[Japan] Dramatic labour law reform take effect

Dramatic changes are taking effect in Japan to address the dangers of overworking, SHRM reports.

After media attention to deaths caused by overwork - “karoshi” - highlighted the issue, The National Diet, Japan's lawmaking body, passed the Work Style Reform Legislation in 2018 making big alterations to labour laws. Most of those provisions take effect this month.

The new law sets limits on overtime hours. With two rules regulating overtime worked. The Basic Limit Rule says overtime - time worked beyond eight hours a day or 40 hours a week - cannot exceed 45 hours a month and 360 hours a year. This is called the basic limit.

The Extended Limit Rule allows an extension of the basic limit under special circumstances like a high volume of customer complaints or a change in product specifications. The total number of overtime hours and hours worked on statutory holidays cannot exceed 100 hours a month.

Employees may not work over the basic limit for more than six months in a year, and they can work no more than 720 hours of extended limit overtime per year.

These rules begin this month for large employers and April 2020 for employers with 50 employees or fewer. Penalties for employers and HR professionals exceeding these limits can include criminal sanctions.

These rules apply to nonexempt employees in Japan. The exempt category in Japan differs significantly from the US. Managers - generally not paid for overtime - must earn more than 10.75million yen annually (US$97,223) to be exempt, according to the new law. Much higher than the $23,660 threshold for parallel exemptions in the US.

It is illegal for employers to misclassify nonexempt employees as exempt and require them to work, under the new law, or demand long hours without overtime pay.

From April 2023 there will be an increased overtime rate for small employers. They will now have to pay one and a half times the regular pay rate if an employee’s overtime exceeds 60 hours. They were exempt from the premium in the past.

The new law requires employees to take annual leave. At least five days a year if they have more than 10 days of leave unused. The requirement takes effect this month.

Employers must now prevent overwork by tracking work hours for all employees, including exempt employees.

There is a Highly Skilled Professional Exemption from overtime limits in the law. An employee classed as highly skilled must meet these criteria to be exempt:

  • The role must require a high degree of expertise. For example, the employee is an analyst, consultant or working in research and development
  • The job description must identify the scope of work.
  • The annual salary must exceed three times the average Japanese wage. The current annual salary for the new exempt status is 10.75million yen

Employers must form a labour management committee to approve the exemption and register it with the labour standards inspection office.

Employers with businesses in Japan are advised to:

  • Provide HR with training on the new laws
  • Train employees on efficient working practices as hours are reduced
  • Audit to find misclassification risks for employee exemptions
  • Implement a system that tracks employee work hours, including those who are exempt