Premium Wages for Overtime, Holiday, and Night Work
Employers are required to pay premium wages at rates specified by law for overtime, holiday, and night work as follows:
Overtime Allowance (for work beyond 8 hours a day or 40 hours a week) Hourly wage × Overtime hours × 125%
Holiday Work Allowance (for work on the statutory day off per week) Hourly wage × Overtime hours × 135%
Night Work Allowance (for work between 22:00 and 05:00) Hourly wage × Overtime hours × 25%
Calculation of Hourly Wage
The hourly wage is calculated as follows, and if it comprises more than one of these components, the total of these calculated amounts becomes the hourly wage:
For Hourly Wage Employees Hourly Wage = Basic Wage (hourly rate)
For Daily Wage Employees Hourly Wage = Basic Wage (daily rate) ÷ Number of prescribed working hours per day
For Monthly Wage Employees Hourly Wage = Basic Wage (monthly salary) ÷ Average prescribed working hours per month in a year
Basis for Premium Wage Calculation
Certain wages are expressly excluded from the basis for calculating premium wages. Any wages not falling under these categories must be included in the premium wage calculation:
Family Allowance
Commuting Allowance
Separate Residence Allowance
Child Education Allowance
Housing Allowance
Wages paid temporarily
Wages paid for periods exceeding one month
Exemptions
Managers and supervisors (those in supervisory or managerial positions) are exempt from the labor hour, break, and holiday restrictions set by the Labor Standards Law. Therefore, it is not necessary to pay overtime or holiday work allowances to managers and supervisors (though night work regulations apply, so night work allowances are required). However, the designation of a manager or supervisor, who must be in a position integrally related to management in terms of labor conditions and personnel management, is often narrowly defined in legal disputes. If a court denies the managerial or supervisory status, the company might face significant unpaid overtime liabilities. Thus, careful consideration is essential when classifying an employee as a manager or supervisor.
If you are considering expanding your business to Japan, please contact Quantum Accounting Inc. for a free consultation during the planning phase or general consultation (available in both English and Japanese). Quantum Accounting's professionals are experts in accounting, tax, legal, and labor issues. Our goal is to provide you with a one-stop professional firm for all the services you need to expand your business into Japan. We are confident that we can help you.