Cashless payment services are becoming increasingly widespread with an increasing number of people spend days without using cash at all. In response to the growing trend, the government has enabled companies to pay wages into workers’ digital wallets through services, often known as “@@ Pay.” This article explains key points to digital wage payment.
The Labor Standards Act stipulates “an employer must pay the full amount of wages in currency directly to the worker.” Most companies pay wages by cash transfer to bank or security accounts designated by employees, which is also allowed as an exception.
The start of electronic wage payment further widens the options of wage payment methods (or wage receiving methods for workers.) Please note that digital payment can be chosen, only if it is desired by an employee. The new rule is not aimed to require employers to adopt the digital payment method, either.
In electronic wage payment, wages are paid by sending money to workers’ fund transfer service provider accounts, instead of paying in cash or through bank transfer. “Fund transfer service providers” are exchange transaction service operators that are not banks or other conventional financial institutions. They are also required to register with the Financial Services. In Japan, many of them are known as “@@ Pay.” As of the end of January 2023, there are 83 registered providers.
To become designated as an electronic wage payment operator, fund transfer service providers need to file an application with the Labour Ministry, which began accepting and examining applications on April 1, 2023. Providers must satisfy the requirements described below. Since the examinations are expected to take a few months, electronic wage payment will not start before the summer this year.
[Requirements]
- A system to guarantee repayment of the full amount of the balance to workers in the event workers become unable to receive wages due to the provider’s bankruptcy or other reasons.
- A measure allowing workers to withdraw an exact amount of wage as designated to the last digit through ATM, etc., and with no ATM usage fee at least once a month.
Since April 1, 2023, workers has been able to receive wages in digital cash through a designated fund transfer service provider. Before starting the method, companies have to check the services chosen by employees are the Labour Ministry’s designated providers. To start digital wage payment, companies also have to sign an agreement with the representative of a majority of employees on the scope of employees who may adopt electronic wage payment and other related matters. It is also important to explain workers who wish to use digital payment about the method’s details and obtain their agreement individually.
Following are the points companies are required to explain to workers. This information and an agreement form are available in the Labour Ministry’s website.
[The amount to be transferred]
Since the purposes of fund transfer services are payment and remittance, rather than saving, workers are advised to set an appropriate amount of wage to receive by considering their spending patterns. They also need to be careful the amount does not exceed the provider’s daily withdrawal limit.
[Upper limit]
The upper limit of electronic wage payment is one million yen. A portion exceeding the limit will be automatically transferred to the worker’s bank account. Since the bank transfer might incur a charge, workers should check the information with their fund transfer service providers in advance.
[Due date]
Workers will be able to withdraw wages transferred to their digital wallets during for at least ten years from the last transaction date by requesting the providers.
Companies should understand these points and confirm whether their employees wish to use digital payment before starting electronic wage payment. It is also important to check providers' fees and necessary procedures in considering whether cashless payment should be introduced or not.
[Reference]
Labour Ministry “Wage payment to fund transfer service providers (digital wage payment)”
The information is based on laws and regulations as of the date of this article.
