How to Set Up Business in Japan Laws & Regulations on Setting Up Business in Japan

Section 4. Human Resource Management

4.5 Legislation on working hours, breaks and days off

4.5.1 Working hours, breaks, days off

  1. Working hours must, in principle, not exceed 40 hours per week or eight hours per day excluding breaks (this is known as "statutory working hours"). However, some businesses are permitted to have their employees work up to 44 hours per week at a maximum of eight hours per day. These businesses include retail and beauty services, cinemas and theatres, businesses related to health and hygiene, as well as restaurants and entertainment businesses with less than 10 regular employees.
  2. In the event that an employee works six hours, the employer must give that employee not less than a 45 minute break; this increases to a one hour break where working hours exceed eight hours.
  3. Employers must grant employees at least one day off per week, or four days off in any four-week period (this is known as "statutory days off"). Sundays or public holidays need not necessarily be days off, and other days may be selected as employees' days off instead by agreement between the employer and employees.

4.5.2 Agreements on overtime and work on days off

Any employer that requires workers to work in excess of statutory working hours or on statutory days off must submit a Notification of Agreement on Overtime and Work on Days off to its local Labor Standards Inspection Office.If employers force employees to do overtime work or work on days off without submitting a Notification of Agreement on Overtime and Work on Days off, they may be penalized.

Even if employers submit a Notification of Agreement on Overtime and Work on Days off, there are limitations for overtime work and work on days off as follows.

Table 4-1
Period 1 week 2 weeks 4 weeks 1 month 2 months 3 months 1 year
Limit 15 hours 27 hours 43 hours 45 hours 81 hours 120 hours 360 hours

However, the extension of working hours to a certain amount of hours beyond the limitations can be included in the Agreement through the appropriate labor-management procedures on a certain period only if there are exceptional circumstances for the extension of working hours beyond the set limitations above.

4.5.3 Employers' "obligation to ascertain and calculate working hours"

The Labor Standards Act contains provisions on working hours, holidays, nighttime overtime work, and other working conditions. Employers are therefore under an obligation to properly ascertain and control working hours.

4.5.4 Overtime payment

Companies must pay an increased rate of wages as set forth in the table below to employees who work in excess of statutory working hours, work on statutory days off or work late at night (between 22:00 and 05:00).

Table 4-2
  Rate of increase
1. Work in excess of statutory working hours 25%
2. Work in excess of statutory working hours exceeding 60 hours in a month* 50%
3. Work on statutory days off 35%
4. Work late at night (between 10 p.m. and 5 a.m.) 25%
5. Work late at night in excess of statutory working hours 50%
6. Work late at night in excess of statutory working hours exceeding 60 hours in a month* 75%
7. Work late at night on statutory days off 60%

*Rates of increase in items 2. and 6. reflect revisions to the Labor Standards Act that took effect on April 1, 2010 (there was previously no special rate for these categories of overtime work). These new rates of increase will not apply to small and medium-sized enterprises for the time being. Moreover, under the new revisions, employers are allowed to offer paid leave in lieu of additional wages for overtime work if agreed upon in a labor-management agreement.

4.5.5 Exceptions for managers and supervisors

Persons in positions of management or supervision and persons handling confidential administrative work who are closely involved in management are not subject to the regulations on working hours, breaks and days off (with the exception of regulations on night work). Whether he or she is regarded as a manager/supervisor is comprehensively judged by facts such as those below;

  • whether the decision-making process of his or her labor conditions and labor management are closely involved in management
  • whether he or she is given the practical authority and business status of a manager/supervisor, regardless of his/her business title
  • whether there is a strict limitation for working hours, such as office hours
  • whether he or she is given the appropriate financial treatment of a manager/supervisor, such as salary, allowance and bonus

4.5.6 Modified working hour system

Some jobs entail large peaks and troughs in the number of working hours according to the year, month or week. In some of these cases, companies are allowed to adopt a system of calculating working hours whereby the company need not pay increased rates in certain weeks or on certain days even where employees work in excess of statutory working hours, provided that the employees involved work no more than the statutory number of working hours on average within a predetermined period. In this case, however, a labor-management agreement must be entered into or appropriate provisions included in work rules before a flexible system can be adopted.

