibits dismissal, enforced leave of absence (휴직), disciplinary suspension (정직), transfer (전직), pay reduction (감봉), and other punishment without just cause, and Korean practice puts the work of proving the cause on the employer. That paragraph is absent from Annex 1, so it binds you only at five or more employees.
Notice how wide that list is. A demotion, a forced transfer, or a pay cut imposed as a sanction is challengeable on the same footing as a dismissal and through the same Article 28 route, which is why a quiet reassignment is a poor substitute for a decision you are unwilling to make.
Three things get tested. The substantive reason comes first. Then proportionality, because a real but minor ground will not support the heaviest available sanction. Then your own procedure: where your rules of employment or a collective agreement provide for a disciplinary committee, a notice period, or a right to be heard, skipping that step is itself a ground to void the dismissal even where the underlying conduct is proven.
Performance is the hardest ground to run in Korea, and it is the one foreign managers reach for first. It needs contemporaneous records, warnings the employee actually received, a documented chance to improve, and a file written in Korean rather than reconstructed in English after the decision. Misconduct is easier to prove and still runs through the same proportionality test.
Which Procedural Rules Decide Whether a Dismissal Stands?
Article 27 and Article 23(2) decide whether the dismissal stands at all, and Article 26 decides what it costs.
Written notice, Article 27. The employer must notify the grounds and the timing in writing, and paragraph 2 makes the dismissal effective only if that is done. On 27 November 2015 in case 2015두48136 the Supreme Court of Korea held that the notice must let the employee know concretely what the grounds are, because the purpose of the provision is to make the employer deliberate, to fix the existence, timing and reasons of the dismissal, and to let the employee respond. A phone call, a message, or a bare reference to a contract clause does not qualify.
Advance notice, Article 26. At least 30 days, or 30 days or more of ordinary wages in lieu. Three exceptions apply: continuous service of under three months, a natural disaster or other unavoidable reason making continuation of the business impossible, and the employee intentionally causing serious disruption or property damage in a case specified by ministerial rule. Annex 1 to the Enforcement Rule (rule in force 23 February 2025, annex amended 19 November 2021) lists nine such grounds, among them taking money or entertainment from a supplier and accepting defective goods, leaking business secrets to a competitor, embezzlement or breach of trust using one’s position, theft or unlawful removal of products or materials, falsification of attendance records or documents by HR, payroll or accounting staff where it causes the business loss, and intentionally destroying workplace equipment and causing major disruption to production, closing with a residual category for comparable intentional damage. Paying in lieu is lawful. Breach of Article 26 leaves the dismissal’s validity intact, because the article carries no effectiveness clause: it creates a debt of 30 days’ ordinary wages, and Article 110, subparagraph 1 puts the breach at up to two years’ imprisonment or a KRW 20 million fine. Paying notice never cures an absent just cause, because the two duties run independently.
Prohibited windows, Article 23(2). No dismissal during leave for the treatment of an occupational injury or illness and for 30 days afterward, and none during statutory maternity leave and for 30 days afterward, unless the employer has made the lump-sum compensation under Article 84 or the business has become impossible to continue. This is the one dismissal rule in the set that carries serious criminal exposure: Article 107 puts a violation at up to five years’ imprisonment or a KRW 50 million fine. It also reaches every employer, because Annex 1 includes Article 23(2) in the list that applies below five employees.
How Does a Managerial Dismissal Work?
Article 24 governs dismissal for managerial reasons (정리해고) through four requirements, and Korean courts weigh them together, each requirement read against how fully the others are met. Article 24 is absent from Annex 1 as well, so a four-person downsizing runs on Article 660 of the Civil Act instead.
There must be urgent managerial necessity, and a transfer, acquisition or merger undertaken to prevent a deterioration in business counts as one. The employer must make every effort to avoid dismissal. It must set reasonable and fair selection criteria and apply them without discriminating by sex. And under paragraph 3 it must notify the majority union, or the representative of a majority of employees where there is no such union, at least 50 days before the intended dismissal date, and consult in good faith. Paragraph 5 is the payoff: satisfy paragraphs 1 to 3 and the dismissal is deemed to have just cause under Article 23(1).
On 9 July 2002 in case 2001다29452 the Supreme Court held that urgent managerial necessity extends beyond avoiding insolvency to a headcount reduction that is objectively reasonable as advance preparation for a crisis that may come, and that the requirements are not fixed quantities but are weighed together, each against the degree to which the others are met. That case was decided under Article 31 of the former Labor Standards Act, the predecessor of today’s Article 24, and the consultation period in that provision was then 60 days against the 50 days in force now. Cite the current article and the current period when you brief your board.
