As part of Shinzo Abe’s economic reform, there has been heated debate in Japan over the introduction of an amendment law to extend the categories of employees who are not eligible for overtime pay.

Under existing labour regulations in Japan, other than in very limited circumstances, employees who work over 8 hours a day on any given day are required to be strictly compensated for their overtime work in accordance with several rigid formulas for calculating overtime pay. What this translates to in practical terms is that companies often find that employees intentionally stay behind after office hours to complete work that they should have finished within office hours. This is because, for many employees, overtime pay constitutes a substantial proportion of their monthly income.

The Government has recently proposed a bill to amend the Labour Standards Act, which, if passed, would open up the categories of employees who are not entitled to overtime pay even if they work over 8 hours a day. It is proposed that white collar workers in the finance, forex dealing and IT industry with an annual salary of over 10 million yen are exempt from overtime pay.

Opinions are still divided both within and outside the Government on this proposed bill and more details are expected to be announced soon.

It is expected that this proposed bill will lead the way to the opening up of further categories of workers who are exempted from overtime pay.

Actions for employers

These amendments are expected to be welcomed by employers who are often bogged down by the complicated and rigid calculations of overtime pay for employees. The amendments are also likely to encourage employees to work more effectively within office hours and may ultimately lead to lower costs for employers overall.