  1. System of annual modified working hours
    Employees' working hours must not exceed 40 hours on average per week for a specified period of more than one month but not more than one year. If a company adopts this system, even workers whose statutory working hours are 44 hours per week, under the exemptions detailed in 4.5.1 1., are subject to the aforementioned 40-hour average.
  2. System of monthly modified working hours
    Provided that provisions are drawn up prohibiting employees' working hours from exceeding 40 hours*1 on average per week for a specified period of not more than one month, the employer may have employees work in excess of 40 hours in a specified week or in excess of eight hours on a specified day.
  3. Flextime system
    Another system under which working hours can be adjusted within a monthly period is the flextime system. Under this, the total number of working hours that a worker must work during a fixed period of not more than one month is established, and workers are free within limits to determine what time they start and stop work each day provided that they meet the total number of working hours required.
  4. Week-based modified working hours
    Under this system, employers may have employees work for more than eight hours but not more than 10 hours per day without having to pay increased rates of wages, provided that employees' working hours do not exceed 40 hours per week. It should be noted, however, that this system is limited to retailers, inns and restaurants with less than 30 regular employees. Furthermore, if a company adopts the system, even workers whose statutory working hours are 44 hours per week, under the exemptions detailed in 4.5.1 1., are subject to the aforementioned 40-hour average.

*1 Under this system, the working hours of workers whose statutory working hours are 44 hours per week under the exemptions detailed in 4.5.1 1. shall remain 44 hours.

4.5.7 System of discretionary working hours

If employees work outside companies or if the progress of work is considerably left to employees, an ordinary method of calculating working hours may be unsuitable. For such case, there is a "deemed working hour system" under which employees are deemed to have worked for a certain period of time. If the deemed working hours exceed statutory working hours, increased rates of wages will occur for the excess hours.

  1. System of deemed working hours outside the workplace
    This system is to deem that employees have worked for prescribed working hours where it is difficult to calculate the employees’ working hours because the employees work outside the workplace for sales, media coverage or other reasons. However, in general, if the employees need to work in excess of the prescribed working hours in order to provide the services, it will be deemed that the employees have worked for "hours generally required to perform those services" or "hours prescribed in the labor-management agreement."
  2. Discretionary working system for professional services
    For certain services that are highly professional and difficult to provide specific instructions pertaining to the means of performing services and the allocation of time, by prescribing working hours in the labor-management agreement and submitting that agreement to the Labor Standards Inspection Office, it will be deemed that the employees worked for the hours prescribed in the agreement regardless of the actual working hours.
  3. Discretionary working system for planning services
    For a person who engages in services such as planning, plan proposal, research and analysis in which the method of performing those services must be left to the employee’s discretion to a large extent, if certain matters are resolved with the majority votes of four-fifth or more of the committee members at the labor-management committee, and the matter is registered to Labor Standards Inspection Office, it will be deemed that the person worked for the hours resolved at the labor-management committee regardless of the actual working hours.

4.5.8 Paid leave

Employers must grant 10 days' paid leave to employees that worked for six consecutive months from the time of hiring and who worked on not less than 80 per cent of all schedule work days. This paid leave may be taken consecutively or separately. Where an employee's application to take paid leave will hinder the normal business operations, the employer may require the employee to take such paid leave at a different time. The number of days of paid leave available to employees increases in proportion to employees' length of service as set forth in the following table.

Table 4-3
Years of service 0.5 1.5 2.5 3.5 4.5 5.5 6.5
Leave days granted 10 11 12 14 16 18 20

The right to annual paid leave expires after two years. In other words, annual paid leave left over from one year may be carried over and taken the next year only. For instance, if an employee is awarded 10 days' paid leave in 2004, but opts not to take paid leave in that year, the employee may carry those days over to 2005 and use them in addition to any leave days which become available in 2005. However, those 10 days awarded to the employee in 2004 cannot be carried over to 2006 or beyond. It should also be noted that employees that have been continuously employed at the same company for not less than seven years and six months can take a maximum of 40 days' paid leave in any one year, including days that became available within that year and those carried over from the previous year. Companies are not required to compensate for the right to annual paid leaveleaves that hashave expired. The same apples to the cases where there isare unused leaveleaves at the time of an employee leaving the company.
While annual paid leave previously had to be taken in units of whole days, up to five days’worth of paid leave per year can now be taken in hourly units if agreed upon in a labor-management agreement (under revisions to the Labor Standards Act that took effect on April 1, 2010).
Part-time workers are granted annual paid leave in proportion to the number of prescribed working days that they work.
Employers are not required to grant paid leave days in addition to those described above to cover days on which employees did not work as a result of any non-work-related illness or injury. It should also be noted that most Japanese companies grant a few additional paid leave to employees for marriage, death of close relatives, and childbirth by the employee's spouse, etc.