Two mechanics get missed. Article 10 of the Enforcement Decree requires a report to the Minister of Employment and Labor at least 30 days before the first intended dismissal date where, within one month, you dismiss 10 or more people at a workplace of 99 or fewer, 10 percent or more of the workforce at 100 to 999, or 100 or more at 1,000 or more. The report states the reason, the number to be dismissed, the content of the consultation with the employee representative, and the dismissal schedule, and Article 3 of the Enforcement Rule puts it on Annex form 2, the 경영상 이유에 의한 해고계획 신고서, filed with the head of the competent local labor office with the documents given to the employee representative attached. Article 25 then follows you for three years: if you hire for the same work a dismissed person was doing, you must give that person priority if they want it.
Watch the subsidy calendar in the same decision. Article 13(1), subparagraph 8 of the Ministry of Employment and Labor notice 「고용창출장려금ㆍ고용안정장려금의 신청 및 지급에 관한 규정」 (고용노동부고시 제2026-52호, in force 1 July 2026) excludes an employer from the 고용촉진장려금 and the 신중년 적합직무 hiring support where, from three months before hiring the subsidised employee until one year afterward, it lets an employee go through workforce adjustment, excluding anyone hired after that person. That exclusion is specific to those two support lines, so check the terms of whichever programme you actually claim before assuming your case is the same.
What Happens When a Dismissal Is Challenged?
The employee files an application with the Labor Relations Commission rather than a lawsuit, and it moves faster than litigation in most jurisdictions your headquarters will compare it to. This route exists only at five or more employees, because Articles 28 to 33 are absent from Annex 1, so a workplace of four or fewer faces no commission application, no reinstatement order, and no enforcement fine.
The employee files with the regional Labor Relations Commission within three months of the dismissal under Article 28, on Annex form 3 to the Enforcement Rule. Article 40 of the Commission’s own Rules fixes when that clock starts, which is the part an employer ends up defending: for a dismissal it runs from the dismissal date written on the Article 27 notice, or from the date the employee received the notice where the stated date falls earlier. For a punishment short of dismissal it runs from the day the employee was notified, including orally. Where a disciplinary re-hearing was used it runs from the original disposition, unless the re-hearing revoked the original and imposed a new penalty, or varied it, or your rules of employment or collective agreement suspend the original’s effect until the re-hearing is decided. Back-dating a dismissal date does not shorten the window. Under the Labor Relations Commission Rules (노동위원회규칙, Rule No. 29, in force 20 February 2024) the chair appoints an investigator without delay and your written answer is requested (Article 45), an application filed out of time is rejected (Article 60(1)), a remedy order must specify a compliance deadline of no more than 30 days (Article 62(3)), and the written decision follows within 30 days of the decision meeting (Article 74(2)).
The standard remedy is reinstatement with back pay. Where the employee does not want the job back, Article 30(3) lets the commission order money equal to or more than the wages the employee would have earned, computed from the dismissal date to the date of the decision under Article 65(2) of the Rules, and the employee must apply for it on Annex form 17 before being notified of the hearing date under Article 64(3). Article 30(4), added on 18 May 2021, lets the commission order that money even where reinstatement has become impossible because the contract expired or the employee reached retirement age.
Appeals are quick and they do not buy you time. An employer has 10 days from notification to seek review at the National Labor Relations Commission and 15 days from service of the review decision to file administrative litigation (Article 31), and Article 32 provides that neither step suspends the order. So the compliance deadline runs while you appeal.
Non-compliance is priced. Article 33 lets the commission impose an enforcement fine (이행강제금) of up to KRW 30 million, which is about USD 22,300 at the Federal Reserve H.10 rate of 1,346.51 won per dollar on 4 September 2026, after 30 days of advance written notice, repeatable up to twice a year until the order is obeyed and for no more than two years. Annex 3 to the Enforcement Decree (amended 19 November 2021) sets four bands according to which order was disobeyed: KRW 5 million to KRW 30 million for a dismissal remedy order, KRW 2.5 million to KRW 15 million for 휴직 or 정직, KRW 2 million to KRW 7.5 million for 전직 or 감봉, and KRW 1 million to KRW 7.5 million for any other punishment. Within the applicable band the amount is fixed on the motive, the degree of fault, the effort made to comply, the length of non-compliance, and the number of employees. Once an order is final, Article 111 makes non-compliance a crime carrying up to one year’s imprisonment or a KRW 10 million fine.
