Workplaces Under 5 Employees & the Labor Standards Act: Complete 2026 Guide for Foreign Workers

Workplaces Under 5 Employees: The Labor Standards Act Does NOT Apply in Full

Millions of workers across Korea are employed at small workplaces with fewer than 5 employees — convenience stores, cafés, small restaurants, and more. Many of them are told by their employer: "The Labor Standards Act (근로기준법) doesn't apply here because we have fewer than 5 employees." This statement is only half true. A significant portion of the Labor Standards Act does apply to workplaces with fewer than 5 employees; only certain provisions are excluded.

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

✅ Key Rights That Apply Even in Workplaces Under 5 Employees

1. Minimum Wage
The Minimum Wage Act (최저임금법) applies to all workers regardless of workplace size. The 2026 minimum wage is 10,320 won per hour (monthly equivalent: 2,156,880 won, based on a 40-hour week / 209 hours per month). Violations are punishable by up to 3 years' imprisonment or a fine of up to 20 million won.

2. Weekly Holiday Allowance (주휴수당)
Article 55 of the Labor Standards Act (근로기준법 제55조) applies to workplaces with fewer than 5 employees. If you work 15 or more hours per week and do not miss any scheduled workday, you are entitled to one day's paid holiday allowance per week.

3. Severance Pay (퇴직금)
The Act on the Guarantee of Workers' Retirement Benefits (퇴직급여보장법) applies to all workplaces with one or more employees. If you have worked continuously for at least one year and averaged 15 or more hours per week, you are entitled to severance pay. If it is not paid within 14 days of retirement, a late-payment interest rate of 20% per year applies (Enforcement Decree of the Labor Standards Act, Article 17 / 근로기준법 시행령 제17조).

4. Obligation to Prepare a Written Employment Contract
Under Article 17 of the Labor Standards Act (근로기준법 제17조), employers must specify and provide in writing the key terms of employment, including wages, working hours, and holidays. Violations are subject to a fine of up to 5 million won.

5. Prohibition on Wage Withholding & Four Major Social Insurances
The principle of full, regular, and direct wage payment (근로기준법 제43조) and the obligation to enroll workers in the four major social insurances (4대보험) apply regardless of workplace size.

❌ Provisions That Do NOT Apply to Workplaces Under 5 Employees

How Is the Number of Regularly Employed Workers Calculated?

The threshold of "fewer than 5 employees" is based on the number of regularly employed workers (상시 근로자 수). This is not simply the number of workers currently on the payroll. It is calculated by dividing the total number of worker-days used during the one month preceding the date of the relevant event by the number of operating days during that same period (Enforcement Decree of the Labor Standards Act, Article 7-2 / 근로기준법 시행령 제7조의2). Part-time and short-hour workers are included in this count, so in practice many workplaces that appear small may actually meet or exceed the 5-employee threshold.

Even Under 5 Employees — Don't Give Up Your Rights

Even if your employer says "the law doesn't apply because we have fewer than 5 employees," you are still absolutely entitled to your core rights: minimum wage, weekly holiday allowance, severance pay, and a written employment contract. If wages are withheld or severance pay is not paid, you can seek relief by filing a complaint (진정) with the Ministry of Employment and Labor (고용노동부).

At Workbear (workbear.kr), you can use the Severance Pay Calculator to instantly check how much severance you are owed, use the AI Labor Law Search to get immediate answers to questions about workplaces under 5 employees, and use the Complaint Writing Assistant if you need help drafting a complaint.

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