Wage System Overiew

Principles of wage payment: employers must pay wages in legal tender, directly to the employee, not less than once per month, and on a specified date. However, employers are allowed to remit wages into a bank account specified by the employee where the employee agrees to that method of payment, and may also deduct social insurance premiums, taxes and similar expenses from wages. The minimum wage is determined according to region and industry. Where an employee is subject to two different minimums, the employee is entitled to the higher of the two minimum wages. The employer must pay the employee a wage that is not less than the minimum wage. It is typical for Japanese companies to pay wages on a monthly basis, and to pay employees summer and winter bonuses.

Working hours, breaks, days off: Working hours must, in principle, not exceed 40 hours per week or eight hours per day excluding breaks (this is known as “statutory working hours”). However, some businesses are permitted to have their employees work up to 44 hours per week at a maximum of eight hours per day. These businesses include retail and beauty services, cinemas and theatres, businesses related to health and hygiene, as well as restaurants and entertainment businesses with less than 10 regular employees. In the event that an employee works six hours, the employer must give that employee not less than a 45 minute break; this increases to a one hour break where working hours exceed eight hours. Employers must grant employees at least one day off per week, or four days off in any four-week period (this is known as “statutory days off”). Sundays or public holidays need not necessarily be days off, and other days may be selected as employees’ days off instead by agreement between the employer and employees. Any employer that requires workers to work in excess of statutory working hours or on statutory days off must submit a Notification of Agreement on Overtime and Work on Days off to its local Labor Standards Inspection Office. If employers force employees to do overtime work or work on days off without submitting a Notification of Agreement on Overtime and Work on Days off, they may be penalized. Even if employers submit a Notification of Agreement on Overtime and Work on Days off, there are limitations for overtime work and work on days off. The Labor Standards Act contains provisions on working hours, holidays, nighttime overtime work, and other working conditions. Employers are therefore under an obligation to properly ascertain and control working hours.

Companies must pay an increased rate of wages as set forth in the table below to employees who work in excess of statutory working hours, work on statutory days off or work late at night (between 22:00 and 05:00):

Work in excess of statutory working hours — 25% increase

Work in excess of statutory working hours exceeding 60 hours in a month — 50% increase

Work on statutory days off — 35% increase

Work late at night (between 10 p.m. and 5 a.m.) — 25% increase

Work late at night in excess of statutory working hours — 50% increase

Work late at night in excess of statutory working hours exceeding 60 hours in a month — 75% increase

Work late at night on statutory days off — 60% increase

Persons in positions of management or supervision and persons handling confidential administrative work who are closely involved in management are not subject to the regulations on working hours, breaks and days off (with the exception of regulations on night work). Whether he or she is regarded as a manager/supervisor is comprehensively judged by facts.

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