Currently large companies are required to pay 50% extra wages for statutory overtime exceeding 60 hours per month. From April 1, 2023, this rule will also be applied to small- and medium-sized companies. This article puts together extra wage rates that must be paid by employers and also explains about statute of limitations for unpaid overtime wages, an issue likely to cause trouble in the coming years.
[1] Extra wage rates
Following table shows three types of extra wage rates.
|
a. Overtime |
Up to 45 hours per month |
at least 25% |
|
Hours exceeding the limit (*1) |
at least 25% (*2) |
|
|
60 hours or more per month (*3) |
at least 50% |
|
|
b. Statutory holiday work |
at least 35% |
|
|
c. Late-night work |
at least 25% |
|
*1) The limit is 45 hours per month, 360 hours per year.
*2) Employers are under legal obligation to make efforts to pay overtime wages higher than 25%.
*3) The rule is only applied to large companies until March 31, 2023.
Currently, only large companies are required to pay extra wages of at least 50% for overtime exceeding 60 hours per month. From April 1, 2023, this rule will also be applied to small- and medium-sized firms, making all employers subject to the regulation. Extra wages must be paid to overtime exceeding statutory work hours (item [a] in the table). Statutory holiday work (item [b]) should not be included.
Meanwhile, if a part of statutory overtime is also worked in late-night hours, the employer must pay an additional extra wage for late-night work (item [c]). This means the extra wage rate for overtime exceeding 60 hours per month during late-night hours will be at least 75%.
[2] Statute of limitation for unpaid wages
With the Amendment to the Standard Labor Act implemented on April 1, 2020, the statute of limitation for unpaid wages has been extended from two years to five years. However, considering impacts on companies, an interim measure has been adopted, setting the time limit at three years.
The three-year statute of limitation is applied on salaries paid on April 1, 2020, or after. For instance, in the case of a salary paid on April 25, 2020, the statute of limitation expires on April 24, 2023. Until April 2022, claims for unpaid wages could be made for a past period of up to two years, but with the Amendment entering into the third year on April 1, companies might start receiving claims for unpaid wages going back three years.
Particularly, the increase in extra wage rate explained in [1] is likely to help direct workers’ attention to unpaid overtime wages. Proper work hour management will be increasingly important for companies.
Companies might also need to revise their work rules according to the change in the extra wage rate in April 2023. Please ensure that the work rules comply with the latest legislation.
Reference material of the Labour Ministry (Japanese only)
