Social Insurance & HR

Effectively managing working hours is essential for human resources and labor compliance, especially for foreign companies operating in Japan. While Japan’s working hours system shares commonalities with other countries, it also provides unique options that, when properly understood and implemented, can improve both employee satisfaction and operational efficiency. This article offers an overview of Japan’s working hours regulations and special working hours systems.

1. Overview of Japan's Working Hours System

Japan’s working hours system is primarily divided into the standard working hours system and special working hours systems.

The standard working hours system, known as the statutory working hours system, is defined in Article 32 of the Labor Standards Act, which sets working hours at 8 hours per day and 40 hours per week (excluding rest periods). Any hours worked beyond these statutory limits are considered overtime, and companies must pay overtime allowances as required by law. This system is simple and uniform, making it easier for companies with stable production and business cycles to manage personnel.

However, many companies operate beyond the standard working hours system due to variations in business cycles, busy and slack seasons, and the nature of certain work. To accommodate these factors, special working hours systems like the flexible working hours system and the deemed working hours system have been established. These systems offer more flexibility and align with employee needs for autonomy. Below are details of these special working hours systems under Japanese labor law.

2. Japan's Special Working Hours System

Japan’s special working hours systems are broadly categorized into three types:

Flexible working hours systems (variable working hours within a fixed period, flextime system)
Deemed working hours systems (deemed working hours system outside the workplace, discretionary working hours system for specialized and planning work)
The highly skilled professional system

Flexible Working Hours Systems

The flexible working hours system allows for adjustment of working hours during specific periods based on business needs, such as busy and slack seasons. The system aims to ensure that the total working hours over the period comply with statutory requirements. This includes the weekly variable working hours system, monthly variable working hours system, annual variable working hours system, and flextime system. Of these, the monthly and annual variable systems, as well as the flextime system, are most commonly used.

According to the Ministry of Health, Labour and Welfare’s "Comprehensive Survey on Working Conditions 2022," 64% of Japanese companies have adopted flexible working hours, with the annual variable working hours system being the most common (34.3% of adopting companies). The Japanese government also actively promotes flexible working hours.

(1) Annual Variable Working Hours System

Under this system, statutory working hours can be adjusted during busy periods, with a maximum daily working hour limit of 10 hours and a weekly limit of 52 hours. Special provisions are needed for employees to work up to 6 consecutive days, with the potential to extend to 12 days during specific periods. However, for periods exceeding 3 months, the number of working days cannot exceed 280 per year, and the maximum number of consecutive weeks exceeding 48 hours per week is capped at 3 weeks.

(2) Monthly Variable Working Hours System

This system applies to short-term busy or slack seasons within a month. The average weekly working hours must not exceed statutory limits (40 hours per week, or 44 hours in certain cases), and employees must receive at least one day off per week or four days off every four weeks.

(3) Flextime System

The flextime system enables employees to choose their working hours within a 3-month period, as long as the average weekly working hours do not exceed 40 hours (44 hours in special cases). A core time may be established to ensure that employees overlap during certain hours, ensuring operational continuity.

System	Monthly Variable Working Hours	Annual Variable Working Hours	Flextime System
Labor-Management Agreement	Required*	Required	Required
Report to Labor Standards Inspection Office	Required	Required	Required if over 1 month
Notification of Work Rules Changes	Required**	Required	Required
Holidays	1 day off per week or 4 days every 4 weeks	1 day off per week	1 day off per week or 4 days every 4 weeks
Max Daily Working Hours		10 hours
Max Weekly Working Hours		52 hours**
Standard Working Hours	Avg. 40 hours (44 in special cases)	40 hours	40 hours (44 in special cases)
Start/End Times	Company-defined		Employee-defined
Max Consecutive Working Days	6 days (12 in certain periods)

Notes:
*The labor-management agreement or employment regulations may apply.
**For companies with fewer than 10 employees, similar internal regulations must be submitted.
***If the target period exceeds 3 months, working days will be calculated based on the annual limit of 280 working days.

Variable working hours systems require proper registration procedures, including labor-management agreements and amendments to work rules. If overtime occurs, Article 36 Agreements are also needed.

Deemed Working Hours Systems

There are two types of deemed working hours systems: the deemed working hours system outside the workplace and the discretionary working hours system (discretionary working hours system for specialized work, discretionary working hours system for planning work). The deemed working hours system outside the workplace is a system in which working hours are considered to be the prescribed working hours in principle, as calculating actual working hours is difficult when working outside the workplace.

