Unpaid Korean Wages Carry Twenty Percent Interest From Payday, Not From Day Fifteen

A foreign employee in Seoul is owed one month of wages: 3,000,000 won for March 2026. The employer does not dispute the debt. The contract fixes payday on the 25th of each month. The employee resigns on 30 June 2026, and the money lands on 25 September 2026. Both sides accept that Korean law adds delay interest at 20 percent a year. They disagree about which day the meter started.

Read one way, the clock starts on 15 July 2026, the day after the fourteen-day settlement deadline that follows the end of employment: 73 days of interest, or 120,000 won. Read the other way, it starts on 26 March 2026, the day after the missed payday: 184 days, or 302,466 won. One unpaid wage, one rate, and a 182,466 won gap that turns on which line of a single article applies.

The Labor Standards Act settled this in an amendment promulgated on 22 October 2024, and the settlement took effect on 23 October 2025. A great deal of published guidance still describes the older reading.

The Scene

Delay interest on withheld pay is one of the few figures in Korean employment law that almost everyone quotes correctly and almost everyone dates incorrectly. The number is 20 percent a year. It is not a fine and not an administrative surcharge: it is money the employer owes on top of the wage, and it accumulates daily.

Until 23 October 2025 that interest reached one category of money only, what an employer has to settle when a worker dies or leaves, so the rule of thumb was simple and for years it was right. Leave the job, wait fourteen days, and from day fifteen the 20 percent begins. A worker still employed and simply not paid got no statutory 20 percent at all.

The amendment changed the shape of the article, not the rate. The single trigger became a list of two, and the second entry attaches the same 20 percent to wages due under the ordinary monthly payday rule, whether or not the worker has left. A new paragraph then decides what happens when a worker already owed in-service wages quits, which is the scene above.

The gap is not academic. The Ministry of Government Legislation's plain-language portal, on a page stamped 15 August 2026, still explains delay interest through the leaving-employment route only, citing item 1 and running interest from the fourteen-day mark after the last day of work. That is accurate for the money it covers, and it is how a worker in the scene above ends up 182,466 won short.

What the Rule Actually Says

The operative sentence sits in the part of the first paragraph before the list. In the current text it reads “사용자는 다음 각 호의 어느 하나에 해당하는 임금의 전부 또는 일부를 각 호에 따른 날까지 지급하지 아니한 경우 그 다음 날부터 지급하는 날까지의 지연 일수에 대하여 연 100분의 40 이내의 범위에서 「은행법」에 따른 은행이 적용하는 연체금리 등 경제 여건을 고려하여 대통령령으로 정하는 이율에 따른 지연이자를 지급하여야 한다”, Article 37(1): where an employer fails to pay all or part of any wages falling under any of the following items by the day specified in that item, the employer must pay delay interest for the days of delay, from the day after that day until the day of payment, at a rate set by Presidential Decree within a ceiling of 40 percent a year.

Two things follow. The ceiling in the Act is 40 percent, not 20; the working figure comes from the Decree. And the start date is not in the paragraph at all. It is delegated to the items, and each item carries its own.

Item 1 covers the settlement money: “제36조에 따라 지급하여야 하는 임금 및 「근로자퇴직급여 보장법」 제2조제5호에 따른 급여(일시금만 해당된다): 지급 사유가 발생한 날부터 14일이 되는 날”, Article 37(1) item 1: wages payable under Article 36, plus lump-sum retirement benefits under the Act on the Guarantee of Employees' Retirement Benefits; the operative day is the day 14 days after the ground for payment arose. Article 36 is that settlement duty: “사용자는 근로자가 사망 또는 퇴직한 경우에는 그 지급 사유가 발생한 때부터 14일 이내에 임금, 보상금, 그 밖의 모든 금품을 지급하여야 한다. 다만, 특별한 사정이 있을 경우에는 당사자 사이의 합의에 의하여 기일을 연장할 수 있다”, Article 36: on death or departure the employer must pay wages, compensation and all other money and valuables within 14 days, provided that where special circumstances exist the parties may agree to extend the due date. That proviso is examined below.

Item 2 is the addition: “제43조에 따라 지급하여야 하는 임금: 제43조제2항에 따라 정하는 날”, Article 37(1) item 2: wages payable under Article 43, with the operative day fixed under Article 43(2). Article 43(2) is the monthly payday rule: “임금은 매월 1회 이상 일정한 날짜를 정하여 지급하여야 한다. 다만, 임시로 지급하는 임금, 수당, 그 밖에 이에 준하는 것 또는 대통령령으로 정하는 임금에 대하여는 그러하지 아니하다”, Article 43(2): wages must be paid at least once a month on a fixed date, provided that this does not apply to wages paid on a temporary basis, allowances, equivalent payments, or wages prescribed by Presidential Decree. For ordinary monthly pay, item 2's date is the contractual payday, and interest begins the next day.

