Salary for overtime work in Japan (HR issue in Japan)

Our client ask us standard working hours, overtime work, and night-shift work in Japan. I share this infomation, so please keeo this for your reference.

The statutory limits are 8 hours per day and 40 hours per week. This can be exceeded if “36 Agreement” is made between the employee and the company (“36 Agreement” see below).

Certain small workplaces with fewer than 10 employees which conduct resale, restaurant, entertainment, healthcare, hotel and similar sectors may use 44 hours per week.

Breaks of at least 45 minutes are required when a shift exceeds 6 hours, and at least 60 minutes when it exceeds 8 hours.

Any work beyond these limits, or on a statutory day off, is lawful only if the employer has concluded a labor-management agreement under Article 36 (a “36 Agreement”) and filed it with the Labor Standards Inspection Office. The general caps of overtime are 45 hours per month and 360 hours per year.

Under a special clause, the caps rise to 720 hours per year, under 100 hours in any single month including holiday work, and an average of 80 hours over any 2–6 month period. The 45-hour monthly cap may be exceeded in at most 6 months per year.

Overtime salary rate

Employees in “management or supervisory positions” (管理監督者) are exempt from the hours, overtime and rest-day rules (=no need to pay over time/rest-day). These employees remain entitled to the night-work premium and annual paid leave. Flexible arrangements such as variable working-hour systems, flextime and discretionary work systems are available but require specific agreements and procedures.

Whether someone qualifies as a “manager or supervisor” (管理監督者)” depends on the actual substance of the role, not on job title. The term covers persons who are in a position integrated with management regarding the determination of working conditions and other labor management. Courts and labor inspectors assess this comprehensively based on three factors: “duties”, “responsibility” and “authority”. If even one factor is not met, the person is unlikely to qualify.

The three requirements (Must be discussed with the labor lawyer)

1. Duties, responsibility and authority. The person must take part in management decisions and hold real authority over personnel matters. In practice, this means participating in management meetings and policy decisions, and having authority over hiring, dismissal and evaluation of subordinates, or over departmental budgets. Merely relaying a superior’s instructions to subordinates is not sufficient. MHLW guidance treats the absence of substantive authority over hiring, dismissal, performance evaluation and working hours as a negative factor.
2. Work style (discretion over working hours). The person must be free to decide their own start and finish times and working hours, rather than being strictly controlled by the company. For example, pay should not be docked for arriving late or leaving early. Strict restrictions on lateness, early departure and working hours, or working the same pattern as subordinates, all weigh against qualifying.
3. Treatment (compensation). Even after accounting for the absence of overtime pay, the person must receive wages befitting their position compared with ordinary employees, such as base salary and position allowances. It weighs against qualifying if there is no preferential treatment in base pay or allowances, if total annual pay is lower than that of ordinary employees, or if the effective hourly rate falls to the level of part-timers or the minimum wage.

What still applies to qualifying managers

Qualifying managers are exempt from the rules on working hours, breaks and days off, so overtime and holiday premiums are not required. However, the night-work premium and annual paid leave still apply. In addition, the Industrial Safety and Health Act requires employers to track and record their working hours as well.

Practical points for assignees

We must say the bar is high (to be determined as a “management or supervisory positions”. Labor inspectors and courts frequently reject manager status for store managers, section chiefs and similar mid-level roles; this is the “nominal manager” (名ばかり管理職) problem. If status is denied, the employer faces claims for up to 3 years of unpaid overtime, plus penalties.