Who Qualifies for Retirement Benefits?
According to guidance from the Ministry of Employment and Labor, employees qualify for retirement benefits if they have at least 1 year of continuous employment and an average prescribed weekly working time of at least 15 hours over a 4-week period. Eligibility is not determined solely by the size of the workplace. When employee status or the continuous employment period is unclear, check how the work was actually performed and the relevant records rather than relying on the name of the contract.
Basic Calculation Formula
The basic statutory retirement pay formula multiplies the average daily wage by 30 days and the continuous employment period. In principle, the average daily wage is calculated by dividing the total wages paid during the 3 months before retirement by the total number of days in that period. Bonuses and annual leave allowances may be reflected differently depending on their payment characteristics and the period they cover, so adding them arbitrarily based only on a pay stub can lead to errors.
Common Mistakes in Calculating the Average Wage
If a legally excluded period, such as parental leave, falls within the most recent 3 months, the period used to calculate the average wage may change. There is also a rule that applies the ordinary wage as the average wage when the calculated average wage is lower. Use the Ministry of Employment and Labor calculator to estimate the amount, and compare it with the wage items and periods used by your employer.
Retirement Pay and Retirement Pensions
The retirement pay system and DB- and DC-type retirement pensions differ in how funds are accumulated and benefits are calculated. With a DB plan, the basis for calculating the benefit to be received is predetermined. With a DC plan, the accumulated amount varies according to the employer's contributions and the employee's investment results. The receiving account and exceptions may also differ, so check your company's rules and the financial institution's guidance.
Early Settlement and Taxes
An early settlement of retirement pay is permitted only when the statutory requirements are met and the employer approves it. Being eligible to apply does not mean the application will necessarily be approved. Retirement income tax uses a separate formula that reflects factors such as years of service and the amount of retirement income; the ordinary comprehensive income tax rate is not simply applied to the entire retirement payment. The tax treatment of transferring funds to an IRP and receiving a pension also varies depending on the receiving conditions.
Payment Date and Responses to Nonpayment
As a general rule, retirement benefits must be paid within 14 days of the retirement date unless the parties have agreed on a different payment deadline for special circumstances. If the amount is incorrect or payment has not been made, gather your employment contract, pay stubs, deposit records, and the company's calculation statement. You may use the Ministry of Employment and Labor's consultation and complaint procedures. For the specific claim deadline and late-payment interest, it is safest to check the law in effect when the matter occurred.