Working Time Reform in Japan

In April of this year, new regulations came into force in Japan that impact many aspects of the country’s labour law. The many amendments have been made with an objective to tackle the issue of overwork in Japan and although most changes took effect this year, some will be phased in over the coming few years. What is the background to the problem? And how will these changes impact the future for employers in Japan?

Karoshi and overwork in Japan

The Japanese are renowned the world over for hard work and many would claim that the Japanese work ethic was a major contributor to its economic revival as it recovered from the ravishes of the Second World War. But there has been a price to pay in terms of workers’ health.

The word Karoshi, meaning death from overwork, was coined in the 1970s when doctors began to notice a correlation between long hours at work and resulting death from strokes, heart disease, and suicide. The National Defence Counsel for Victims of Karoshi estimates that more than 10,000 people die from cardiovascular disease related to overwork each year—three times the number of people killed in road accidents. But the problem is not new, nor is it surprising. During the 1920s many female silk mill workers in Nagano Prefecture, exhausted from 14-hour work days and desperate to escape their harsh working conditions, committed suicide by jumping into a nearby lake.

With such a cultural attachment to long working hours, change is no easy feat. Previous labour reforms have provided guidance on limiting overtime, but this advice has been widely ignored. The new reforms introduce mandatory limits including fines as much as 300,000 Yen or up to six months in jail for both employers and managers responsible for non-compliance.

New Overtime Limits

The new rules involve two separate limits and are not exactly straight forward:

• The ‘basic limit’ applies to any working time over 8 hours per day or 40 hours per week and cannot exceed 45 hours in any one month and 360 hours in a year
• The ‘extended limit’ which applies both to overtime and work on statutory holidays (including Sundays)
  • Cannot exceed 100 hours in a month
  • For a maximum of six months in a year
  • With an average of no more than 80 hours per month
  • And a maximum of 720 hours in a year

The new limits have been widely discussed but one of the controversial aspects of the regulations is the topic of exemptions. As with most labour regulations around the world, there are exemptions for employees that are deemed to be managing their own time rather than being managed by the employer. Following fierce debate between government, employers, and trade unions, an additional category of exemption was created—the Highly Skilled Professional. There are a number of factors that must be taken into account when determining whether an employee falls into this category (such as their salary, nature of their work etc.) and individuals can opt-out of the exemption.

Recording of Working Time

The Industrial Safety and Health Act had previously required employers to track their employees’ working time but did not specify how that was to be done and it only applied to ‘non-exempt’ workers. Now, the latest amendment to the Act requires employers to track time for all employees in accordance with ministerial ordinance. 

Why tighten the requirement to track time? There exists a fear that the new limits on overtime working will lead to unrecorded, unpaid overtime, which ultimately defeats the objectives of these new limits. Employers must therefore take note of such ministerial guidance and, if they have not already done so, consider implementing a modern Time and Attendance solution that can easily evolve with the ever-changing regulations.

Mandatory Annual Leave

Employers are required to provide 10 to 20 days of paid annual leave to workers, depending on their length of service with the company. However, due to the hard-work culture in Japan many workers do not take their annual entitlement and simply allow it to expire, which is what happens automatically after two years. This latest amendment to the Labour Standard Act requires employers to designate five days as compulsory annual leave to ensure that workers take at least five days each year.

Increased Overtime Rates for Small Employers

Effective in 2023, small employers will no longer be exempt from paying the higher rate of overtime premium (50%) for overtime hours exceeding 60 in a month.

What does this mean for employers with workers in Japan?

The authorities are getting serious about tackling the problem of Karoshi with new mandatory rules and penalties for non-compliance. Therefore, it is important that employers carefully review their working time agreements with employees and put in place appropriate systems and processes to track actual working hours and to ensure that workers take at least the minimum required annual leave.