Settlement is the normal exit. Articles 68 to 73 of the Rules run it, and Article 16-3(5) of the Labor Relations Commission Act (in force 19 May 2022) gives a settlement record the effect of a judicial settlement under the Civil Procedure Act, which is why it closes the matter for good. The Korea Labor Institute’s 2025 policy study 『부당해고 구제제도의 개선 방안』 (정책연구 2025-09, 김근주 and others) reports, on the National Labor Relations Commission’s 2023 statistical yearbook, that unfair dismissal and related cases were 15,816 of the 18,946 cases the commissions handled in 2023, or 83.5 percent, and that outcomes split almost evenly between adjudication at 34.9 percent, settlement at 32.4 percent, and withdrawal at 32.7 percent. The same study puts the worker relief rate, meaning findings plus settlements as a share of cases decided other than by withdrawal, at 64.7 percent in 2023. Its Table 2-3, drawn from the same yearbook at page 29, gives the share of adjudications decided for the employee as 1,712 findings on 4,779 adjudications in 2021, or 35.8 percent, falling to 33.5 percent in 2022 and 31.9 percent in 2023, while the settlement rate rose from 28.6 to 30.8 to 32.4 percent. The study’s prose at page 17 puts the 2021 share at 38.2 percent, a figure its own table does not reproduce, so the table is the number to brief. It also reports about KRW 27 billion in enforcement fines imposed in 2024 against collection rates of 43.7 percent in 2020, 42.1 percent in 2021, and 26.3 percent in 2024.
Assume the employee is represented. Under Article 6-2 of the Labor Relations Commission Act, a commission may appoint an attorney or a certified public labor attorney (공인노무사) to act for a socially vulnerable applicant at no cost, and the Ministry notice setting the threshold (고용노동부고시 제2021-131호, in force 1 January 2022) fixes it at a monthly average wage below KRW 3 million.
Probation and Fixed Term: The Two Structures Foreign Employers Misread
Both are treated as a dismissal at the point where you expected a clean expiry.
Refusing to conclude the main contract at the end of a probationary period (시용) is an exercise of a reserved right to terminate, so it is a dismissal. In 2015두48136 the Supreme Court accepted that such a refusal can be justified more broadly than an ordinary dismissal, given that the purpose of probation is to observe and assess aptitude, capability, character and diligence, while still requiring objectively reasonable grounds that are socially acceptable, and requiring the employer to give concrete and substantive reasons for the refusal in writing. A notice saying only that the probationary period has expired was held ineffective on that ground. The one real advantage probation carries is narrow: Article 26 does not require advance notice where continuous service is under three months, so a decision taken inside three months avoids the notice duty and nothing else.
Fixed-term contracts run to two years, including renewals, under Article 4(1) of the Act on the Protection of Fixed-Term and Part-Time Employees (in force 18 May 2021), subject to six listed exception grounds, and Article 4(2) deems an employee used beyond two years without a ground to hold an indefinite contract with full dismissal protection. Letting a contract expire is not automatically free either. On 14 April 2011 in case 2007두1729 the Supreme Court held that where the contract, the rules of employment, a collective agreement, or the actual practice around renewal criteria and procedures has created a legitimate expectation of renewal, an unfair refusal to renew has no effect and the employment continues as if renewed.
The other scheduled exit is retirement age. Article 19 of the Act on Prohibition of Age Discrimination in Employment and Elderly Employment Promotion (in force 10 June 2022) requires employers to set a retirement age of 60 or over and deems any lower age to be 60.
Is Severance Owed However the Job Ends?
Yes, and at any headcount. The retirement benefit obligation sits in the Employee Retirement Benefit Security Act (근로자퇴직급여 보장법, in force 1 July 2026), outside the dismissal provisions entirely, and the two regimes answer different questions.
Article 3 applies that Act to every business using employees, excluding only a business using cohabiting relatives alone and domestic employment. Severance therefore reaches the under-five workplace where just cause does not. Article 4(1) requires at least one retirement benefit plan, excluding employees whose continuous service is under one year and those whose contractual hours average under 15 a week over four weeks. Article 8(1) fixes the legacy 퇴직금 plan at 30 days or more of average wage for each year of continuous service, and the Ministry’s interpretive rule 「근로자퇴직급여 보장법 제4조제1항 단서 해석기준」 (예규, in force 6 November 2015) confirms that “under one year” means total continuous service under a year, so an employee with several years plus some months is owed the part-year pro rata as well.
Payment timing is tight and it is where foreign employers default without noticing. Article 9(1) requires payment within 14 days of the triggering event, extendable only by agreement in special circumstances, and Article 36 of the Labor Standards Act puts every other outstanding sum, including unused annual leave, on the same 14 days. Article 9(2) requires severance to be transferred into the employee’s individual retirement pension (개인형퇴직연금) account rather than paid out, and Article 3-2(1) of the Enforcement Decree (in force 24 March 2026) lists the exceptions: retirement at 55 or over, an amount at or below the figure the Minister sets, death, a foreign employee who leaves Korea after retiring, and sums another statute requires to be deducted. That ministerial figure is KRW 3 million or less, about USD 2,230 at the same rate, set by 「개인형퇴직연금제도로의 이전 예외사유 해당금액 고시」 (고용노동부고시 제2026-65호, in force 1 September 2026). The amount appears in the notice’s attached amendment file, which law.go.kr serves beside an empty body text for the instrument, and that file states the figure against both Article 3-2(1)2 and Article 9, subparagraph 3 of the Decree. In practice that means you need the departing employee’s pension account details before the 14 days start running, not after.
