Retirement Pension Plan System in Korea
Here's some brief explanation of Retirement Pension Plan System v.s Retirement Pay System in Korea.
Employee Retirement Benefit Security Act stipulates the "mandatory retirement pension plan(Defined Benefit Retirement Pension or Defined Contribution Retirement Pension)" for an employee who leaves a company after at least 12 months of service.
If a company makes no decision about the "retirement pension plan", "retirement(severance) pay system" is automatically ad
opted to protect the employee and the severance pay to be paid to a employee is average wage of 30 days per 1 year of service.
In practice, companies prefer to subscribes the DC plan due to its simplicity and to avoid large liabilities in the future, then make monthly contributions equivalent to one-twelfth of the monthly salary to the bank or insurance company. The DB plan is not recommended due to its complexity. As for the company who not subscribe to any retirement pension plan, the company should pay the "severance pay" at the time of the termination.