Hello, this is Attorney Choi Jong-ha from the law firm Cheongchul.

The Labor Standards Act provides very strong and strict protection to workers, and in most cases does not allow for 'exceptions'. However, as many of you may know, such a strong Labor Standards Act generally does not apply to 'businesses with fewer than 5 employees'. Employers operating businesses with fewer than 5 employees are free from provisions directly related to employees' welfare and income, such as overtime pay and annual leave, and can even dismiss employees without any special reason.

So, what exactly is a ‘business with fewer than 5 employees’? Since it is based on the number of personnel, it is easy to confuse it with the number of people working simultaneously in the same office (or store), but there are more complicated criteria applied than you might think. Below, I will first explain the calculation formula for the number of regular employees, and then I will discuss the exceptions to this formula.

Article 7-2 of the Enforcement Decree of the Labor Standards Act explains the method for calculating the number of regular employees as follows:

[ The total number of employees used for 1 month prior to the date legal application arises in the relevant business or workplace ] / [ The total operating days during the same period ]

At this time, 'the total number of employees' refers to the sum of all employees who worked during that period. For ease of understanding, let's refer to the following weekly shift schedule (usually the number of regular employees is calculated over a month, but if the business has started for less than a month, the date the reason for calculation arose will be the calculation period).

In the case of a business operated as shown in the table above, the 'total number of employees' for that week is 12. In other words, for the business in question, the total number of employees is 12, and with 7 operating days, the number of regular employees is 1.71.

But what if among the workers above, B was the owner or branch manager? In the case of a branch manager, it would be necessary to verify more specific factual circumstances, but personnel who are difficult to consider as 'employees' are excluded from the total number of employees. In that case, the total number of employees for the business above is 9, and with 7 operating days, the number of regular employees becomes 1.29.

So, would there be any difference if all the employees had part-time hours under the same working conditions (for example, if C and D worked only 4 hours in the morning)? Intuitively, it seems there would be a difference, but according to our Labor Standards Act, the working hours of employees are not considered in calculating the number of regular employees. In other words, even if A, B, C, and D are all considered part-time workers, the number of regular employees for the business is still 1.71.

Then, how about in the following case?

This is a shift structure commonly seen in businesses where work is concentrated on certain days. In this case, the total number of employees is 25, and with 7 operating days, the number of regular employees is 3.57. However, the Labor Standards Act treats such businesses the same as those with 5 or more regular employees. This is because the number of days that fell below the legal application standard (in this example, Tuesday, Thursday, and Friday) is less than half of the total period (7 days) when calculating the number of employees per day during the calculation period.

 The opposite case is also true. Even if the number of regular employees calculated according to the formula is 5 or more, if the number of days that fell below the legal application standard during the period exceeds half of the total period, the business will be treated as having fewer than 5 regular employees.

 Considering this method of calculation, there are also businesses that maintain the number of regular employees at 4 on days with less work (of course, in this case, annual leave calculations must be done separately). However, the determination of the number of regular employees is calculated by counting backward from the point when the cause for calculation arises for 1 month, so when attempting to keep the number of regular employees below 5, it is necessary not only to consider variables such as holidays but also to be well prepared so that it is not excessively operated and evaluated as a 'holiday', distinguishing calculations for 'closed days', 'days off', 'leave', and 'holidays' properly.