This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.
Overtime pay is set by "hourly wage x premium rate x hours", but the amount turns on what goes into the hourly wage and on whether the premium rate is 25%, 35% or 50%. On a monthly salary of 300,000 yen (1,920 scheduled working hours a year) the hourly equivalent is 1,875 yen, so one hour of statutory overtime is 2,344 yen, late-night work 2,813 yen and work on a statutory day off 2,531 yen. And 10,000 yen of overtime pay does not land in your account as 10,000 yen: income tax, resident tax and employment insurance premiums come off first, leaving about 7,900 yen (for someone in the 10% bracket). Overtime worked in April to June even pushes up your social insurance premiums for the following year. This article sorts out the premium rates under Article 37 of the Labor Standards Act, the seven allowances that may be excluded, the conditions for a fixed overtime allowance, and the fact that late-night premiums are due even to managers, using materials from the Ministry of Health, Labour and Welfare (MHLW) and the Labor Bureau.
The short answer: one hour of overtime on a 300,000 yen monthly salary is 2,344 yen. A quick table of premium rates
| How you worked | Premium rate (statutory minimum) | Multiple | Monthly salary 300,000 yen, hourly equivalent 1,875 yen |
|---|---|---|---|
| Beyond scheduled hours but within 8 hours a day (overtime within statutory hours) | None | 1.00 | 1,875 yen |
| Statutory overtime (beyond 8 hours a day or 40 hours a week) | 25% or more | 1.25 | 2,344 yen |
| The part of statutory overtime beyond 60 hours a month | 50% or more | 1.50 | 2,813 yen |
| Late-night (10 p.m. to 5 a.m.) overtime | 25% + 25% = 50% or more | 1.50 | 2,813 yen |
| Beyond 60 hours and late-night | 50% + 25% = 75% or more | 1.75 | 3,281 yen |
| Work on a statutory day off (the one day off a week) | 35% or more | 1.35 | 2,531 yen |
| Late-night work on a statutory day off | 35% + 25% = 60% or more | 1.60 | 3,000 yen |
The MHLW states that premium pay of at least 25% must be paid for overtime, at least 50% for the part beyond 60 hours a month, at least 25% for late-night work and at least 35% for a statutory day off[MHLW]. The 50% rate beyond 60 hours a month has applied to small and medium-sized firms as well since April 2023[MHLW leaflet]. The same premium rates apply to part-timers, casual staff, fixed-term employees and dispatched workers.
A statutory day off has no concept of "statutory working hours", so even 10 hours of work on that day stops at 35%, with no extra 25% on the hours beyond 8. Only when late-night work overlaps does it reach 60%. Conversely, work on a company-designated day off (one of the two days in a five-day week, for instance) is not "holiday work" but ordinary overtime: 25% if you are beyond 40 hours in the week, and it also counts towards the 60 hours a month.
How to work out the hourly wage: monthly salary divided by the monthly average of scheduled working hours. Every allowance but seven goes in
Monthly average of scheduled working hours = 1,920 hours / 12 = 160 hours
Hourly wage = 300,000 yen / 160 hours = 1,875 yen (a 10,000 yen commuting allowance is excluded)
One hour of statutory overtime = 1,875 yen x 1.25 = 2,344 yen (50 sen or more is rounded up)
20 hours of overtime in a month is 2,344 yen x 20 = 46,880 yen. With 4 late-night hours included, 2,344 yen x 16 + 2,813 yen x 4 = 48,756 yen
For a monthly salary the rule is to "divide the wage set for the month by the number of scheduled working hours in that month", and a company whose scheduled hours differ from month to month divides by the "monthly average of scheduled working hours over one year"[Osaka Labor Bureau]. The annual scheduled hours can be read off the yearly calendar in the work rules. If the scheduled day is 7 hours 45 minutes, the year comes to roughly 1,900 hours.
Only the following seven allowances may be excluded from the base for the calculation, and the MHLW states explicitly that the list is "an exhaustive enumeration, not a set of examples"[MHLW, Check Your Working Conditions].
The seven that may be excluded (judged by substance, not by name)
- Family allowance (paid according to the number of dependents)
- Commuting allowance
- Separation allowance for living apart from family
- Children's education allowance
- Housing allowance (paid according to rent or mortgage payments)
- Wages paid on an extraordinary basis (a marriage allowance, for example)
- Wages paid at intervals longer than one month (bonuses, for example)
What must go into the base
- Base pay, position allowance, qualification allowance, job allowance
- A flat "housing allowance" or "family allowance" paid to everyone (a fixed amount unrelated to housing costs or dependents cannot be excluded)
- Attendance allowance, sales allowance, regional allowance
- Splitting base pay into "base pay + job allowance" and then leaving out the job allowance is not allowed (the Osaka Labor Bureau's answer is "you cannot")
10,000 yen of overtime pay leaves about 7,900 yen. April to June also raises next year's premiums
Overtime pay attracts income tax, resident tax and employment insurance premiums. Health insurance and employees' pension premiums are set by the grade of your "standard monthly remuneration", so they do not rise in the month you work the overtime, but overtime pay paid in April to June is reflected in the grade that applies from September.
| Income tax bracket (taxable income) | What comes off | Take-home from 10,000 yen of overtime pay |
|---|---|---|
| 5% (taxable income up to 1.95 million yen; annual income up to roughly 3.5 million yen) | Income tax 5.1% + resident tax 10% + employment insurance 0.5% | about 8,440 yen |
| 10% (taxable income up to 3.3 million yen; annual income up to roughly 5.5 million yen) | Income tax 10.2% + resident tax 10% + employment insurance 0.5% | about 7,930 yen |
| 20% (taxable income up to 6.95 million yen; annual income up to roughly 10 million yen) | Income tax 20.4% + resident tax 10% + employment insurance 0.5% | about 6,910 yen |
Note: the income tax figures include the special reconstruction surtax. Monthly withholding follows the withholding tax tables, so the amount taken in any one month will differ from this; the year-end adjustment settles it at your annual rate.
