In general, foreign employees from affiliated companies overseas who are dispatched to Japan must join both the social security system of their home country and Japan’s social security system, resulting in double insurance payments. However, due to the Social Security Agreement between China and Japan, it is possible to avoid double participation.

Table of Contents

• Social Security Agreement
• Status of the Effectiveness of Social Security Agreements with Various Countries (as of October 1, 2019)
• The Japan-China Social Security Agreement Effective from September 1, 2019

Social Security Agreement

With the increasing international movement of people, more individuals are being dispatched to work abroad or coming to Japan for work. Generally, they are required to join both the social security systems of their home country and Japan, incurring double insurance payments. However, countries that have signed a social security agreement can exempt individuals from joining one country’s insurance system, and the periods of insurance paid by both countries can be combined. The content of the social security agreement varies depending on the country involved and the foreign worker’s home country. Generally, those who are dispatched to Japan for less than five years may be exempt.

Status of the Effectiveness of Social Security Agreements with Various Countries (as of October 1, 2019)

Countries with Signed Agreements: Germany, the UK, South Korea, the US, Belgium, France, Canada, Australia, the Netherlands, the Czech Republic, Spain, Ireland, Brazil, Switzerland, Hungary, India, Luxembourg, the Philippines, Slovakia, and China.

Japan-China Social Security Agreement Effective from September 1, 2019

The agreement applies only to the following pension systems:

• China’s basic pension insurance for employees
• Japan’s National Pension and Employees’ Pension Insurance

Social Security Agreement Procedures

Procedures Before Dispatching to Japan:

• Before dispatching to Japan, please apply for a “Certificate of Insurance” from China’s Social Insurance Management Center.

Procedures After Dispatching to Japan:

• After arriving in Japan, submit the “Certificate of Insurance” to Japan’s Pension Office as needed.
• For employees dispatched to Japan before the agreement’s effectiveness, after submitting the “Certificate of Insurance” issued in China to Japan’s Pension Office, also submit a “Loss of Eligibility Declaration” to the Pension Office.

Paid Annual Leave in Japanese Corporate HR Management: Compliance and Key Considerations

Paid annual leave is an important aspect of human resource management in Japanese companies. This article introduces the compliance requirements of Japan’s paid annual leave system, as well as key points to consider.

Table of Contents

1. Legal Provisions and Implementation of Paid Annual Leave in Japan
2. How is Paid Annual Leave Calculated?
3. How Can Paid Annual Leave Be Taken?
4. What to Do with Unused Paid Annual Leave? How to Accumulate? Can It Be Cashed Out?
5. Legal Liabilities for Violating Paid Annual Leave Regulations
6. Conclusion

Legal Provisions and Implementation of Paid Annual Leave in Japan

According to Article 39 of Japan’s Labor Standards Act, employees who have worked for at least six months continuously and have worked for at least 80% of the workdays during that period are entitled to paid annual leave. According to a report by Japan’s Ministry of Health, Labour and Welfare in the 5th year of Reiwa, the average number of annual leave days enjoyed by workers in Japan was 17.6 days, with 10.9 days being self-requested by employees (the remaining portion was designated by employers). The leave acquisition rate reached a record high of 62.1%.

The system also defines the rights and obligations of employers: The right refers to the employer’s seasonal adjustment authority, designed to balance employee annual leave with business operations and prevent operational disruptions caused by concentrated leave. The obligation is based on Japan’s Work Style Reform Law, requiring employers to designate 5 days of paid annual leave for employees every year. It’s important to note that the seasonal leave designation must be clearly outlined in the company’s employment rules (see: What are Japan’s employment rules and how to meet compliance requirements?).

How is Paid Annual Leave Calculated?

For full-time employees, whether regular or fixed-term employees, regardless of their position (management or general staff), the legal standard for paid annual leave is as follows:

Continuous employment is defined as consecutive service in the same company, including re-employed retirees. Additionally, during an employee’s absence due to work-related injuries, occupational diseases, statutory child care leave, or nursing care leave, the period is considered as normal attendance for the calculation of paid annual leave. If a company has a suspension of operations due to its own reasons, the period of suspension should generally be excluded from the total workdays when determining the eligibility for paid annual leave.

For part-time employees, paid annual leave is prorated. Specific calculation methods and applicable conditions are omitted here, but please consult a social insurance labor consultant for more details.

