Significant Changes to Japan Labor Laws

In 2019, Japan made some changes to its Labor Law to ensure that its rapidly aging population continues to benefit from the workforce. The changes include limits to overtime work and changes to overtime rates, professional exemptions for highly skilled workers, and annual leave changes. Learn more:

Limit to Overtime Work
Under Japan’s new Labor Law, there will be a maximum limit to overtime hours for employees. In case of non-compliance, penalties include imprisonment of up to six-months or fines of up to 300,000 Yen. These penalties can be applied against the employer, and against the person responsible for overseeing employee working hours such as the country manager or HR manager. The rules include:

  • Basic Limit Rule: Overtime working hours exceeding 8-hours per day or 40 hours per week cannot exceed 45 hours per month or 360 hours per year
  • Extended Limit Rule: In special circumstances such as unexpected orders, employers are allowed to cross the basic limit rule. However, overtime hours on statutory holidays (such as Sundays) cannot exceed 100 hours per month. The yearly extended limit rule lies at 720 hours per year

These rules became effective in April 2019 for large employers, and in April 2020 for small employers. Large employers are those that have more than 50 employees.

Change in Overtime Rate
In April 2020, Japan’s Labor Laws were changed to increase overtime that exceeded 60 hours per month from 1.25 to 1.5 times the average rate. However, small employees were exempt from this change of law and were allowed to follow the previous rate of 1.25 times the regular rate.

However, if the employees exceed 60 hours per month of overtime work, small and large employers alike would have to pay 1.5 times the regular rate. This change is to be effective from April 2023.

Annual Leave
Japan has always had a mandatory annual leave system. Full-time employees are allowed an annual leave of 10-20 days, depending on how long they have served their employer. There are no specific rules for sick leaves, so employees take annual leaves when they fall sick.

According to a change of law in April 2019, employers were asked to specify the days for annual leave if the employee had not taken off at least five days during the entire year. The concept was to make sure that employees got their well-deserved annual leave.

Professional Exemption
The “manager” exception is the most commonly used overtime exemption in Japan. It is not easy to qualify as a manager. If they work from 10 PM to 5 AM, they are awarded 1.5 times their regular rate. However, new laws have exempted highly-skilled professionals from overtime pay and late-night allowance. This is because businesses wanted to ensure flexible working hours for highly-skilled employees. Since this law faced a lot of backlash, specific rules were passed to ensure only competent professionals fell into this category. These included:

  • A high degree of expertise is required for the position, and his/her position should not overlap that of an employee working on a product or service
  • The job description should mention all the details clearly
  • The average salary of a highly-skilled professional should be triple the salary of an average employee in Japan

According to the law, employers must create a labor-management committee so that the labor office can be notified of any changes. Highly-skilled professionals are allowed to withdraw their consent at any time.

In light of COVID-19, Japan will have to adjust its work ethic to protect its employees and employers. The main reason for reducing work hours is to allow more people- including senior citizens and college students- to stay in the workforce for as long as they want. To learn more about global compliance solutions, click here

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