With 50,000 yen of overtime pay a month in April to June, someone on a monthly salary of 300,000 yen sees their standard monthly remuneration rise from 300,000 yen to 360,000 yen, which means 8,514 yen a month, or about 100,000 yen a year, in extra premiums until August of the following year. That is 100,000 yen of premiums in the following year against 150,000 yen of overtime pay, so during these three months the real return on overtime shrinks considerably in take-home terms (overtime in April to June raises your social insurance premiums for a year). The premiums you pay do, however, feed into your future pension and your injury and sickness allowance, and they are deductible as social insurance premiums for tax.
Fixed overtime allowance (deemed overtime): anything beyond it must still be paid
A salary described as "including a fixed overtime allowance of 50,000 yen for 30 hours a month" is lawful, but it has to meet the following conditions[MHLW][MHLW, disclosure in job advertisements].
- Base pay and the fixed overtime allowance must be distinguishable. The job posting, the employment contract and the work rules state "the amount of base pay excluding the fixed overtime allowance" and "how many hours it covers and for how much".
- Anything beyond the fixed hours must be paid on top. Work 40 hours under a contract covering 30 hours and the premium pay for the other 10 hours is paid separately. This is the principle confirmed by the Supreme Court (the Koshinkai medical corporation case, 7 July 2017).
- The fixed overtime allowance must not fall below the statutory calculation. On base pay of 250,000 yen over 160 hours, 30 hours comes to 250,000 / 160 x 1.25 x 30 = 58,594 yen as the minimum, so 50,000 yen already falls short.
"There is no overtime pay because I am on an annual salary" is also wrong: the Osaka Labor Bureau explains that including premium pay in an annual salary escapes illegality only where the contract makes that clear, the portion is distinguishable, and it is at or above the statutory amount. Where a job advertisement quotes a long fixed overtime period, also check whether the hourly figure derived from the base pay falls below the minimum wage.
No overtime pay for managers? Late-night premiums and paid leave apply to "supervisory employees" too
The provisions on working hours, breaks and days off do not apply to a "supervisory or managerial employee" under Article 41 of the Labor Standards Act, and no premium pay for overtime or holiday work is due. But the MHLW states explicitly that the provisions on annual paid leave, childcare and family care leave, and late-night premium pay are not excluded[MHLW]. Even if your overtime pay disappears when you become a section chief, work after 10 p.m. still requires the 25% late-night premium.
In any case a "supervisory employee" is determined by the reality of the role, not the job title: the three elements must all be present, namely (1) taking part in management decisions with the authority to direct and supervise labour management, (2) discretion over your own hours of attendance, and (3) treatment in pay befitting the position. Court decisions have denied the status even to a store manager (the McDonald's Japan case, 2008), a sales section chief (the Ikueisha case, 2002) and a post-holder on an annual salary of 12.5 million yen (2011).
(1) the annual scheduled working hours in the work rules, (2) the breakdown of allowances in your employment contract (which of them are flat amounts), and (3) a copy of your time card or attendance records. With these three you can check your own overtime pay against the formula above. The statute of limitations on wage claims is three years, so if there is an unpaid amount you can claim it retroactively through a consultation with the Labour Standards Inspection Office or through labour tribunal proceedings.
How the tax on the extra pay from overtime is settled is set out in how to read your pay slip, and the treatment of bonuses in take-home pay from a bonus.
Frequently asked questions
Can fractions of overtime hours be rounded down?
Daily working hours are counted to the minute, and rounding down anything under 15 minutes is not permitted. Only where a fraction of less than one hour arises in the monthly total may it be rounded down below 30 minutes and up at 30 minutes or more.
Does overtime pay differ between a substitute day off and a compensatory day off?
With a substitute day off, arranged in advance by swapping the day off, there is no holiday work and no 35% premium is due. A compensatory day off, given after the fact, leaves it as holiday work, so the 35% is required. Even with a swap, if working hours for that week go over 40 hours, 25% applies to the excess.
Summary
- Overtime pay equals the hourly wage multiplied by the premium rate multiplied by hours worked. For a monthly salary of ¥300,000 (hourly equivalent ¥1,875), one hour of statutory overtime is worth ¥2,344.
- Premium rates are 25% for overtime, 50% for overtime beyond 60 hours a month, 25% for late-night work, and 35% for statutory holiday work. The same rates apply to part-time and dispatched workers.
- Only seven types of allowances—such as family, commuting, and housing allowances—can be excluded from the base calculation. Allowances paid uniformly to all employees cannot be excluded.
- For someone in the 10% tax bracket, ¥10,000 in overtime pay nets about ¥7,930 after tax. Overtime worked from April to June also raises social insurance premiums for the following year.
- With fixed overtime pay, any amount exceeding the fixed hours must always be paid additionally. Even managers and supervisors are still entitled to late-night premium pay and paid leave.
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This article is based on the materials below. Your company's work rules or a collective agreement may set rates more favourable than these.
Note: this article is general information. The take-home estimates are guides for each tax bracket; the amount actually withheld is determined by the withholding tax tables and the year-end adjustment.