SMEs are required to pay a 50% overtime premium for monthly overtime work exceeding 60 hours
The Japanese Ministry of Health, Labor and Welfare has made a new amendment towards premium wage rate for overtime work for small and medium enterprises (SMEs). The amendment implemented in April 2023 raised the overtime premium rate to 50% for SMEs, which previously only applied to large enterprises with grace period measures. With this amendment, the reduction of working hours is expected to lead to improved productivity and performance, but the economic burden on SMEs due to the payment of overtime premiums is also acknowledged as a challenge that needs to be addressed.
■Alternative Leave System:
It is also possible to establish a system to grant paid leaves, known as “alternate leaves” in lieu of paying the increased premium wages. The introduction of this system requires a labor-management agreement, and there are provisions specifying that the leave must be granted within two months from the day following the end of the month with overtime work exceeding 60 hours.
■Relationship with Late-Night and Holiday Work:
If overtime work exceeding 60 hours is performed during the late-night hours, employers are obligated to pay an overtime premium calculated at a rate of 75% or higher, including the late-night premium. Additionally, statutory holiday work is not included in the calculation of the 60-hour threshold.
■ Benefits of this Legal Amendment:
The amendment is expected to result in a reduction of working hours, making it easier to manage employees’ health and creating a more favorable working environment. This, in turn, can lead to increased employee motivation and a decrease in attrition. Payment of overtime premiums increases compensation for workers and can improve work-life balance.
■Future Challenges:
There are various challenges, including the financial burden on SMEs and securing human resources. Differences in awareness among employees and the establishment of systems to accommodate employees are among these challenges. Addressing these issues requires not only individual efforts made by the SMEs, but also support from the national government, local governments, industry organizations, and the workers themselves.
■In Conclusion:
SMEs will need to review their employment policies, personnel systems, and labor management systems to adapt to the payment of overtime premium wages and ensure compliance.
It is also essential to be aware of the appropriate procedures and precautions to avoid any risks associated with this legal amendment. Information gathering and reassessment of countermeasures are also crucial to create an optimal working environment.
Please refer to the brochure from the Ministry of Health, Labor and Welfare (in Japanese only) here: LINK
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