(Please note that the subject of overtime work and / or pay in Japan is very complicated, and this Q&A should be seen as a primer rather than a comprehensive guide.)

01. How much overtime payment am I entitled to?

02. What is Article 32?

03. What is Article 37?

04. Can an employer use overtime as a way to avoid shakai hoken enrollment?

05. Can I be forced to do overtime work?

06. Can an employer set their own overtime rates independently of the law?

07. Can an employer set a fixed allowance instead of overtime being a percentage of base salary?

08. How much overtime am I allowed to work?

09. Is “Overtime Included In Salary” legal?

1. HOW MUCH OVERTIME PAYMENT AM I ENTITLED TO?

According to the Article 37 of the Labor Standards Act, these are the rates of salary that an employee is entitled to:

Note that “night work” refers to work that is performed between the hours of 10 p.m. and 5 a.m. (22:00 and 05:00), as defined in Article 37 of the Labor Standards Act.

The statutory working hours of up to 8 to eight hours per day / 40 hours per week are set out in in Article 32 of the Labor Standards Act (see below).

2. WHAT IS ARTICLE 32?

Article 32 of the Labor Standards Act is the part of Japanese labor law that sets out statutory (i.e. “written law”) working hours for all employees.

It has many sub-articles and sections, but the relevant part of labor law for the purpose of working out working hours and overtime rates (as per the table above) is as follows:

 (1) An employer shall not have a worker work more than 40 hours per week, excluding rest periods.

(2) An employer shall not have a worker work more than 8 hours per day for each day of the week, excluding rest periods. 

For example, the overtime rate of +125% begins when an employee works more than the 8 hours per day or 40 hours a week of these laws.

3. WHAT IS ARTICLE 37?

Article 37 of the Labor Standards Act is the part of Japanese labor law that deals with overtime hours and overtime rates (“Increased Wages for Overtime Work, Work on Days Off, and Night Work”)

Like Article 32, Article 37 is also quite complicated, but the part that is relevant to this topic reads as follows:

 …the employer shall pay increased wages for work [at a rate of] no less than 25 percent and no more than 50 percent over the normal wage per working hour or working day; [however,] in the event that the working hours [exceed] 60 hours per month, the employer shall pay increased wages for work during those exceeding hours at a rate no less than 50 percent… 

In this case, Article 37 directly refers to the “statutory” hours written in Article 32. 

4. CAN AN EMPLOYER USE OVERTIME AS A WAY TO AVOID SHAKAI HOKEN ENROLMENT?

No.

It’s illegal for an employer to use overtime (especially “overtime included in salary” – see below) as a means to have an employee work longer hours while claiming that the employee falls short of shakai hoken enrollment limits.

Overtime can not be used as a “legal loophole” to artificially deflate working hours for the purpose of evading shakai hoken enrollment responsibilities.

Once the total working time of an employee per week goes beyond 30 hours, an employer is required by law to enroll the employee in shakai hoken.
5. CAN I BE FORCED TO DO OVERTIME WORK?

No.

It’s illegal for an employer to force an employee to do overtime work unless there is a signed agreement from an elected individual who will represent the majority of workers in the workplace.

Because this law is governed by Article 36 of the Labor Standards Act, these kinds of agreements are called “Article 36 Agreements“.

Until an “Article 36 Agreement” exists, it is illegal to force an employee to do any overtime work, and there cannot be any overtime work at all unless it is voluntary.

In addition, an employer must explain the specific reasons why employees will be required to work overtime or on statutory days off, the types of duties in which employees will be asked to perform, the hours in which such employees may have to work overtime in a day, among other things (Article 16 of the Ordinance For The Enforcement Of The Labor Standards Act).
6. CAN AN EMPLOYER SET THEIR OWN OVERTIME RATES INDEPENDENTLY OF THE LAW?

An employer can set the rate of overtime to be above the legal baseline, but can not set the rate to be below the legal baseline.

For example, in the case of someone who works more than 40 hours per week, the employer can set the rate of overtime pay to be anywhere between +125% and +150%.

However, the employer cannot set the rate to be below the statutory rate of +125%. 
7. CAN AN EMPLOYER SET A FIXED ALLOWANCE INSTEAD OF OVERTIME BEING A PERCENTAGE OF BASE SALARY?

Similar to the above point, an employer can set a fixed rate of overtime allowance (e.g. ¥3,500 per hour) providing that the allowance is equal to or greater than the legal baseline rate for the type of overtime work being performed.

For example, if an employee earning ¥500,000 per month, working 40 hours per week, were to perform overtime work during normal hours (i.e. before 10 p.m. on a work day), an overtime allowance of ¥3,500 per hour would be illegal.

As the per hour salary of such an employee would be around ¥3,125, the overtime allowance of ¥3,500 would fall below the +125% (¥3,906) required by law.

However, a fixed allowance of ¥4,000 would be legal (+128%).

It is important for an employee to check to make sure that any such fixed allowances are legal.

8. HOW MUCH OVERTIME AM I ALLOWED TO WORK?

The number of hours of overtime that an employer is allowed to have an employee work is set by the Ministry of Health, Labor, and Welfare (MHLW), in accordance with section (2) of Article 36 of the Labor Standards Act:

 (2) The Minister of Health, Labor and Welfare may, in order to ensure that the extension of Working Hours are appropriate, prescribe standards for the limits on the extension of Working Hours […] in consideration of the welfare of Workers, trends in overtime work, and other circumstances. 

In principle, these hours are limited by the guidelines set forth in the MHLW’s “Model Rules of Employment” (Article 19) as follows:

However, one of the weaknesses of the MHLW’s guidelines is that are often treated as a “soft limit” for overtime, and ignored by companies without real consequence.

In June of 2018, the “Work Reform Bill” was passed to set a “hard limit” of 100 hours per month or 720 hours per year on the number of overtime hours an employee is allowed to work.

Although these “hard limits” are much higher than the “soft limits” set out by the MHWL, until the “Work Reform Bill” was passed, employers could effectively ask employees to work without limit if a worker’s representative agreed to it.

9. IS “OVERTIME INCLUDED IN SALARY” LEGAL?

No, it is not.

For more information, please refer to our dedicated article on this topic: “Overtime Included In Salary”

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