The rate is one line of the Decree. Article 17 attaches it to “법 제37조제1항 각 호 외의 부분”, the part of Article 37(1) outside its items, and fixes it: “연 100분의 20을 말한다”, it means 20 per 100 per annum. Because the rate hangs on the part outside the items, both items carry the same 20 percent. The amendment split the date, not the rate.

That leaves the collision. A March wage left unpaid is at once a wage payable under Article 43 and, after the June resignation, part of the settlement money payable under Article 36. Both items point at the same 3,000,000 won with different dates. The new second paragraph decides it: “사용자가 제1항제2호에 따른 임금을 지급하지 아니하여 지연이자를 지급할 의무가 발생한 이후 근로자가 사망 또는 퇴직한 경우 해당 임금에 대한 지연이자는 제1항제2호에 따른 날을 기준으로 산정한다”, Article 37(2): where a worker dies or leaves employment after the duty to pay delay interest has already arisen under item 2, the delay interest on those wages is calculated on the basis of the item 2 date. Leaving the job does not reset the clock to day fifteen.

The third paragraph is the escape hatch, renumbered by the amendment, which matters when reading older commentary: “제1항은 사용자가 천재ㆍ사변, 그 밖에 대통령령으로 정하는 사유에 따라 임금 지급을 지연하는 경우 그 사유가 존속하는 기간에 대하여는 적용하지 아니한다”, Article 37(3): paragraph 1 does not apply to periods in which a natural disaster, an incident, or another ground set by Presidential Decree continues. Those other grounds are Article 18 of the Decree, whose first item borrows items 1 to 3 of Article 7(1) of the Wage Claim Guarantee Act.

The amendment is Act No. 20520, promulgated on 22 October 2024. Article 1 of its Addenda reads “이 법은 공포 후 1년이 경과한 날부터 시행한다. 다만, 다음 각 호의 사항은 그 구분에 따른 날부터 시행한다”, Article 1 of the Addenda: this Act enters into force one year after promulgation, provided that the matters in the following items take effect on their own dates. The two carve-outs are Article 60(6) and Article 74(1) and (7). Article 37 is in neither, so it moved with the main body on 23 October 2025, and the National Law Information Center entry for Labor Standards Act Article 37 carries the 2024.10.22 marks on all three paragraphs. A second Addenda article fixes reach: “제37조의 개정규정은 이 법 시행 이후 제37조제1항제2호의 개정규정에 따른 지연이자 지급사유가 발생하는 경우부터 적용한다”, Article 2 of the Addenda: the amended Article 37 applies from the first item 2 ground for delay interest arising after the Act takes effect.

The Numbers

Take the scene as given: 3,000,000 won of March 2026 wages, a payday of the 25th, resignation on 30 June 2026, payment on 25 September 2026. Interest is day-counted across a 365-day year on the unpaid principal.

On the item 2 route the clock opens on 26 March 2026 and closes on 25 September 2026: 184 days. At 20 percent a year, 3,000,000 won produces 600,000 won over a full year, so 184 days yields 302,466 won.

On the item 1 route the trigger is the resignation. Fourteen days from 30 June 2026 lands on 14 July 2026, so the clock opens on 15 July 2026 and runs 73 days to 25 September 2026. The same principal at the same rate yields exactly 120,000 won.

The difference is 182,466 won, not a rounding artefact of two formulas. It is the price of one stretch of calendar: 26 March 2026 to 14 July 2026, 111 days, which the item 1 reading drops. Those 111 days alone come to 182,466 won, the same figure, which is the check that the two readings differ only in start date.

A comparison is worth having, because the exclusions discussed below take the 20 percent away without naming a replacement rate. Korea's default statutory rate is in the Civil Act: “이자있는 채권의 이율은 다른 법률의 규정이나 당사자의 약정이 없으면 연 5푼으로 한다”, Article 379 of the Civil Act: the rate on an interest-bearing claim is 5 percent a year unless another statute provides otherwise or the parties agree otherwise. The same 184 days at 5 percent is 75,616 won, not 302,466 won. Article 37 is the kind of other statute Article 379 steps aside for, which is why the employment figure is four times the civil one.

