1. Minimum statutory terms

1.1 Key statutes

The key statutes governing employment relationships in Japan are the Employment Standards Act and the Employment Contract Act.

Other significant statutes relating to employment law include:

• the Act Concerning Succession of Employment Contracts;
• the Act on Resolution of Individual Employment Disputes;
• the Child Care Leave & Family Care Leave Act;
• the Civil Act;
• the Disabled People Employment Promotion Act;
• the Employment Safety and Sanitation Act;
• the Employment Tribunal Dispute Resolution Act;
• the Equal Employment Opportunity Act;
• the Golden Age Employment Security Act;
• the Minimum Wage Act;
• the Occupation Security Act;
• the Part-Time Workers Act; and
• the Worker Dispatch Act.

Significant statutes relating to labour law include:

• the Labour Relation Accommodation Act; and
• the Labour Union Act.

Significant statutes relating to Labour Insurance, Social Insurance and Pension include:

• the Workers Accident Compensation Insurance Act;
• the Unemployment Insurance Act;
• the Health Insurance Act;
• the Welfare Pension Insurance Act;
• the Defined Contribution Pension Act; and
• the Defined Benefit Pension Act.

1.2 Probationary period

It is fairly common for unlimited period contracts to contain an initial probationary period of 3-6 months. While there is no explicit restriction on the length of a probationary period, the general principle is that a probationary period will only be effective for a period that is reasonable.

It is important to note that the provisions of the Employment Standards Act generally apply during any probationary period, and that restrictions on termination of employment under the Employment Contract Act also apply during the probationary period.

1.3 Minimum wage

Minimum wage requirements in Japan are governed by the Minimum Wages Act. Currently, 2 kinds of minimum wages have been determined under the Act – regional minimum wages, which apply to all employers (regardless of industry) within a particular geographical area; and industrial minimum wages, which apply to employers in a specific industry within a particular geographical area. Minimum wages are usually revised on an annual basis.

1.4 Remuneration structure

Remuneration in Japan for an unlimited period employment agreement generally consists of 3 components:

• regular monthly salary (plus any fixed allowances);
• bi-annual bonuses; and
• retirement allowance.

Although the bi-annual bonus and retirement allowance are not required by law, it is common that they (or something similar) are included in remuneration structures. If they are not to be included, it is common to expressly state this in the contract of employment.

1.5 Working hours

Hours of work
Under the Employment Standards Act, an employer is prohibited from requiring employees to work more than 8 hours per day or more than 40 hours per week. However, this restriction does not apply in relation to supervisors and managers who are affiliated with management with respect to decisions regarding working conditions and management of work (‘managerial/supervisory employees’).  The interpretation of managerial/supervisory employees is very narrow.

An employer may make use of flexible working hours or discretionary working hours by meeting certain requirements prescribed by the Employment Standards Act.

Rest periods
An employer must provide non-managerial/supervisory employees with rest periods of at least 45 minutes where working hours exceed 6 hours, or at least 1 hour where working hours exceed 8 hours.

An employer is required to provide non-supervisory employees with at least one designated holiday per week. This is known as the ‘statutory weekly holiday’.  (Many employers designate Sunday as a statutory weekly holiday, but any day within one week suffices, from a legal viewpoint.)

Overtime
If an employer requires a non-managerial/supervisory employee to work more than 8 hours per day, more than 40 hours per week, or on the statutory holiday, the employer must first enter into a written agreement with a labour union that has more than half of employees as a labour union member (or if there is no such labour union, then an employee representative who represents the majority of employees). If such an agreement is entered into, working hours may be extended by up to 15 hours per week, 27 hours a fortnight, 45 hours a month, 81 hours in 2 months, 120 hours in 3 months, or 360 hours in a year.

The applicable overtime allowance is additional 25% of the average hourly rate. Special allowances also apply to night-time work (additional 25%) and work performed on the statutory weekly holiday (additional 35%).  These rates will be subject to change as of 1 April 2010.

1.6 Public holidays

It is not mandatory to provide employees with paid days off for public holidays in Japan. Most employers do however provide employees with a day off pn public holidays.

1.7 Paid annual leave

After the first 6 months of employment, a full-time employee is entitled to be granted 10 days’ paid annual leave. For each year thereafter, the number of days granted per annum gradually increases up to 20, in accordance with the following table:

 Untaken annual leave may be carried over for up to 1 year. Pro-rata annual leave entitlements apply for part-time employees.

1.8 Other types of leave

Maternity leave
Female employees are entitled to unpaid maternity leave of 6 weeks prior to the birth and 8 weeks after the birth (total 14 weeks).

Childcare leave
An employee may apply for full-time unpaid leave to look after their child until the child turns 1, and in some circumstances this may be extended until the child reaches the age of 18 months.

Family care leave
An employee with a spouse, parent or child who is dependent on their care may apply for unpaid family care leave for up to 93 days.

Menstruation leave
A female employee may take unpaid menstruation leave if she has significant difficulty performing her duties at work.

1.9 Limited period employment

Employers are allowed to enter into an employment contract with a limited period. This period may be no more than 3 years.

Employers may unilaterally terminate a limited period employment contract only where there is an ‘unavoidable reason’.  An ‘unavoidable reason’ is interpreted as narrower than a ‘justifiable reason’ applicable to those employees whose employment period is not limited (see 2.1 below).

1.10 Insurance

Labour Insurance
Employers are required to have employees insured concerning Labour Insurance.  Labour Insurance comprises Workers Accident Compensation Insurance and Unemployment Insurance.

Workers Accident Compensation Insurance operates when employees get sick or injured while they are working or when they commute. Unemployment Insurance operates when employees leave the employer and are unable to find a new job.

Social Insurance
Employers are also required to have employees insured concerning Social Insurance.  Social Insurance comprises Health Insurance and Welfare Pension Insurance.

Health Insurance operates when employees get sick or injured unrelated to work.  Welfare Pension Insurance operates when employees reach an age where they are unable to receive salary from employers due to their retirement.