In a year with unemployment or parental leave benefit, two questions come up: is it taxed, and does it go into year-end settlement? The answer is one line of the Income Tax Act, Art. 12(3)(e): unemployment benefit, parental leave benefit, reduced-hours benefit and maternity-related leave benefits received under the Employment Insurance Act are not subject to income tax. And because Art. 20(2) defines total pay as wage income “excluding tax-free income”, these benefits are also left out of total pay for year-end settlement. The calculator shows which benefits are on the list and what your total pay comes to.
1. Unemployment, parental leave, reduced-hours and maternity-related benefits under the Employment Insurance Act are tax-free (Art. 12(3)(e)).
2. Tax-free income is left out of total pay (Art. 20(2)) — 24 million won of salary plus 9 million won of parental leave benefit is total pay of 24 million (our example).
3. Unemployment benefit = jobseeker’s allowance + re-employment allowances (Employment Insurance Act Art. 37), and no public charges are levied on it either (Art. 38-2).
Calculator
Updates as you type. Total pay = wage income minus tax-free income (Art. 20(2)). Benefits received under the Employment Insurance Act are left out. Treating extra money from the employer as taxed is our reading: the article names only benefits “under the Employment Insurance Act”. The example amounts are ours.
The tax-free list
| Type | What the source says | Worth noting (ours) |
|---|---|---|
| Income Tax Act Art. 12(3)(e) | Unemployment benefit, parental leave benefit, reduced-hours benefit and maternity-related leave benefits received under the Employment Insurance Act; job transition grants for discharged soldiers; parental leave allowances for public servants under their laws | Sits under the heading “wage and retirement income falling under any of the following” |
| Income Tax Act Art. 20(2) | Wage income amount = the total of the items in para. 1 (excluding tax-free income; “total pay”) minus the wage income deduction | Out from the start of year-end settlement |
| Employment Insurance Act Art. 37 | Unemployment benefit is divided into jobseeker’s allowance and re-employment promotion allowances; the latter are early re-employment, vocational training, wide-area job search and relocation allowances | “Unemployment benefit” usually means the jobseeker’s allowance |
| Employment Insurance Act Art. 75 | “Maternity-related leave benefits” = benefits for maternity, miscarriage or stillbirth leave, a spouse’s maternity leave, fertility treatment leave, and a spouse’s miscarriage or stillbirth leave | A spouse’s leave benefit is included |
| Employment Insurance Act Arts. 38, 38-2 | The right to unemployment benefit cannot be assigned, seized or pledged, and no national or local public charges are levied on money paid as unemployment benefit | The public-charges article, beyond tax |
The wording matters. What is tax-free is benefit received “under the Employment Insurance Act”. Extra money an employer adds during parental leave under its own rules isn’t that, so on our reading it is wage income added to total pay. Public servants’ parental leave allowance is named separately in the same item.
Total pay for two people — our example
| Case (our example) | Total pay | Worth noting (ours) |
|---|---|---|
| Salary of 24 million won for January–June, parental leave benefit of 9 million won for July–December | 24 million won | 33 million received, 9 million tax-free |
| Same person, employer adds 1 million won during leave | 25 million won | The employer’s 1 million is taxed (our reading) |
| Salary of 18 million won, then leaves and receives 6 million won of unemployment benefit | 18 million won | The 6 million is tax-free |
The amounts are our examples. Real parental leave benefit is in parental leave benefit calculator and the daily unemployment benefit in unemployment benefit calculator. Lower total pay changes the wage income deduction and the tax; that sum is in wage income deduction.
Which box other money on leaving falls into (severance, leave pay, shutdown allowance) is in severance pay income type checker.
Checklist
- ☐ Employment insurance benefits don’t go into total pay
- ☐ Check the withholding receipt for extra money the employer paid during leave
- ☐ A spouse’s maternity leave benefit and fertility leave benefit are “maternity-related”
- ☐ Re-employment allowances (early re-employment etc.) are also unemployment benefit
Questions that remain
Does tax-free mean no income at all?
Art. 12 only says it is “not taxed”. How other rules, such as the income test for dependants, count these benefits is in their own articles, which we didn’t check this time.
Is unemployment benefit for the self-employed tax-free too?
Item (e) says only “unemployment benefit received under the Employment Insurance Act” and doesn’t split employees from the self-employed. The self-employed jobseeker’s allowance is also paid under that Act, so on our reading it is covered.
Sources
- Korean law database (law.go.kr) — Income Tax Act Arts. 12(3), 20(2) — source (current text, effective 1 July 2026, Act No. 21221; checked 26 October 2026). Art. 12(3) heading and item (e) (Employment Insurance Act benefits, transition grants, public servants’ parental leave allowance), Art. 20(2) (total pay).
- Korean law database — Employment Insurance Act Arts. 37, 38, 38-2, 75 — source (effective 18 September 2026, Act No. 21473; checked 26 October 2026). Types of unemployment benefit, protection of the right, exemption from public charges, scope of maternity-related leave benefits.
- Not read. How other rules, such as the dependant income test, count tax-free benefits; other items of Art. 12.
- What we added. The “worth noting” column and the Korean everyday gloss.
Where to check further
- Your employer’s withholding receipt — that no insurance benefit is mixed into total pay.
- Employment24 or a job centre — the type and amount of benefit you received.
Written on 26 October 2026. The content is from the source; the glosses are ours.