Two further points close the cost model. Article 10 gives the claim a three-year prescription period, and Article 12 ranks retirement benefits ahead of taxes, public charges and other claims against the employer’s assets, with the final three years’ worth ranking ahead even of secured claims. Dismissal for misconduct does not forfeit the entitlement, and paying it settles nothing about the dismissal itself. Every departure converts that quiet accrual into cash on 14 days’ notice, which is why the per-head severance line Inquivix prices for a single site in the cost of opening a franchise cafe in Korea belongs in your exit model as much as your payroll model. Carry the reserve into the entry budget alongside the other lines in cost of entering the Korean market.
What to Do Before You Terminate Anyone in Korea
Work this order, because reversing it is how a defensible decision becomes an expensive one.
- Compute the headcount under Article 7-2 of the Enforcement Decree for the month before the date you intend to act, apply both half-of-days overrides, and keep the arithmetic on file.
- Check the prohibited windows in Article 23(2) first, since that is the one mistake carrying criminal exposure at any headcount.
- Read your own rules of employment and the employment contract, then follow the procedure they set, since your headquarters template carries no weight at the commission.
- Pick the route explicitly: cause, managerial reasons, mutual agreement, non-renewal, or retirement age. Each carries its own paperwork, and the managerial route adds the 50-day consultation and possibly the 30-day report.
- Draft the notice with concrete grounds and dates, in Korean, and have it reviewed before it is sent, because Article 27 gives you no second attempt at the same dismissal date.
- Decide notice or pay in lieu and budget the 30 days either way.
- Fund the exit before it happens: severance into an individual retirement pension account within 14 days, unused leave in the same 14 days, and a realistic reserve for the commission scenario, which runs to back pay from the dismissal date to the decision, a compliance deadline of up to 30 days, and enforcement fines of up to KRW 30 million.
The most valuable output of this exercise is often a clean disqualification. Where the employee is inside a prohibited window, where you are inside a subsidy commitment period, or where the performance file was written after the decision, the honest answer for this quarter is that the dismissal will not stand, and a negotiated exit documented as a settlement record at the commission reaches the same destination at a known price.
Frequently Asked Questions
Can you dismiss an employee in Korea without cause? Only below five ordinary employees. Article 11(1) of the Labor Standards Act and Annex 1 to its Enforcement Decree leave Article 23(1) out of the provisions applying to workplaces of four or fewer, so those employers terminate an indefinite contract under Article 660 of the Civil Act. At five or more, just cause is required and the employer carries the burden of showing it.
How much notice is required to terminate an employee in Korea? At least 30 days, or 30 days or more of ordinary wages in lieu, under Article 26, and this duty applies at any headcount. The exceptions are continuous service under three months, a disaster or other unavoidable reason making the business impossible to continue, and nine specified grounds of intentional serious damage listed in Annex 1 to the Enforcement Rule.
What does an unfair dismissal cost an employer in Korea? Reinstatement with back pay from the dismissal date to the decision, or a monetary award at least equal to those wages where the employee does not want the job back. Ignoring the order adds enforcement fines of KRW 5 million to KRW 30 million per imposition where the order concerned a dismissal, with lower bands for lesser punishments, up to twice a year for two years, and non-compliance with a finalised order is criminal under Article 111.
Does an employee dismissed for misconduct still receive severance? Yes. The Employee Retirement Benefit Security Act sets the entitlement by continuous service, with no forfeiture for the reason the employment ended, so 30 days or more of average wage per year of service is payable within 14 days whatever the grounds. Paying it also settles nothing about the dismissal, which the employee can still challenge within three months.
Getting the Sequence Right
Korean dismissal law is restrictive at five employees and permissive below it, and almost every expensive mistake foreign employers make comes from applying one regime’s rules inside the other. Settle the headcount question, the route, and the paperwork before anyone is told anything.
Nothing here is legal advice, so confirm the thresholds and the procedure with Korean counsel or a certified public labor attorney (공인노무사) before you act on a specific case. Joon K Lee advises international companies on the structural decisions behind a Korean team, with Inquivix delivering market entry and digital growth once the team is in place, and the drafting exposure around the contract itself sits in the guide to Korean contract law essentials. For an operator’s read on a Korea exit you are planning, write to joon@joonklee.com.
