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Asia employment law bulletin 2020


Japan has adopted the so called “life-time” or “long-term” employment system for many years. This system has provided job security to employees in Japan but with the declining economy and aging population, many companies can no longer afford to provide this type of employment. Furthermore, this system has caused various social issues, such as excessive working hours (because companies expect full dedication from their employees in exchange for providing life-time/long term employment), a predominantly male work force (because of the long working hours) and an increase in non-regular staff (because it is very difficult to terminate regular employees in Japan).

The Work Style Reform Act was introduced in June 2018 to tackle these problems and some of the related regulations came into effect in April 2019, such as the regulations setting the upper limits on the hours of overtime which can been worked at large corporations and the regulations requiring employers to ensure that their employees actually take at least 5 days of paid annual leave each year.

There are two main updates regarding employment regulation in 2020 as part of the Work Style Reform Act: (1) Equal Pay for Equal Work; and (2) the introduction of upper limits to the hours of overtime for small and medium-sized enterprises.

Equal Pay for Equal Work

As above, the traditional “life-time” or “long-term” employment system has resulted in a significant increase in the number of non-regular staff. The working conditions of non-regular staff are significantly worse than those of regular employees and it is very difficult for a non-regular staff to become a regular employee. This has created a significant division in society and the Equal Pay for Equal Work regulations, which will come into effect in April of this year, were enacted as part of the new law to tackle this issue. The regulations require employers to treat non-regular staff (such as fixed-term employees, part-time employees and dispatched workers) “equally” with regular employees in relation to all terms and conditions of employment including salary, bonus, allowances, leaves and pension.

The regulations do not require completely equal treatment if the job and/or career path of the non-regular staff are different from those of regular employees. They prohibit “unreasonable” differences compared with regular employees. As for dispatched workers, this requirement will not apply if the employment (dispatch) agency enters into a labour management agreement under which it is agreed that the dispatched workers will be paid at market rate.

New regulations of overtime work for small/mid-sized enterprises

The new regulations setting upper limits to the hours of overtime have been introduced into large enterprises from April 2019. From April 2020, the new regulations will be also introduced into small and medium-sized enterprises.

Akiko Yamakawa, Vanguard