"I Only Saw the Boss's Daughter Once..." Tears of a Young Worker Over Business-Splitting Tricks [Wage Arrears Tracker] ①

"Suspected Fewer-than-Five-Employees Businesses" Up 3.8 Times in 10 Years
Authorities Must Intervene Actively

Editor's NoteThe amount of unpaid wages, which surpassed 2 trillion won for the first time last year, is expected to reach a record high, approaching 800 billion won as of April this year. Even considering the economic downturn, it is difficult to understand why the amount of unpaid wages in Korea exceeds that of Japan, which has twice the labor force, by more than 20 times. We investigated the causes behind how South Korea became a country where wage arrears are so common and easy to commit.

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"They boast about donating day and night, but why can't they pay the wages they've withheld? It's infuriating."

So-Young Kim (25), who worked at a cafe in Daejeon, filed a complaint with the local labor office in December last year along with other employees of the same cafe regarding unpaid wages. The business owner, Shin (68), allegedly disguised the size of the workplace as having "fewer than five employees" to avoid paying certain wages, such as overtime and night shift allowances. Kim claims that Shin exploited the fact that businesses with fewer than five employees are classified as small businesses and therefore are exempt from certain provisions of the Labor Standards Act, such as paying night shift allowances and complying with working hours.

The employment contract written by So-Young Kim when she was hired at the cafe owned by Shin Mo. It includes the phrase "transfer work between partner companies is possible."

The businesses registered under the names of Shin, his wife, and his daughter amount to a total of eight, including three cafes, a restaurant, and a karaoke room. Kim stated, "There were about 13 employees working together, but Shin assigned them to different cafes and gave them instructions," and added, "During the eight months I worked at the cafe, I saw Shin's daughter, who is the nominal owner, only once." If Kim's claims are true, the cafe operated by Shin qualifies as a business with five or more employees.

The labor inspector in charge of the case calculated the unpaid wages Kim should receive at 15,180,000 won based on Kim's work records. However, Shin insists that the business has fewer than five employees and argues that he owes Kim no unpaid wages. The Daejeon Regional Employment and Labor Office stated, "We cannot accept the employer's calculation method, and currently, a labor inspection is underway at these businesses," adding, "There are about 80 victims of unpaid wages across all businesses operated by the employer."

The salary details received by So-Young Kim from August to October last year. In August, the payment was made under the name of the business owner, Shin, and in September and October, it was deposited under the name of Shin's spouse, Jung. Kim argues, based on the salary details, that the personnel and accounting of the businesses operated by Shin are not separated, so the business does not qualify as an establishment with fewer than five employees.

Kim, who has expressed her intention to pursue legal action against the employer, said, "If the employer had shown any effort to resolve the unpaid wages, I would have felt they were remorseful, but the employer keeps postponing appearances at the labor office," adding, "It seems like a stalling tactic, and it's infuriating."

After seven months without resolution, the case has now moved to the prosecution stage following Kim's report. In a phone call with Asia Economy, Shin claimed there was no reason to pay the overdue wages, stating, "This is a family-run business, not a case of splitting businesses. It's a matter of interpretation."

'Suspected Fewer-than-Five-Employees Businesses' Up 3.8 Times in 10 Years..."Authorities Must Intervene Actively"

Cases where small businesses evade the application of the Labor Standards Act through "business splitting" and ultimately lead to unpaid wages are rapidly increasing every year.

According to the Ministry of Employment and Labor on June 14, the number of businesses suspected of being disguised as having fewer than five employees reached 144,561 last year. This is 3.8 times the 37,994 cases recorded in 2015, ten years prior. The number of suspected disguised businesses increased sharply during the COVID-19 pandemic. These are businesses that report having fewer than five regular employees but are suspected of splitting the business or disguising employees as freelancers or independent contractors.

As a result, last year, the amount of unpaid wages in businesses with fewer than five employees reached 665.9 billion won, a 30.05% increase from the previous year. Of all victims of unpaid wages last year, 130,600 people, or 46.1%, were from businesses with fewer than five employees. In businesses with 5 to 29 employees, the amount of unpaid wages was 793.2 billion won, with a growth rate of 20.91%. In total, 80% of all unpaid wages occurred in businesses classified as small, with fewer than 30 employees.

Ha Eunseong, a labor attorney at Saetbyeol Labor Law Office, emphasized, "There is widespread abuse of the protection clauses for small businesses with fewer than five employees, with large hotels and motels disguising most workers as independent contractors sent from dispatch agencies," and added, "Genuinely small self-employed business owners do not even have the capacity to use such tricks. Active intervention by the authorities is necessary."