Although there is a disadvantage of interim settlement of severance pay, it is still desirable to use the interim settlement system properly if necessary.
It must be proved with the right reasons in order to receive the interim settlement of severance pay.
I’ve summarized the interim settlement of severance pay in detail today, so please get to know everyone.
Table of Contents
Outline of severance pay
The company pays 30 days of the average annual wage as severance pay to workers who have worked more than 14 hours a week for more than a year.
Retirement allowance = 1 day average wage X 30 days X total continuous working period / 365
Here, the average wage is the wage divided by the number of days in the three months immediately before leaving the company.
Therefore, if you are planning to leave the company, you will have to receive a little more wages through allowances such as overtime or overtime for three months before leaving the company to increase your severance pay.
Many people think that this severance pay can only be received when you leave the company, but if there are reasons below, you can get it before you leave the company.
Reasons for interim settlement of severance pay and method of application
If there are any of the following reasons, you can request the company to settle the severance pay while working and receive the accumulated severance pay in advance.
However, even if it is a reason, it does not necessarily provide interim settlement.
This is because interim settlement of severance pay is not an obligation under the current law.
If there is a reason for the company to refuse, the employee’s request for the settlement of severance pay may be rejected.
In other words, requests for interim settlement can be rejected depending on the company’s situation, and there is no way for workers to do so.
Below are six reasons for interim settlement of severance pay.
the purchase of a house
When a homeless person purchases a house in his or her name, it is the reason for the interim settlement of severance pay.
It’s the actual reason for many workers’ requests.
The standard for homeless people is the presence or absence of houses registered in the name of workers applying for interim settlement of severance pay.
Therefore, even if there is a house in the name of a household member (for example, a spouse), it is recognized as a homeless person if there is no house in the name of an applicant for interim settlement of severance pay.
Time of application: Within one month after registration of ownership transfer from the date of conclusion of the sales contract
Required documents: documents confirming whether a person is homeless and documents confirming whether a house is purchased (a copy of a contract, a building design, a construction contract, etc.)
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a deposit for housing purposes
Even if you don’t buy a house, you can settle your severance pay in the middle due to the lease and deposit.
Even if the contract period is extended, interim settlement is possible.
Application time: one month after the balance payment date from the date of signing the lease contract
Required documents: documents confirming whether a person is homeless and a copy of the lease contract
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Medical expenses incurred by the person, spouse, or dependents
The third reason for the interim settlement of severance pay is that medical treatment is required for more than 6 months, but it is paid in excess of 125/1000 of the total wage of the worker.
Dependants refer to the dependents of the worker or spouse, and are eligible for immediate family members over 60 years of age, direct descendants under 20 years of age (or cohabiting adoptees), siblings under 20 years of age or over 60 years of age.
You can get it regardless of the dependents’ wealth or income that many people are concerned about.
Outpatient treatment and medication are also considered as nursing periods.
Application time: Within one month from the date of termination if the medical treatment is completed in case of medical treatment or is scheduled to be performed
Required documents: documents including medical certificates, doctor’s note, and long-term care certificates that require medical treatment for at least 6 months, (documents that can confirm the end date and burden of treatment expenses) necessary for the confirmation of dependents
Reason for interim settlement of severance pay
Declaration of bankruptcy or decision to commence individual rehabilitation procedures
If you have been declared bankrupt by the court or decided on a rehabilitation procedure, you can also receive an interim settlement of severance pay.
Time of application: Where bankruptcy is declared within five years from the date of application (must be effective)
Required documents: Court bankruptcy declaration, decision to commence rehabilitation proceedings
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wage cuts through the implementation of the wage peak system
Interim settlement is also possible if you decide to continue working for more than three months by reducing working hours through the agreement between workers and employers.
If it is the case where the employee’s severance pay is reduced due to shorter working hours, it is the interim settlement of severance pay.
Application time: The date on which the wage peak system is implemented
Required documents: documents confirming whether the wage peak system is implemented, and documents confirming wages
In the case of disaster damage
You can apply for interim settlement when it is difficult to recover and the recovery period is long due to damage such as flooding, damage, loss, and burial.
This includes cases where spouses and dependents are missing due to other disasters or where more than 15 days of hospitalization are required due to disasters.
Disadvantages of interim settlement of severance pay
It is a severance pay that you will receive anyway, but there are disadvantages when you receive it in advance due to the interim settlement of the severance pay.
The only downside to the interim retirement allowance is a tax called retirement income tax.
In fact, you have to pay retirement income tax even after you leave the company, but there is a way to save tax.
However, in the case of interim settlement, there is a disadvantage of having to pay retirement income tax as it is (IRP, etc.)
Disadvantages of interim settlement of severance pay
Retirement income tax is designed to lower the tax rate with various deductions as you work longer.
However, if you make an interim settlement of severance pay, you will be charged retirement income tax as much as the interim settlement period of severance pay from the date of joining the company.
The disadvantage of interim settlement of severance pay is that when you retire after continuing to work, you will lose money by working for a short period of time because you calculate a new period of service after the interim settlement date.
Related information can also be found on the National Tax Service inquiry bulletin board below.
Question > Calculation of severance pay after interim settlement of severance pay
If so, I wonder if there is a solution to the shortcomings of the interim settlement of severance pay
Of course, there is a solution.
You can use a system called “Special Provisions on the Settlement of Retirement Income.”
The special case for retirement income settlement is to calculate retirement income tax by adding interim and final severance pay.
If you settle down, you will recalculate the number of years of service by adding up the total period of work, and pay only the rest except for the retirement income tax paid during the interim settlement.
The special case for settlement of retirement income is that workers are required to apply to the management, and they must submit a receipt for withholding retirement income received during interim settlement.
One thing to note is that applying the exception is not necessarily a benefit.
Therefore, it is essential to check whether it is a gain or a loss to apply the special settlement exception.
What is the special case for the settlement of severance pay (National Tax Service?
How to calculate retirement income tax
The calculation of retirement income tax has recently been revised, and it is very cumbersome and difficult for individuals to calculate it themselves.
Therefore, we recommend using the program provided by the National Tax Service in the order below rather than paying directly.
I left the address of the National Tax Service retirement income tax simulation calculator below.
If you need to calculate retirement income tax after January 1, 2022, you can use the calculator below.