N+1 Severance Calculation Explained

Problem

In termination cases, severance pay is rarely a simple formula. This skill focuses on the ambiguous parts of N+1 calculations: how service years are rounded into N, whether bonuses, allowances, subsidies, and overtime pay belong to the monthly wage base, when the local average wage cap applies, why the notice pay may be based on the last month's wage instead of the trailing 12-month average, and how the tax-free threshold and separate taxation are handled.

How it works

The skill breaks the calculation into structured steps:
- Determine N: applies rules for full years, six months or more but less than one year, and less than six months, with reminders about segmented rules around 2008.
- Determine the monthly wage base: uses the average wage over the 12 months before termination, including common components such as base salary, bonuses, allowances, subsidies, and overtime pay where applicable.
- Apply caps: when the monthly wage exceeds three times the local average wage for the previous year, the calculation uses the three-times ceiling and notes the 12-year limit.
- Handle +1 and taxes: distinguishes the notice pay when 30 days' prior written notice is not given, and applies the local average-wage-based tax-free threshold with separate taxation for the excess.

Boundaries and cautions

This skill is intended to explain calculation logic and organize amount expectations; it is not formal legal advice. N+1 is generally not the right framework for illegal termination, voluntary resignation, negotiated termination, or labor service agreements. Local average wages, tax rules, and disputed wage-base items can vary by region and year, so the final amount must be confirmed against the latest local data, arbitration, or court decisions.