Payroll Administration

Japan's Salary System

Japan's legal working hours and rest regulations

Japanese labor law has clear requirements regarding standard working hours and employees’ right to rest:

Standard Working Hours: Japanese law stipulates a maximum of 8 hours per day and 40 hours per week (excluding rest periods).
Daytime Rest Periods: If actual daily working hours exceed 6 hours, employers must provide at least 45 minutes of rest; if exceeding 8 hours, at least 60 minutes of rest must be provided.
Statutory Rest Days: Employers must provide employees with at least one statutory rest day per week, or at least 4 days within every 4 weeks.
Paid Leave (Annual Leave): Employees who have worked continuously for a company for 6 months and have an attendance rate of 80% or more of all working days are legally entitled to 10 days of paid annual leave. To protect employees’ physical and mental health, companies are obligated to ensure that employees entitled to more than 10 days of paid leave annually actually take at least 5 days of it each year.

Salary system and statutory overtime pay (increase wages)

Japan’s statutory pay system imposes different punitive premiums on overtime work depending on its nature:

Overtime Prerequisite (Article 36 Agreement): In principle, for employees to work overtime outside of statutory working hours or on statutory rest days, companies must sign an agreement under Article 36 of the Labor Standards Act (referred to as the “Article 36 Agreement”) with employee representatives and file it with the local labor standards inspection office. Even with this agreement, the maximum regular overtime hours is generally capped at 45 hours per month and 360 hours per year.
Weekday Overtime Allowance: For “overtime work” exceeding 8 hours per day or 40 hours per week, companies must pay at least 1.25 times the normal wage (i.e., an increase of 25%) for overtime pay.
Excessive Overtime Allowance: If an employee’s accumulated overtime hours exceed 60 hours in a month, the company must pay at least 1.5 times the normal wage (i.e., an increase of 50%) for the portion exceeding 60 hours.
Night Shift Allowance: If employees are required to work during the nighttime hours (10:00 PM to 5:00 AM the following day), the company must pay a night shift allowance of at least 1.25 times the normal wage (an increase of 25%). Note: If nighttime work also constitutes overtime, the two allowances must be combined, and the company must pay at least 1.5 times the normal wage (25% for overtime + 25% for nighttime work).
Statutory Rest Day Allowance: If employees are required to work on statutory rest days, the company must pay a rest day wage of at least 1.35 times the normal wage (an increase of 35%).

Special working hour system (flexible and discretionary working hours system)

To adapt to the different business rhythms of various industries, Japan allows for a more flexible working hours and pay calculation system under specific conditions:

Discretionary Working Hours: For jobs involving a significant amount of fieldwork or highly specialized work that is difficult to measure using fixed clocking times (such as professional business, planning business, and R&D), Japan allows a “discretionary working hours system.”
Working Hours and Pay Calculation: Under the discretionary working hours system, regardless of the actual working hours, employees are legally considered to have worked the “required time” stipulated in the labor contract for both legal and pay calculation purposes. However, it is important to note that if this “deemed working time” agreed upon by both parties exceeds the legal standard working hours (8 hours per day), the company must still pay overtime wages for the excess.

Our advantages

Experienced payroll team, familiar with local regulations and industry standards
High-standard data security and confidentiality mechanisms
Reduced corporate administrative costs and error risks
Ensuring employees receive their salaries on time and accurately

Kindly contact us to learn more about our payroll administration services.

MSMC ASIA

#19-06 160 Robinson Rd, SBF Center, Singapore 068914