Got your severance breakdown and noticed your annual performance bonus or incentive pay was left out of the average wage calculation?
Companies often calculate severance in the way that works best for them. But whether a performance bonus counts toward your average wage is a legal question — one that can be challenged regardless of what your employer tells you. This guide covers why company calculations can be wrong, what actually determines whether a bonus counts, and how to push back.
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Key Facts: Severance Pay and Performance Bonuses
Severance = average wage × years of service — what counts as "average wage" is everything
Performance bonuses and incentives can qualify depending on how they're structured
Your employer saying they don't count doesn't make it legally correct
In early 2026, Korea's Supreme Court clarified the standard for bonus wage eligibility
Severance pay is calculated as your average wage multiplied by your years of service. Average wage means the average of all wages paid in the three months before you left.
The key issue is which items count. Companies tend to exclude anything beyond base salary — but whether performance bonuses, incentives, and allowances should be included can significantly change your final amount.
If your employer says a particular item doesn't count, that's their position — not necessarily the law. It's worth having someone check before you accept it.
One more thing worth knowing: some employers argue that a worker wasn't an employee at all, and therefore isn't entitled to severance. If that's the situation, the employment status question needs to be resolved first.
It depends on how the bonus is structured. The fact that your employer calls it "discretionary" doesn't automatically disqualify it. Courts look at the following:
Certainty of obligation — Is the payment criteria clearly set out in company rules or internal policy?
Regularity — Has it been paid consistently, year after year?
Stability of rate — Has it followed a fixed calculation method?
Link to work performance — Is it tied directly to individual results or output?
If your breakdown is missing a performance bonus — or you haven't received it yet — don't just let it go.
Knowing the calculation is wrong is one thing. Actually pushing back on your employer is another — and doing it directly takes a toll, especially if there's a language barrier involved.
That's where Sugar Square comes in.
① Legal analysis — We review your payment records and company policy to build the legal case for inclusion.
② Formal notice — We send a certified legal notice to your employer setting out the argument, which opens the door to negotiation.
③ Negotiation on your behalf — You don't communicate with your employer directly. Sugar Square handles everything. If they don't cooperate, we prepare for follow-up steps including filing with the Ministry of Employment and Labor.
④ Settlement agreement — Once resolved, we draft an agreement to prevent any further disputes.
No direct confrontation. No uncomfortable messages from your employer. Just a clean resolution.
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A Note from Your Lawyer
Your employer's answer isn't always the legally correct one. Whether your bonus should count starts with a proper review — and if you've just received your breakdown, now is the right time to do it.
Severance pay: the final chapter of your professional journey. Even though it’s a critical asset, it’s never easy to challenge an employer who claims "that’s not included," or to verify complex calculations on your own.
Sugar Square Law & Advisors handles everything—from legal analysis and formal notices to negotiations and settlement agreements. We create a shield so you never have to face your employer directly, ensuring the most seamless and professional conclusion to your employment. For foreign nationals in Korea, we communicate directly in your language, removing the need for an interpreter.
Q. How do I know whether my bonus should be included?
A. The assessment looks at whether the payment obligation was clearly defined, whether it was paid regularly, and whether it was tied to individual performance. If the criteria are set out in company policy and it's been paid consistently, there are grounds to argue for inclusion. A professional review is the safest next step.
Q. My employer said it's excluded. Do I have to accept that?
A. No. Their position isn't always legally correct. A review of your records and company policy can tell you whether there's a case. Whether you've received your breakdown or are still waiting, now is a good time to check.
Q. Do I have to handle the negotiation myself?
A. No. Sugar Square is set up so you never need to communicate with your employer directly — from the formal notice through to negotiation and settlement.
Q. I already received my severance but I've only just realized there might be a problem. Is it too late?
A. Not necessarily. Additional claims are possible in some circumstances within three years of receiving payment. Check with a professional to find out what's possible now.
[CONTACT]
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e-mail: sugar@sugar.legal
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