Labor Law Update 4.1

Labor Law Reform

As of April 1st, Japanese labor laws have changed.

In 2018, Japan passed “The Work Style Reform Bill”. This Bill (now Law) amends eight laws (including the Labor Standards Act (LSA)) and the Industrial Safety and Health Act (ISHA). Prime Minister Abe has been pushing hard to address the job shortage concerns (i.e. immigration law reform); and it looks like his labor reform policies are finally starting to become tangible.

Limiting overtime was the main focus of this latest reform; compliance and making sure (large companies, in particular) follow proper protocol with their employees. However, skilled professionals with high wages (i.e. consultants and financial traders) are exempt. The two new rules on overtime are:

  1. Overtime work hours will be capped at 45 hours per month (or 360 hours per year, respectively).
  2. In exceptional cases, the legal upper limits can be extended up to 720 hours per year, or an average of 80 hours per month (but no more than 100 hours per month), or up to 6 months in a year.

**Companies that violate the rules may face imprisonment (labor up to 6 months) or a fine of JPY 300,000.**

Most of the changes took effect on April 1, 2019. That said, since the labor shortage varies from sector to sector, doctors and blue-collar workers (taxi/truck drivers, construction workers, etc.) will be exempt from the law for five years. Highly Skilled Professionals and managers are also treated a bit differently:

Exempt employees (those who are not entitled to overtime pay) are typically managers and Highly Skilled Professionals (HSPs). Managers are entitled to premium pay for work done between 22:00 and 05:00, but not Highly Skilled Professionals. HSPs are excluded from regulations regarding working hours, holidays, extra wages for late-night work, etc. However, these workers can choose to withdraw their consent to be covered by the system at any time. It’s the responsibility of the company to prove whether or not an employee is a highly skilled professional.

**You must track the working time of ALL employees, exempt or non-exempt.

Take steps to confirm your employee classifications.**

Employers are obliged to allow employees at least 5 days of annual paid leave. For employees who have already been granted 10 days (or more) of annual paid leave, employers must designate a period for leave. In short, if employees don’t voluntarily take their allotted paid leave, the employer is required to instruct them to take a vacation.

“Equal pay for equal work” is meant to eliminate the “unreasonable disparities” between regular employees, part-time employees, short-term employees, and temporary employees. However, these changes won’t come into play until April 1, 2020 (for large companies) and April 1, 2021 (for small companies).

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