After a number of prominent fatalities that have been linked to excessive working hours at some of Japan’s largest corporations in 2015 / 20161 and increasing public pressure, the government initiated a so-called “Work-Style Reform”. The reform aims at reducing excessive overtime hours of employees in order to prevent stress-induced illnesses and nourish a more balanced work-life culture. At the same time, the government strives to bring more flexibility to the labor market and increase productivity as Japan is facing an unprecedented socio-economic challenge with its aging population and shrinking labor force.

The “Act on Arrangement of Relevant Acts to promote the Work Style Reform 働き方改革を推進するための関係法律の整備に関する法律 (“Act”) was promulgated on 6 July 2018 and is going to be implemented consecutively starting from 1 April 2019. Key aspects of the Act are as follows:
In order to balance working hours and promote a more diverse and flexible working style:

• Introduction of a legal cap on overtime (generally starting from 1 April 2019, provided for SMEs only from 1 April 2020) – cf. Section 1 below.
• Extension of the application of the premium rate for overtime work that exceeds 60 hours per month (50%) to SMEs (starting from 1 April 2023).
• Establishment of a “Highly Professional Workers System” (starting from 1 April 2019) – cf. Section 2 below.
• Management of working hours of employees as designated by ministerial ordinance (starting from 1 April 2019).

In order to secure fair labor conditions regardless of employment status:

• Solidification of the “Equal Pay for Equal Work”-principle (generally starting from 1 April 2020, provided for SMEs only from 1 April 2021) – cf. Section 3 below.
• Enhancement of the employer’s obligations to explain labor conditions (starting from 1 April 2019).

1. Introduction of a Legal Cap on Overtime
1.1. General Cap on Overtime
The Act stipulates for the first time a clear and binding ceiling on overtime working hours for employees. In principle, overtime shall not exceed 45 hours per month and 360 hours per year. Under special circumstances, the overtime cap can be extended to 100 hours per month (for a single month), 80 hours per month (for a period of two to six months), or 720 hours per year. Furthermore, the statutory monthly overtime limit of 45 hours shall not be exceeded more than six times a year. Noteworthy, the monthly statutory overtime limit will include holiday work while the yearly statutory overtime limit will exclude holiday work, which has been criticized for providing loopholes for employers.