Workplaces with Fewer Than 5 Employees & the Labor Standards Act: Complete 2026 Guide for Foreign Workers

Workplaces with Fewer Than 5 Employees: The Labor Standards Act Applies Differently

Many workplaces around us—convenience stores, small cafés, and small restaurants—fall into the category of "workplaces with fewer than 5 employees." Workers at these establishments often do not receive the full protections of the Labor Standards Act (근로기준법). This is because Article 11 of the Labor Standards Act (근로기준법 제11조) explicitly states: "For businesses or workplaces that employ four or fewer workers on a regular basis, certain provisions of this Act shall not apply, as prescribed by Presidential Decree."

Note for foreign workers: Your employment contract may provide terms more favorable than the statutory minimums described below. Always check your contract.

Key Provisions That Do NOT Apply

① No Unfair Dismissal Relief Application

Article 23 of the Labor Standards Act (근로기준법 제23조) — which prohibits dismissal without just cause — and Article 28 (제28조) — which allows unfair dismissal (부당해고) relief applications — do not apply to workplaces with fewer than 5 employees. This means that even if an employer dismisses a worker without a reasonable reason, the worker cannot file a relief application with the Labor Relations Commission. However, it is still possible to contest the dismissal through a civil lawsuit.

② No Premium Pay for Extended, Night, or Holiday Work

The 50% premium pay for extended, night, and holiday work under Article 56 of the Labor Standards Act (근로기준법 제56조) does not apply to workplaces with fewer than 5 employees. Even if you work overtime, you will receive only ordinary wages. However, if the employment contract includes a clause providing for premium pay, you may claim it based on that agreement.

③ No Annual Leave (연차유급휴가)

The annual paid leave (연차유급휴가) provisions of Article 60 of the Labor Standards Act (근로기준법 제60조) also do not apply. The entitlements of 1 day per month (up to 11 days) for workers with less than 1 year of service, and 15 days for workers with 1 or more years of service, are guaranteed only at workplaces with 5 or more employees.

④ No Shutdown Allowance

The shutdown allowance under Article 46 (제46조) — which requires payment of 70% of average wages when a business suspends operations due to reasons attributable to the employer — also does not apply.

Provisions That Apply Regardless of Size

Being a small workplace does not mean all protections disappear. The following rules apply without exception even at workplaces with fewer than 5 employees:

• Minimum wage: 10,320 won per hour in 2026 (monthly equivalent: 2,156,880 won, based on a 40-hour week / 209 hours per month)
• Weekly holiday allowance (주휴수당): Workers who work 15 or more hours per week are entitled to one day of paid weekly holiday
• Dismissal notice (해고예고): The employer must give 30 days' advance notice or pay 30 days' ordinary wages
• Severance pay (퇴직금): The Act on the Guarantee of Workers' Retirement Benefits applies to workers with 1 or more years of service who work 15 or more hours per week; payment must be made within 14 days of the retirement date (with annual interest of 20% for late payment)
• Four major social insurances: National Pension, National Health Insurance, Employment Insurance, and Industrial Accident Compensation Insurance all apply
• Maternity and parental leave protections: Maternity protection provisions under the Act on Equal Employment and Support for Work-Family Reconciliation (남녀고용평등법) and the Labor Standards Act apply
• Prohibition of workplace harassment: Article 76-2 of the Labor Standards Act (근로기준법 제76조의2) applies (though some differences exist in the complaint-handling procedure)

How "Regular Number of Workers" Is Calculated

Whether a workplace qualifies as having fewer than 5 employees is determined not simply by the number of people currently working, but by the "regular number of workers" (상시 근로자 수). According to the Ministry of Employment and Labor's administrative interpretation, this is calculated by dividing the total person-days worked during the business period by the number of operating days to arrive on an average figure. Even if an employer intentionally reduces headcount to stay below 5, if 5 or more workers were regularly employed in practice, the workplace may be deemed to have 5 or more employees.

How Much Severance Pay Am I Entitled To?

If you have not received severance pay from a workplace with fewer than 5 employees, or if you want to verify the amount, use the severance pay calculator at workbear.kr. Enter your average wage and length of service to instantly check your estimated severance pay. If you have questions about filing a complaint or seeking relief, the AI labor law search function is also available.

This article is for informational purposes only and does not constitute legal advice. For specific cases, consult a certified labor attorney (노무사) or lawyer.