How Can Paid Annual Leave Be Taken?

Paid annual leave is a right under the Labor Standards Act, and employees are legally allowed to choose the time for their leave. However, to balance this right with business operations, employers are given seasonal adjustment rights. If an employee does not take at least 5 days of paid annual leave in a year, the employer is obligated to designate 5 days of paid leave for the employee. The employer must also listen to the employee’s preferences during the designation of leave. These seasonal adjustments must be clearly stated in the employment rules (see: How to create employment rules for HR management in Japan).

Furthermore, in Japan, paid annual leave can be taken in different ways, not necessarily in continuous blocks. While leave is typically taken one day at a time, other arrangements may be allowed under certain conditions (see table below):

It is important to note that the start date and the fiscal year’s basis for annual leave calculation may vary by company, sometimes resulting in overlapping leave periods. In such cases, the company’s internal HR management system will determine how to calculate leave, and a social insurance labor consultant can assist with this process.

What to Do with Unused Paid Annual Leave? How to Accumulate? Can It Be Cashed Out?

Unused annual leave can be carried over into the next year, but the statutory period for clearing annual leave is 2 years. As previously mentioned, employers must provide employees with at least 5 days of paid annual leave each year. If the leave is not taken, it can accumulate into the next year.

The purpose of paid annual leave is to provide rest for employees, so the law does not allow for the cashing out of unused leave except in certain cases:

• Paid leave beyond the statutory minimum.
• Paid leave exceeding the expiration period.
• Unused leave remaining upon resignation or retirement.

It is important to note that any compensation for unused leave must not impede the employee’s right to take paid leave. Employment contracts or rules should not explicitly allow the cashing out of paid annual leave. Additionally, employers are not required to buy out unused leave.

When annual leave is converted into cash, there are two common calculation methods:

1. Based on the employee’s wage standard at the time of conversion.
2. A fixed amount specified in the employment rules.

For the first method, the conversion can be based on one of the following:

• The employee’s average wage.
• The standard monthly remuneration under health insurance law.
• The actual wages paid for hours worked as defined by the Labor Standards Act.

Legal Liabilities for Violating Paid Annual Leave Regulations

According to Article 39 of the Labor Standards Act, if an employer fails to ensure that an employee takes at least 5 days of paid annual leave, they may face a fine of up to 300,000 yen. This fine is calculated per employee, so if multiple employees are affected, the fine will be multiplied by the number of employees.

If the employer fails to specify seasonal adjustments for paid annual leave in the employment rules, a fine of up to 300,000 yen may also apply.

For employers who do not provide the required 5 days of paid annual leave, they may face imprisonment of up to 6 months or a fine of up to 300,000 yen, with the fine calculated based on the number of affected employees.

Conclusion

In conclusion, paid annual leave in Japan is a statutory right for employees and an important aspect of corporate HR management. By effectively organizing internal HR management systems, companies can fulfill their employees’ legal rights while balancing business needs. As Japan’s system is flexible, it is advisable to consult with professionals, such as social insurance labor consultants, to ensure compliance with labor laws.

The work time system is one of the most important aspects of human resources and labor management for businesses. It is not only a key element in labor law compliance, but also an essential tool in building a compensation structure. In fact, Japan’s work time system is similar to that of many countries, offering various options. A deep understanding of Japan’s work time system, when applied correctly under the premise of legal compliance, can greatly enhance the satisfaction of both employers and employees, achieving a win-win situation for both sides.

This article provides a brief overview of Japan’s work time system choices.

The content of this article includes:

Table of Contents

1. Overview of Japan’s Work Time System
2. Special Work Time Systems in Japan
3. Conclusion

Overview of Japan’s Work Time System

Japan’s work time system can be divided into two main types: the standard work time system and the special work time system.

The standard work time system, also known as the statutory work time system, is defined by Article 32 of Japan’s Labor Standards Act, which stipulates that employees work 8 hours a day and 40 hours a week, excluding break times. Under this system, any work beyond the statutory work hours is considered overtime, for which employers must pay overtime wages. This system is simple and straightforward, making it easier for businesses with stable operational rhythms to manage human resources.

