Overtime compensation rates
Annual paid leave by hour
Since April 1 2010 the Labour Standards Act has set the legal standards for working time and compensation for overtime. Its aim is to maintain the occupational health of Japan's workforce and to encourage a sound work-life balance by seeking to limit long working hours.
If an employee works more than 60 hours of overtime in one calendar month, his or her employer must pay additional overtime compensation that is at least 50% higher than the employee's regular, non-overtime wage. Before the act entered into force, the minimum uplift for overtime work was 25%, regardless of the number of overtime hours worked. Certain small and medium-sized companies are exempt from the increased overtime compensation rate, at least temporarily. With respect to the 25% difference in the minimum overtime rate required by the amendment (ie, from 125% to 150% of the wage), an employer can provide leave at the employee's regular wage instead of paying extra wages, provided that the employer first enters into a labour management agreement with its employees to that effect. The percentage increases for holiday work and late-night work are 35% and 25%, respectively.
Previously, an employer had to enter into a labour management agreement in order for its employees to work overtime; special provisions were required in the agreement if employees were to be required to work more than 45 hours of overtime a month. However, amendments introduced in 2010 provide that if an employer enters into a labour management agreement with special provisions, it must:
- stipulate a compensation rate for overtime work in excess of 45 hours a month;
- make efforts to set the overtime compensation rate higher than 25%; and
- reduce overtime in excess of 45 hours a month as far as possible.
Previously, employees were required to take annual paid leave by the day. However, the act introduced a right to take up to five days' leave by the hour if a labour management agreement to that effect is entered into at the workplace. An employee may choose whether to take annual leave by the day or by the hour.
For further information on this topic please contact Hideki Thurgood Kano at Anderson Mori & Tomotsune by telephone (+81 3 6888 1000), fax (+81 3 6888 3050) or email ([email protected]).