4.5.9 Maternity, childcare and family care leave

  1. Maternity leave
    If an employee of expectant mother requests permission for leave of absence six weeks prior to the expected date of delivery (14 weeks in the case of multiple pregnancies), the employer must approve the request. Furthermore, employers are, in principle, prohibited to cause any female employee to work for a period of eight weeks commencing from the day following that on which the employee gave birth.
  2. Childcare leave
    If an employee with a child aged less than one-year-old requests permission for a leave of absence (by the child's first birthday in principle, or up to the age of 18 months if certain conditions are met), the employer must approve the request. Employers may deem employees who have worked at the company for less than one year to be ineligible for childcare leave, provided, however, that the employer does so by stipulating to that effect in a labor-management agreement.
  3. Exemption from non-scheduled work, obligation for short-time working system, and limitation of overtime work
    If an employee with a child aged less than three years old requests to be exempted from non-scheduled work, he/she must not be made to work in excess of prescribed working hours.If an employee with a child aged less than three years old requests to take short-time working hour system, he/she must be allowed to do so. If an employee with a child of preschool age requests to be exempted from non-scheduled work, he/she must not be made to work overtime in excess of 24 hours in a month or 150 hours in a year.
  4. Family care leave
    If an employee with a family member who has been judged to require a certain level of nursing care requests permission for a leave of absence to provide such nursing care (up to a maximum of 93 days in total per that family member), the employer must approve such a request once only for each occasion that a family member falls into a condition requiring full-time nursing care. Employers may deem employees who have worked at the company for less than one year and those whose employment will terminate within 93 days ineligible for family care leave, provided, however, that the employer does so by stipulating to that effect in a labor-management agreement.
  5. Leave of absence to nurse a child or to take care of family
    If an employee with a child of preschool age requests to nurse his/her sick or injured child, he/she may take a leave of absence of up to five days per year (or up to 10 days per year if he/she has two or more children of preschool age).In addition, if an employee with a family member requiring nursing care requests permission for a leave of absence to nurse such a family member, he/she may take a leave of absence of up to 5days per year (or up to 10 days per year if he/she has two or more of such family members).

The above periods of leave may be unpaid. Under certain conditions, however, an employee may receive certain benefits under health insurance coverage during the above period 1. and under employment insurance coverage during the above periods 2. and 4..
The Japanese government has set a target that 30 % of leadership positions should be filled by women by 2020.

4.5.10 Investigations by labor standards inspectors

Labor standards inspectors are public employees given the role under Japanese labor standards legislation of entering any kind of business establishment to ensure legal compliance and assist the improvement of working conditions.
A recent focus of investigations has been on the nonpayment of overtime pay, and information published by the Ministry of Health, Labour and Welfare shows that outstanding overtime pay of at least 10 million yen was paid by 196 companies (adding up to 11 billion in total) in FY2014.


Section4. Human Resource Management

Samples of forms businesses are required to submit to authorities *Example

No. Section Form English Japanese
21 4-3a Notice of Employment English/JapanesePDF file(540KB) 
22 4-3b Employment Agreement EnglishPDF file(127KB) * JapanesePDF file(360KB) *
23 4-5 Notification of Agreement on Overtime work Working on Holidays EnglishPDF file(586KB) * JapanesePDF file(531KB) *
24 4-6 The Model Rules of Employment EnglishPDF file(1.0MB) JapanesePDF file(1.1MB)
25 4-9a Notification of Acquisition of Employment Insurance Qualification EnglishPDF file(295KB) * JapanesePDF file(363KB) *
26 4-9b Notification of the Acquisition of Health insuranceQualificationEmployees' PensionInsurance Qualification EnglishPDF file(503KB) * JapanesePDF file(630KB) *
27 4-9c Labor insurance Estimated insurance premiums / Increased estimated insurance premiums / Final insurance premiums Declaration EnglishPDF file(560KB) * JapanesePDF file(1.0MB) *
28 4-9d Basic amount for calculation of monthlyremuneration of person insured Health insurance Employees' pensioninsurance EnglishPDF file(607KB) * JapanesePDF file(843KB) *
29 4-9e Notification of Dependent Under Health Insurance (Change) EnglishPDF file(617KB) * JapanesePDF file(807KB) *
30 4-9f Notification of the Establishment of a Labor Insurance Relationship EnglishPDF file(613KB)  JapanesePDF file(943KB) *
31 4-9g Notice of establishment of the business place to which employment insurance is applied EnglishPDF file(311KB)  JapanesePDF file(328KB) *
32 4-9h Notice of New Application Health insurance Welfare pension insurance EnglishPDF file(508KB) * JapanesePDF file(705KB) *

These sample application forms indicate the essential points and descriptive examples of registration, visa, taxation, and personnel and labor affairs that are necessary when a foreign company establishes a corporation etc. in Japan. These documents are not published by competent authorities and therefore are not official. Therefore, when going through the official procedures consult a specialist or download the official documents from the competent authorities.

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