Labor Law/Labor Column Part 3: Wage
2018/02/07
1. Importance of wage payment Not only in Japan, payment of wages, which is a source of daily living are the greatest concern for general employees, and understanding of wage legislation is important because there are many disputes related to wages. Therefore, this article is focuses on basic legal regulations on wages.
2. Definition of wages
Employment Act (the rest is omitted) Upper wage is defined as basic salary paid in cash to workers and all other payments as compensation for labor based on employment contract, and it is stipulated that the following is not included (Article 2 (1)).
a) Housing allowance, meal allowance, fuel cost, utilities fee, medical allowance, other recognized welfare benefits
b) Pension fund, Retirement Pension Fund, Superannuation Allowance, Termination of employment / Termination of contract / Layoff / Allowance on retirement, savings, other funds and welfare for workers by the company on their own calculation
c) Travel expenses / Special allowance
d) Costs to be paid to workers due to the nature of work
e) Benefit paid for dismissal or retirement
f) All or part of the annual bonus
Based on the above provisions, overtime payment is falls under wages, but payments that are not consideration for labor such as bonuses and retirement payments and payments not based on employment contracts do not fall under wages.
3. Payment method / Period / Payment amount
Wages must be paid at least once a month because it is prescribed that the wage period[1]should not exceed 1 month (Article 18 (1)). Besides cash, you can also make payment by bank transfer or cheque (Article 25A), but payment in kind is not allowed. The overtime allowance can’t be less than 1.5 times the hourly wage if it is outside hours of the working day, etc. There is also regulation on the employment law for the payment amount (see the table in Part 2)
[1] Wage period refers to the period underlying wages paid to workers (Article 2 (1))
4. Payment Timing
In general, wages must be paid within 7 days from the last day of the wage period (before the 7th day if the holiday is earlier) (Article 19). When the employment contract is over, the payment date will be different as follows depending on the reason for termination.
a) If an employment contract with a fixed period due to the expiration of the period, if the employment contract is terminated due to advance notice and if the employment contract is terminates without notice, the company shall pay wages in full amount on the end date of the employment contract (Article 20).
b) If the worker terminates the employment contract without prior notice, the wage must be paid within 3 days of the resignation (Article 21 (2)).
According to the minimum wage order, on July 1, 2016 the minimum wage rate was raised to the monthly rate RM1,000 / hourly wage RM4.81 for employees in the Malay Peninsula; while employees in Sabah, Sarawak and Labuan Federal Territory is monthly rate RM920 / hourly rate RM4.42 (Article 3). This order is widely applied to workers except domestic workers such as maids (Article 2).
6. Advance wage
A company can lend advance wage, but it can’t subject to interest (Article 22, 24 (1) c). In principle, the total amount of advance wage shall not exceed the aggregate the amount of wages which employee earned in the preceding month, unless such advance is made to the employee for the purpose below:
a) To purchase, construction and renovation of houses
b) To purchase land
c) To purchase an automobiles, motorcycles, bicycles
d) To purchase shares of the employer’s business offered for sale by the employer
e) To purchase of computers
f) Medical expenses of employees or close relatives
g) Temporary stipulation of the Social Security Act Payment for inability to work
h) Educational expenses etc. of employees or close relatives
Deduction from wages is allowed for the following items on the Employment Law (Article 24 (2)).
a) Overpaid due to company error made over the past 3 months
b) Compensation based on employment contract violation
c) Repayment of prepayment wage
d) Other cases permitted by law
In general, the deductible amount is supposed to be 50% of the wage per month (Article 24 (8)).
However, this notice does not apply to no advance notice compensation due termination of employment contracts or final payment in the case of termination of employment contracts (Article 24 (9 a, b)). Also, when paying a mortgage, you can deduct up to 75% if you obtain the prior approval of the Director of the Labor in writing (Article 24 (9 c)).
8. 13 months allowanceIn Singapore, there is a custom of paying a salary of 13 months by the name of AWS (the Annual Wage Supplement) etc., and many companies are following this in reality. In Malaysia, there are companies that paying 13 months as well, and some companies pay bonuses according to personal achievement or 1 month contractual bonus. Regarding bonuses, if there did not stated in the employment contracts or employment rules, under the employment law, company are not obligated to pay, but in order to avoid conflict at a later date, it’s better to talk about whether bonuses statement clearly indicate on the employment contract or any bonuses payment at the time when signing the employment contract.
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