Global Compliance Desk – Japan

Key Aspects of the Work Style Reform

The bill, enacted by the Diet on 29 June 2018, takes aim at Japan’s “work styles” with regulations limiting overtime hours and raising the income of temporary and part-time workers. “The Work Style Reform Bill,” the government’s highest-priority task for the 196th session of the Diet, was enacted on June 29, 2018. It was passed by the upper house with votes from a majority of lawmakers in the ruling Liberal Democratic Party (LDP), its coalition partner Komeito, Nippon Ishin no Kai and other opposition parties.

The bill is a comprehensive legal package with proposed amendments to a total of eight laws including the Labor Standards Act (LSA) and the Industrial Safety and Health Act (ISHA).

Maximum Limit of Overtime Works

As opposed to the current set limit to overtime hours, effective April 1, 2019, there will be express and mandatory maximum limit to overtime hours unless the job falls into one of the few exempt positions. This limit on overtime will become effective for large employers starting in April 2019, and for small employers starting in April 2020. There are basically two separate rules on this point.

• Basic Limit Rule – Overtime work hours, which are working hours exceeding 8 hours per day or 40 hours per week, cannot exceed 45 hours per month and 360 hours per year (“Basic Limit”).
• Extended Limit Rule – In the case of special circumstances, the employer is allowed to extend the Basic Limit. The total number of overtime work and work on statutory holidays (e.g., Sundays), however, cannot exceed 100 hours per month, and the average overtime hours cannot exceed 80 hours per month in the applicable second through sixth months after the rule takes effect for each employee. The number of months when the employee works over the Basic Limit cannot exceed 6 months in a year.  The yearly maximum Extended Limit hours for overtime work will be 720 hours.

Annual Leave

Full-time employees are generally entitled to annual leave ranging from 10 to 20 days depending on the length of service with the employer. There is no mandatory sick leave, so employees will usually take annual leave when they get sick. Effective April 1, 2019, the employees to take at least 5 days of annual leave if they have more than 10 days of unused annual leave.

Time Tracking Requirement for All Employees

Employers are currently required to track the working time of all non-exempt employees in Japan. Effective April 1, 2019, however, employers will be required to track working hours for all employees including exempt employees in order to protect each employee’s health. 

Other Amendments

• Enhancement of Flextime System – Period of adjustable working hours (“calculation period”) will be extended from 1  month to 3 months effective April 1, 2019. 
• Raise in extra wage rate for overtime work exceeding 60 hours per month – Effective April 1, 2023, SMEs will have to pay the same extra pay rate (50%) as large enterprises.
• Establishment of a “highly professional” Work System –  Effective April 1, 2019, workers who have a clear scope of duties with specialized skills and a definite annual income above a certain level will be excluded from regulations regarding working hours, holidays, extra wages for late-night work, etc., on conditions including that measures to ensure health is taken, the worker personally consents to the system, and a resolution of the Labor Management Committee is passed.

• Protect the Employees’ Health – Effective April 1, 2019,  labor law requires the employer to provide necessary information to the industrial doctor in order to protect the health of the employee and also requires employers to implement whatever the doctor advises with regard to the employee’s health. Employers will be required to arrange for the employee to see the medical doctor when certain exempt employees work more than 100 hours overtime, and an employee works more than 80 hours overtime in a month and requests to see a doctor.