Labor Laws in Japan

Labor-Related Laws

In Japan, there are a number of Labor Laws regarding the protection of workers that companies are required to comply with, including:

a) The Labor Standards Act: minimum standards on working conditions
b) The Industrial Safety and Health Act: minimum standards on working conditions regarding health and safety
c) The Minimum Wage Act: a minimum wage for workers

These laws generally apply to all enterprises in Japan including subsidiaries or branch offices of international companies. They also apply to foreign workers in Japan if the foreign workers meet the definition of workers under these laws.

Work Rules

The Labor Laws establish basic requirements relating to several key areas of the employment relationship. Currently, Japan requires companies with over 10 employees to establish and file “Work Rules” with the local Labor Standards Inspection Office. For a company with less than 10 employees, it is recommended to have internal Work Rules to deal with labor related issues.

These rules include working conditions such as working hours, wages, as well as internal rules and policies applicable to the workforce. The Labor Laws restrict changes to Work Rules in a disadvantageous manner to employees. Employers must follow a regulated process to make changes to work rules.

Wage Payment in Japan

Under the Labor Laws, employers must pay wages on a specified date once per month. Employers are allowed to deduct social insurance premiums, taxes and similar expenses from wages, and make a deposit into employees’ bank accounts. Employees’ wages are typically deposited into their accounts the 25th of the month while companies can freely decide the date of payment.
In addition to the monthly salary, traditional Japanese companies pay summer (July) and winter (December) bonuses in their standard pay package.

Minimum wage

In Japan, minimum wage varies by region and minimum hourly wages are set by the Minister of Labour. As of 2016, the minimum hourly wage in Tokyo is 932 yen for all workers. The cost of commuting, extra pay (including overtime, working on holidays, working at night, and others) and temporary payments (bonuses, allowances) must be paid in addition and are not included in the calculation of the minimum wage.

Overtime Work and Work on Holidays

Statutory working hours is defined as 40 hours per week and 8 hours per day under the Labor Laws. The Labor Laws stipulate that an employer must provide a break of at least 45 minutes during working hours.
If an employee works over 40 hours per week, their company must pay an overtime allowance to the employee if they are not a Manager. Companies whose employees work overtime on a regular basis must prepare and file the “Article 36 Agreement”, an agreement regarding overtime work between employees and employers to the Labor Standards Inspection Office. This agreement should be renewed every year.

Companies are required to pay additional wages as determined in the table below to employees who
(a) work in excess of statutory working hours (8 hours a day)
(b) work on statutory days off
(c) work late at night (between 10:00 pm and 5:00 am)

# Items Rate of increase
(1) Work in excess of statutory working hours 25%
(2) Work in excess of statutory working hours exceeding 60 hours per a month 50%
(3) Work on statutory days off 35%
(4) Work late at night (between 10 pm and 5 am) 25%
(5) Work late at night in excess of statutory working hours 50%
(6) Wok late at night in excess of statutory working hours exceeding 60 hours per a month 75%
(7) Work late at night on statutory days off 60%

Paid leave

The number of days of paid leave depends on how long an employee has continuously worked for a company. A worker is entitled to take 10 days of paid leave in their first year of service after they have completed six months of continuous employment. The number of days of paid leave granted to employees increases in proportion to the employee’s length of service as shown in the following table.

Years of service 0.5 1.5 2.5 3.5 4.5 5.5 6.5
Leave days granted 10 11 12 14 16 18 20

Accumulated Paid Leave days may be saved until the following year, but each year’s Paid Leave days expire after two years. An employee does not have the legal right to demand payment for the unused period upon the termination with the company. The company can decided whether the period of paid leave is converted to cash.