There are many labor-related laws in Japan, but the Labor Standards Law is the fundamental law that sets out the minimum working conditions such as wages, working hours, holidays, overtime pay, annual paid leaves, unpaid leaves and retirement. According to the Japanese Labor Standards Law, no employer shall discriminate against or favor any workers by reason of gender and nationality.
In general, the Japanese Labor Standards Law applies to foreign workers who are also eligible for fundamental labor rights to organize a labor union to negotiate with their employers for better working conditions. When a worker is employed, the employer shall prepare a labor contract to determine the working conditions he or she will work under. To prevent future labor disputes, Article 15 of the Japanese Labor Standards Law stipulates that working conditions must be set out clearly and the following matters shall be handed to the employees in writing.
1. The period of the labor contract
2. The working place and job duties
3. Existence of overtime work
4. Time to start and finish work, breaks, holidays, annual paid leaves and shift time when applicable
5. Amount of wages, the methods of computation and payment of wages, the date of closing accounts, paydays and matters relating pay rise
6. Matters relating to retirement
An employer also needs to draw up rules of employment if the company at any time employs 10 or more workers. Rules of employment shall not infringe any law and Collective Agreement made between an employer and a labor union. When any part of the individual labor contract is worse than rules of employment, that part is invalid and superseded rules of employment. It is very difficult for foreign workers to understand the labor contract or rules of employment in Japanese so foreigner should ask their employer to prepare translation version to avoid any potential disputes.
Labor Insurance and Social Insurance
There are 4 types of statutory labor insurance (Workers’ accident compensation insurance and Employment insurance) and social insurance plans (Health Insurance, National Pension Insurance, and Welfare Pension Insurance) in Japan.
Workers’ accident compensation insurance
A worker may be injured at the workplace while commuting. Workers’ accident compensation insurance provides the injured workers with benefits to cover medical costs and disability and survivor’s benefits. The application for benefits shall be filed with the Labor Standards Inspection Office. Any company which employs a worker are obligated to join the Workers’ accident compensation insurance and all the premiums shall be borne by the employer.
Employment Insurance shall provide benefits to an employee who has become unemployed after the Hello Work or Public Employment Security Office agrees he or she has lost employment and look for a new job. Unemployment benefits are provided to general full-time employees who have been insured for 6 months or longer during the year prior to the date when they became unemployed. An eligible worker should apply for the unemployment benefits at the Public Employment Security Office that controls the areas of residence. Any company which employs a worker must join this insurance and premiums shall be shared by the employer and employee.
Health insurance system shall protect the health and livelihood of people living in Japan and their families with medical treatment benefits for sickness, injury, disability, and other problems. Those who are employed participate in health insurance administered by government or health insurance union and those who are self-employed or not employed join national health insurance through the ward or city office that controls the area of residence. When the insured person is treated for sickness or injury, seventy percent of the expense will be covered by the health insurance in Japan. For workers, monthly premiums are determined based on employees’ wages and shared between the employer and worker. For national health insurance, premiums are determined based on annual income and family size.
National Pension and Welfare Pension Insurance
The Japanese pension system consists of National Pension Insurance and Welfare Pension Insurance. National Pension Insurance is a basic pension program that pays the basic old-age pension benefits to all insured person after the age of 65 and join the program the ward or city office that controls the area of residence. Welfare pension insurance pays in addition to basic old-age pension benefits and workers participates the welfare pension insurance through employers and monthly premiums are determined based on employees’ wages and shared between the employer and worker. Any foreigner insured by National Pension and Welfare Pension for 6 months or longer is eligible to claim a withdrawal lump sum payment if he or she had not received any pension benefits. The application must be submitted to the Social Insurance Office within two years after leaving Japan permanently.
Workers including foreigners are subject to pay national income tax and local tax. The national tax is collected by regional tax offices and local tax is collected by the ward or city office that controls the area of residence. The employer is obligated to withhold tax when paying a salary and taxpayer doesn’t have to do a tax return unless their annual income exceeds 20 million Yen or meet other requirements to do the final tax return. If foreigners are paying foreign taxes and want to avoid double taxation, foreign taxpayers may choose to have foreign tax credited against his or her Japanese income tax and need to do the final tax return.