However, many businesses experience fluctuations in their operations due to seasonal changes, busy and slow periods, or job characteristics that extend beyond the applicability of the standard work time system. To address this, special work time systems have been introduced, which include more flexible systems such as modified work hours and systems that treat certain work time as deemed working hours. The following sections introduce these special work time systems in Japan’s labor law.

Special Work Time Systems in Japan

Japan’s special work time systems can be roughly classified into three categories:

1. Modified work hour systems, including work hours modified within a specific period, and flexible work hour systems.
2. Deemed work hours, including work time deemed outside the workplace, discretionary work systems (for specialized and planning types of discretionary work), and
3. High-level expert work hour systems.

1. Modified Work Hour Systems

These systems allow businesses to adjust work hours according to busy and slack periods within a given timeframe, ensuring that the overall work hours during that period comply with statutory requirements. Specific periods can be broken down into weekly, monthly, or yearly modified work hour systems, as well as flexible work hour systems. Due to the limited scope of application for weekly modified work hours, the following explanation primarily focuses on the monthly and yearly modified work hour systems and flexible work hour systems.

According to the Ministry of Health, Labor, and Welfare’s 2023 Employment Status Report, 64% of Japanese companies use modified work hour systems, with the yearly modified work hour system being the most popular, accounting for 34.3% of such companies. At the same time, the Japanese government is actively promoting flexible work time systems.

(1) Yearly Modified Work Hour System

In the yearly modified work hour system, the statutory upper limit on work hours during busy periods can be adjusted: the daily work hour limit is 10 hours, and the weekly work hour limit is 52 hours. During this modified period, employees can work up to 6 consecutive days. The 6-day limit can be extended to 12 days if consecutive rest days are placed at the start and end of the period. Additionally, for periods exceeding 3 months, the law stipulates that the total number of workdays in the year cannot exceed 280, and continuous work weeks exceeding 48 hours can only last for 3 weeks.

(2) Monthly Modified Work Hour System

For periods within one month, businesses may implement modified work hours due to short-term busy or slack periods. During this period, the average weekly work hours must not exceed statutory limits (40 hours per week, or 44 hours for special cases). Additionally, at least one rest day must be ensured each week, or four rest days within a four-week period.

(3) Flexible Work Hour System

The flexible work hour system allows businesses to set total work hours within a 3-month period, with employees deciding their own attendance times. Typically, core working hours are designated to ensure normal operations while employees are present. Within this system, weekly average work hours must not exceed 40 hours, or 44 hours for special cases.

2. Deemed Work Hour Systems

Deemed work hour systems include work time deemed outside the workplace and discretionary work systems (for specialized and planning types of work). The work time deemed outside the workplace system applies when work is done outside the office, and it is difficult to calculate working hours, so work time is generally recognized based on the designated work time.

Discretionary labor systems apply to jobs where the nature of the work requires employees to make independent decisions about their work, such as planning, analysis, and research. This system is defined through a labor agreement or a labor committee decision, and employees must give written consent to apply this system.

(1) Definitions and Scope

The planning-type discretionary labor system applies to work related to business planning, design, and analysis. It provides employees with a significant amount of autonomy over their work, allowing them to exercise considerable discretion. This system is implemented after a decision by the labor committee and a report to the Labor Standards Supervision Office. The specialized business discretionary labor system applies to positions requiring specialized knowledge, where it is difficult to provide specific instructions on work methods and hours. In these cases, the work is considered to have been done within the working hours agreed upon in the labor agreement.

3. High-Level Expert Work Hour System

This system is targeted at high-income professionals, specifically those with annual incomes of 10.75 million yen or more. Under this system, the statutory work hours, rest periods, and overtime rules are generally not applicable. However, employees under this system must be guaranteed 104 rest days per year and 4 rest days every 4 weeks. Written consent from the employee is also required.

Conclusion

This article has provided a brief overview of Japan’s special work hour systems. Similar to China’s special work time systems (such as the comprehensive calculation work hour system and the irregular work hour system), Japan’s special work time systems respond both to the objective needs of business operations and to the particularities of certain job types. By understanding and correctly applying these systems, foreign-owned companies operating in Japan can more effectively manage human resources, improve cost control, and enhance efficiency, ultimately achieving a win-win situation for both employers and employees.

If you wish to learn more about Japan’s special work time systems or need assistance with applying them in your company, feel free to contact us. Our team of professional social insurance labor consultants can offer you reliable support.