How a Split Pay Structure Quietly Shrinks Your Hagwon Severance
When a hagwon lists your salary as a base amount plus separate allowances, only the base usually counts toward severance and pension, so your payout at the end of a year can be smaller than the total monthly figure suggests.
Park English2026-09-123 min read
Say your contract reads 2,500,000 won base pay, plus a 300,000 won "meal allowance," plus a 200,000 won "settlement allowance." Total: 3,000,000 won a month. Looks clean. Looks like a 3 million won job.
It might not be, once you leave.
Severance in Korea is calculated on your average wage, roughly one month's ordinary wage for every year worked. But "ordinary wage" is a specific legal term, and not everything on your payslip automatically counts. Courts and the Ministry of Employment and Labor look at whether a payment is regular, fixed, and uniform — paid to everyone, every month, in the same amount, no matter performance or attendance. If it passes that test it's usually folded into ordinary wage. If a hagwon can argue an allowance is discretionary or conditional, they can try to exclude it.
We've seen contracts where the "base" is set deliberately low and the rest padded out in named allowances, sometimes for tax reasons, sometimes because it lowers the school's matching pension and health insurance contributions, which are calculated as a percentage of reported base income. The teacher's monthly take-home barely changes. The number used to calculate severance a year later can be meaningfully smaller.
This is not always deliberate. Plenty of small hagwon owners inherited a pay structure from a previous director and don't fully understand the wage-base implications either. But the effect on your money is the same whether it's a strategy or an accident.
What allowances typically look like, and how they tend to be treated:
| Line item | Common in contracts | Usually counted as ordinary wage? |
|---|---|---|
| Base salary | Almost always | Yes |
| Housing allowance (fixed monthly amount) | Common | Often, if paid every month regardless of conditions |
| Meal allowance (fixed) | Common | Often, same logic |
| Performance or attendance bonus | Occasional | Usually not — conditional by design |
| One-time settlement or completion bonus | End of contract | No — it's a lump sum, not a recurring wage |
That table is a general pattern, not a ruling. Whether a specific allowance in your specific contract counts is a fact question, and it gets argued case by case at the labor office. If your severance ever looks wrong, that's the office to call — 고용노동부, or a local labor attorney if the amount is large enough to matter.
Three things to actually do before you sign, or before your contract renews:
- Ask for the monthly breakdown in writing, not just the total. A director who won't itemize it is telling you something.
- Ask directly whether allowances are paid every month at a fixed amount, or whether they can be reduced or withheld. Get the answer into the contract, not just spoken.
- When your contract nears its end, calculate your own expected severance using your last three months of ordinary wage, and compare it to what the school proposes before you sign anything releasing them from further payment.
None of this means split pay structures are a red flag on their own. Plenty of legitimate hagwons use them for tax efficiency and pay severance correctly regardless. The problem shows up when nobody checks the math until the final payslip is already sitting in the bank.