Increase in surcharges for overtime work
#Overtime regulations have been further tightened in #Japan. As of 1 April 2023, the allowance for overtime exceeding 60 hours per month has increased from 25% to 50% (Article 37(1) of the Labour Standards Act). Previously, there was a transitional arrangement for small and medium-sized enterprises (SMEs), which expired on 31 March 2023.
For overtime that does not exceed 60 hours per month, the 25% allowance still applies. However, it is possible to split the total salary in employment contracts into a basic salary and an overtime supplement for up to 45 hours per month. This means that overtime can be included in the monthly total salary, regardless of whether overtime is actually worked.
Accurate recording of working hours is crucial. Employers have a duty to ensure this, and in case of doubt, employers are obliged to provide evidence of an accurate record. If overtime compensation is not paid properly, employees can demand back payments retroactively for five years at the end of the contract due to the corresponding amendment to the law in 2020 (for a transitional period that has not yet been determined, however, a restriction to three years currently applies).
It is important to take into account the special allowance duties for work on Sundays or statutory non-working days as well as in the case of night work (10 p.m. to 5 a.m.). Even employees in managerial positions are not exempt from the surcharges for night work, so it is essential to accurately record working hours to avoid any unnecessary work during night hours that would incur additional charges.
When drafting contracts for managerial positions, it is necessary to check in detail if the conditions for overtime, breaks and days off are met based on the assigned tasks and responsibilities, to avoid any surprises when the contract is terminated and additional payments for overtime become due.
If you have any questions regarding this topic, you can contact our ADWA member in Japan, Michael Mueller from ミュラー外国法事務弁護士事務所 ? Mueller Foreign Law Office .