Hello, this is Choi Jong-ha, attorney at Law Firm Cheongchul.

It is said that anyone working in a company carries their resignation letter in their heart. However, this is more of a story from a time when many people worked at the same job for a lifetime after joining at a young age. Nowadays, it seems that many are submitting the resignation letters they carry in their hearts quickly and changing jobs. In this age of frequent resignations and job changes, we would like to examine three things to consider before resigning.

1.   Let’s check if the severance pay is calculated correctly.

If you have worked more than 15 hours a week for over a year, you can receive severance pay regardless of the type of work or the size of the business. While most employees are aware of this up to this point, it is common not to know how to actually calculate this severance pay.

Severance pay is generally based on the average wage for three months. However, many employees overlook the fact that if the average wage is lower than the normal wage, the severance pay is calculated based on the normal wage. Particularly in workplaces that set the standard working hours at 209 hours per month (if Saturday is designated as a non-paid holiday in the employment rules or labor contract, it is highly likely that the standard working hours are 209 hours), it is quite common for the normal wage to exceed the average wage. In this case, depending on whether the normal wage is applied according to the legal standards, the final amount of severance pay can vary significantly.

For example, if A, who was hired on January 1, 2015, and worked under the condition of 209 standard working hours per month, resigns on January 1, 2025, and received a monthly basic salary of 5 million won in 2024, A's daily average wage would be 163,043.48 won.

Generally, employers who calculate this will multiply the above 163,043.48 won by 30 to find the monthly salary for one month, and then multiply by 10 to pay the severance for 10 years. The severance pay calculated in this way comes to 48,913,044 won.

However, this is a method of calculating severance pay that violates the Labor Standards Act. A's daily normal wage is 191,387.56 won (basic salary of 5,000,000 won / standard working hours of 209 hours X working day of 8 hours), which significantly exceeds the daily average wage of 163,043.48 won. Based on this standard, the properly calculated severance pay is 57,463,459 won.

Simply applying the normal wage instead of the average wage can result in a difference of nearly 10 million won in severance pay.

 In summary, before resigning, it is necessary to confirm (1) the company's standard monthly working hours, (2) the normal wage, and (3) the average wage, and check whether the severance pay is calculated appropriately based on these factors. This applies similarly to retirement pension systems, so keep that in mind.

2.   Let’s check the unused annual leave compensation.

 Annual leave is naturally given to be used, but it is also true that there are frequent situations where it cannot be used due to work circumstances. For such cases, our law stipulates that compensation equivalent to one day of the normal wage must be paid for any unused annual leave, but in reality, most employees do not receive this compensation.

 This is partly because many small businesses in the past substituted annual leave for holidays, and on the other hand, because so-called 'annual leave promotion measures' have been introduced. However, national holidays are now recognized as days off on which annual leave does not have to be taken, and in practice, it is very rare for annual leave promotion measures to be formally recognized. Courts assess the proper operation of annual leave promotion measures quite strictly, and it is difficult for small businesses to comply with all these strict procedures.

 As a result, from the perspective of employees, it is common to claim annual leave compensation from three years back from the time of resignation. If we assume that unused annual leave is about 10 days a year, the amount of compensation should be equivalent to receiving one additional month's salary at the time of resignation.

 So, is there really no way to claim annual leave compensation if the annual leave promotion measure is applied properly? The answer is 'no.' Even in workplaces that use legitimate promotion measures, annual leave for those who resign before the promotion is completed must be compensated. Annual leave is granted at the beginning of the year (or at the time when a new 'annual year' begins based on the date of employment), but the promotion measures are only completed at the end of the year, so if one resigns during that period, compensation must be given.

 Annual leave compensation must be reflected in the severance pay according to the formula, so it is essential to take care of this thoroughly before resigning.

3.   Let’s check company documents, non-compete obligations, etc.

 When resigning, just as it is important to carefully gather what one has to receive from the company, it is also crucial to avoid situations that may lead to trouble with the company. When a resigning employee claims various amounts from the company, the company may check if there is anything from the employee that can be claimed in return by applying the 'offense principle'.

 In doing so, a common issue that arises is the leakage of internal company information and non-compete obligations. Any materials or products created while working for the company remain the property of the company, and retaining or leaking them outside can constitute a breach of trust. Actions such as securing a large number of documents just before resigning can be problematic, so it is necessary to be cautious.

 Additionally, some companies may stipulate in contracts that “you must not move to a competing company for one year after resignation,” which establishes a non-compete obligation. It is essential to check whether such clauses exist when resigning and to prepare in advance for such issues. However, just because there is a non-compete clause does not mean that one must be overly cautious and resign. The courts have stated that “even if a non-compete agreement exists between the employer and employee, such agreements that excessively restrict the employee's right to choose a profession and labor rights guaranteed by the Constitution or overly limit free competition should be considered invalid as a legal action against good morals and social order as stipulated in Article 103 of the Civil Act,” and that the determination of the validity of such non-compete agreements must be comprehensively considered based on the protectable interests of the employer, the employee's position before resignation, the duration and area of the competition restrictions, the provision of compensation to the employee, the circumstances of the employee's resignation, public interests, and other factors.

 If you have agreed to non-compete obligations, it would be wise to seek the advice of a legal expert before changing to a competing company.