The discretionary working hours system is mainly applied to work that requires employee discretion due to the nature of the tasks. This system is implemented based on a labor-management agreement between the company and the worker or a resolution by the labor committee, which stipulates the deemed working hours and requires the written consent of the employee. The discretionary working hours system is divided into the discretionary working hours system for planning work and the discretionary working hours system for specialized work.

The following explains Japan's deemed working hours systems, focusing on the discretionary working hours system.

(1) Definition and Scope of Application

The discretionary working hours system for planning work is a discretionary working hours system implemented based on a resolution of the company's labor committee, passed with a majority of four-fifths or more, and notification to the Labor Standards Inspection Office. This system is necessary to allow the worker a significant degree of discretion in planning, drafting, researching, and analyzing work related to the company's operations due to the nature of the tasks.

The discretionary working hours system for specialized work is a special working hours system in which it is objectively difficult to give specific instructions regarding working styles and hours due to the specialized nature of the work, making it necessary to leave the decision to the discretion of the worker. If the worker provides labor under a labor-management agreement, it is deemed that the worker has worked within the working hours stipulated in the agreement.

Following the 2024 legal revision, the industries and occupations to which the discretionary working hours system for specialized work applies have expanded to 20 types: (1) research and development of new products and technologies, (2) analysis and design of information processing systems, (3) reporting and publishing industries, coverage, editing, and program production under the Radio Law (Broadcasting Law), (4) creative occupations such as apparel, interiors, industrial products, and advertising, (5) directing and scriptwriting occupations for radio and television programs and film production, (6) copywriting occupations for advertising, (7) information system consulting, (8) interior design, (9) game software production, (10) securities analysis, (11) financial product development, (12) scientific research occupations in higher education institutions, (13) M&A consulting (newly established in 2024), (14) accountants, (15) lawyers, (16) architects (first-class, second-class, and wooden structure architects), (17) real estate appraisers, (18) patent attorneys, (19) tax accountants, and (20) small and medium enterprise consultants.

(2) Procedural Elements

Japanese law also stipulates strict procedural requirements for applying the discretionary working hours system. If a company intends to apply the discretionary working hours system for planning work, it must adhere to the procedural requirements to ensure the legality and validity of this special working hours system.

To apply the discretionary working hours system for planning work, a resolution from the labor committee, passed with a majority of four-fifths or more, and notification to the Labor Standards Inspection Office are required for the target occupations. For the discretionary working hours system for specialized work, companies must conclude a labor-management agreement with a labor union consisting of a majority of workers or a worker representative and notify the Labor Standards Inspection Office. Additionally, companies must revise their work rules and employment contracts for employees subject to this system.

It is important to note the following points when applying both the discretionary working hours system for planning work and the discretionary working hours system for specialized work:

1	Written consent must be obtained from employees. The consent must be in writing, and employees may withdraw their consent in writing. Therefore, the company's work rules do not override the employee's written consent.
2	Authenticity of employee discretion. If the company provides instructions on work methods or time schedules, it is not considered discretionary.
3	The provisions deemed as working hours are limited to daily working hours. The application of the discretionary working hours system does not exclude provisions from the Labor Standards Act regarding rest periods, holidays, work on holidays, and late-night work.
4	Employees who refuse the application of the discretionary working hours system cannot be subject to disadvantageous treatment.
5	The validity period of the labor-management agreement or resolution of the labor committee should ideally be within 3 years.
6	Companies must comply with measures to protect workers' health and welfare under the Industrial Safety and Health Act.
7	The company must establish an internal mechanism to address internal concerns regarding the application of the discretionary working hours system.
8	Companies must comply with the obligation to store related documents according to the law.

Highly Skilled Professional System

The "Highly Skilled Professional System" is a special working hours system for highly paid professionals, as stipulated in Japanese labor law. It applies to workers with a high level of specialization and an annual income of 10.75 million yen. Under this system, the provisions of the Labor Standards Act regarding working hours, rest periods, and overtime are generally not applicable. However, to protect the mental and physical health of workers, employees under the Highly Skilled Professional System must receive 104 days off per year and 4 days off every 4 weeks. Additionally, the system requires the written consent of the employee, and employees should not be regularly engaged in tasks outside their duties.

The application of the Highly Skilled Professional System also requires a resolution from the labor committee and completion of the reporting procedure to the Labor Standards Inspection Office.

3. Summary

The above provides an overview of Japan's special working hours systems. By understanding and applying these systems effectively, the person in charge of a foreign company in Japan can achieve both reduced labor costs and improved employee performance.