Government legislation ministry rules regular wage must set severance floor

The government legislation ministry said Tuesday that employers must calculate severance pay using an employee's regular wage if that amount exceeds their average wage.

The ruling came in response to a public inquiry regarding specific calculation methods under the Employee Retirement Benefit Security Act. The ministry noted that while the act defines average wage by referencing the Labor Standards Act, it omits an explicit citation of the clause requiring the regular wage substitution.

The ministry explained that the regular wage serves as a minimum guarantee for various statutory allowances, and allowing severance calculations to fall below this threshold would contradict the legislative intent of both laws.

In its response dated May 26 to inquiry number 26-0209, the Legislation Bureau stated, "In this case, severance pay must be calculated using the regular wage as the average wage in accordance with Article 2, Paragraph 2 of the Labor Standards Act."

To resolve this uncertainty, the agency recommended amending the retirement benefit regulations to explicitly incorporate the relevant clause from the labor law.