Change in Overtime Pay Rate for SMEs
Due to the revision of the Labor Standards Act in 2010, companies were required to raise the extra wage rate to 50% or higher for overtime work exceeding 60 hours per month. Although small and medium sized enterprises (SMEs) have been given a grace-period on the rate for the time being, due to the so-called Work Style Reform Laws, they are also obligated to apply the 50% or higher rate for the above overtime work, starting from 1 April, 2023.
2. The points of the amendment
Previously, SMEs were allowed to apply 25% across the board for the extra wage rate regardless of the length of overtime work.
However, effective 1 April, 2023, SMEs also have to apply the extra wage rate of 50% or higher for overtime work exceeding 60 hours per month. In detail, the extra wage rates of work exceeding statutory working hours are as follows.
① ～ Limited working hours (45 hours) : 25%
② Limited working hours ～ 60 hours : 25% *or higher (*obligations to make efforts)
③ 60 hours ～ : 50%
Please note that work exceeding statutory working hours does not include work on statutory holidays but include work on holidays other than statutory holidays. For example, in cases where Sundays are statutory holidays, work on Saturdays should be included in calculating the work exceeding statutory working hours.
3. Measures to be taken for the amendment
In line with this amendment, SMEs should take the following measurements.
(1) Consideration of alternative leave
The employer can grant alternative leave to the employee who has worked more than 60 hours per month instead of paying the portion of the extra wage increased by this amendment, based on a labor-management agreement. Even when the employee actually takes alternative leave, the employer still needs to pay the extra wage rate of 25% for the statutory overtime working hours.
(2) Revision of rules of employment
The employer needs to stipulate the raised extra wage rate on the rules of employment.
(3) Preparation of the time and attendance system
The employer should have the time and attendance system to properly separate the overtime work up to 60 hours with that exceeding 60 hours per month.
In this News, we mentioned “Change in Overtime Pay Rate for SMEs.”
As you can see, the calculation of overtime work payment is so confusing that the employer needs to take some careful considerations for this amendment.
Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.
(Reference / Japanese)
Change in Overtime Pay Rate for Working Hours Exceeding 60 Hours Per Month
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