From April 2024, companies will be required to clearly indicate “the scope of change in the place of work or duties in the future” to all employees in employment contract. Among other matters that companies will be required to notify to fixed-term employees, this article explains about the limit to contract renewals.
[1] Statement of the limit of contract renewal
Some companies have a rule on the upper limit to the number of fixed-term workers’ contract renewals, e.g., “The total contract term shall not exceed four years,” or “The contract may be renewed up to three times.” If there is an upper limit to contract renewals, companies must describe the limit in the Notice of Employment from April 2024.
In describing the matter, some companies may get confused if they should indicate the count from the initial contract or state the number of possible renewals in the future. According to the rule, either way is acceptable, as long as the understanding of the worker and the company is the same. Companies will be able to avoid misunderstanding by indicating the total number of renewals possible or the upper limit to the length of employment and how many times the contract has been renewed so far.
[2] Explanation in the case the upper limit is set or changed
Even if a contract does not have a limit to the number of renewals, there may be circumstances requiring the company to set the limit later. For example, the company has to scale down a planned project to be assigned to the employee, because it could not receive funding as expected, or the company has to shorten the total length of employment contract from five years to three years for some reason. In such case, the company needs to explain the reason to the employee.
The company should explain the reason individually by giving a written notice. It is also acceptable to issue a document to applicable employees or hold a meeting to explain. The important point is to explain clearly for the employees to understand.
Among the items that must be clarified to fixed-time employees but is often missed is the department to consult regarding improvements in employment management. Please check your template of the Notice of Employment again and make changes appropriately.
[Reference]
Labor Ministry, “Rules on explicit explanation of labor conditions will change from April 2024”
https://www.mhlw.go.jp/stf/newpage_32105.html
This article is based on laws and regulations as of the date of posting.