One more figure belongs here for workers whose money sits in a retirement pension rather than a company severance account. The Ministry of Government Legislation's guidance on payment of delay interest for retirement benefits sets a two-step rate for pension benefits under the Act on the Guarantee of Employees' Retirement Benefits and its Decree: 10 percent a year for the first 14 days after the triggering event, then 20 percent. Folding that structure into an Article 37 calculation is a common route to a wrong number.

Where This Doesn't Apply

The item 2 date is not a universal answer, and four limits sit in the primary text itself.

First, the calendar. Article 37 in its current form took effect on 23 October 2025, and Addenda Article 2 keys it to item 2 grounds arising after that day. Earlier, the in-service route did not exist, and the older single-trigger version of the paragraph is the one to read. A worker with arrears crossing that boundary has two regimes on one ledger.

Second, the payday has to exist. Item 2 borrows its date from Article 43(2), whose proviso lifts temporary payments, allowances, equivalent items and wages prescribed by Presidential Decree out of the fixed-date requirement. Where there is no fixed date, item 2 has nothing to point at. The Decree provisions populating that proviso were not read for this article, so the perimeter is left open here.

Third, the settlement date can move by agreement. The proviso in Article 36 lets the parties extend the fourteen-day due date where special circumstances exist, and item 1's date is defined off that event, so an extension pushes the item 1 clock back. It does not touch the item 2 clock, which is anchored to a payday already past.

Fourth, the pauses. Article 37(3) suspends the whole first paragraph while a listed ground continues, and Article 18 of the Enforcement Decree of the Labor Standards Act lists four. Item 2 is broader than bankruptcy: it covers cases where funds for wages and retirement pay are hard to secure because of restrictions under statutes such as the Debtor Rehabilitation and Bankruptcy Act, the National Finance Act or the Local Autonomy Act. Item 3 is the one an employer is most likely to invoke: “지급이 지연되고 있는 임금 및 퇴직금의 전부 또는 일부의 존부(存否)를 법원이나 노동위원회에서 다투는 것이 적절하다고 인정되는 경우”, Decree Article 18 item 3: where it is deemed appropriate to dispute before a court or a Labor Relations Commission whether all or part of the delayed wages and retirement pay exist. Item 1 routes to items 1 to 3 of Article 7(1) of the Wage Claim Guarantee Act, which the Ministry of Government Legislation's portal describes as a rehabilitation decision, a bankruptcy declaration, and a ministerial finding of insolvency; that Act's own text was not read for this article, so the description rests on the portal's gloss. Item 4 is a catch-all for equivalent grounds.

One further point about those pauses: the Decree removes the 20 percent for the period a ground continues, and it puts no other figure in its place. No primary source located for this article states which rate covers a suspended stretch. The 75,616 won line above is a comparison, not a holding.

Finally, this is about the interest figure, not about enforcement routes or criminal exposure; the penalty article was not examined here. The Ministry of Employment and Labor press release of 23 October 2025 on the amended Labor Standards Act does set the delay-interest change beside a separate court remedy: a worker facing clearly intentional non-payment, or non-payment lasting three months or more, may claim damages of up to three times the unpaid wages in court, apart from filing a complaint with the Ministry. That is a different claim with different requirements.

If You Are Actually in This Situation

Start with the contract, not the resignation letter. The item 2 date is whatever fixed payday Article 43(2) obliged the employer to set, normally written into the contract or the rules of employment. That one date decides whether the calculation opens in March or in July.

Then write down four dates in order: the missed payday, the day after it, the last day of employment, and the fourteenth day after that. The first pair gives the item 2 clock, the second the item 1 clock. If the earliest default happened while still employed, Article 37(2) keeps the item 2 date through the resignation, so the item 1 pair is only a cross-check on the settlement duty.

Multiply rather than estimate: 20 percent of the unpaid principal, divided across a 365-day year, times the day count. On a single month's pay of 3,000,000 won, moving the start date from July back to March is worth 182,466 won, close to a third of a full year's 600,000 won. Where several months are outstanding, each month carries its own payday and its own clock.

Check the boundary date before assuming the in-service route is open. Arrears that fell due before 23 October 2025 sit under the previous version of the paragraph, which matters most where an employer has been paying part of the wage for a year or more.

Keep the interest claim distinct from the wage claim. The 20 percent is a statutory addition to the principal, calculated to the day of payment, so it grows while the parties negotiate. Two earlier pieces here handle neighbouring calculations people merge into this one: the difference between severance pay and dismissal notice pay, and what happens to contributions when a foreign worker leaves Korea. Neither moves the date on which Article 37 starts counting.

The National Law Information Center entry for Labor Standards Act Article 36 and the same centre's entry for Civil Act Article 379 on the statutory interest rate are the two texts to keep open beside the contract while doing the arithmetic.