Overtime on a Fixed Monthly Salary: What Is Actually Owed
A small metal-parts factory in Aichi employs 14 workers. Kenji works 9:00–18:00 with a 60-minute break, Monday through Friday, at a fixed monthly salary of ¥280,000, which the company labels 'includes 30 hours of overtime.' In March he actually worked 62 hours of overtime (all statutory, none on holidays) because of a rush order. His employment contract separately states a basic wage of ¥200,000 plus a 'fixed overtime allowance' of ¥80,000. The company paid only the ¥280,000. Kenji's average monthly scheduled hours are 173. The employer argues the fixed allowance covers everything up to 62 hours because 'he agreed to it.'
1. Calculate the statutory overtime premium owed for March and identify what the employer must still pay, showing each step.
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Step 1 – Find the base hourly rate. Fixed overtime allowances that are paid regardless of hours worked are generally excluded from the base for premium calculation, so use the basic wage: ¥200,000 ÷ 173 hours ≈ ¥1,156/hour.
Step 2 – Apply the statutory premium. Under the Labor Standards Act, overtime beyond 8 hours/day or 40 hours/week requires at least 25% premium (higher if monthly overtime exceeds 60 hours, where 50% applies to the excess).
- First 60 hours: ¥1,156 × 1.25 × 60 ≈ ¥86,700
- Hours 61–62 (above the 60-hour threshold): ¥1,156 × 1.50 × 2 ≈ ¥3,468
- Total statutory overtime pay ≈ ¥90,168
Step 3 – Offset what was paid. The ¥80,000 fixed allowance is valid only to the extent it actually covers the premium for hours worked. It covers roughly 55 hours, not 62. The employer therefore still owes approximately ¥10,168 for March, and the 'agreement' cannot waive the statutory minimum. Going forward, a fixed-allowance clause must specify the number of hours covered and true-up any excess.
2. The employer wants to switch Kenji to a 'discretionary work' (裁量労働制) arrangement to avoid paying overtime. What conditions must be met, and can it be done for this role?
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Discretionary work is not a tool for avoiding overtime pay; it changes how deemed hours are calculated, not the obligation to pay premiums on deemed hours.
Requirements for the professional-type (専門業務型) scheme:
- The work must fall within one of the enumerated professional categories (e.g., research, design, media production, consulting) - not routine factory production work.
- A written labor-management agreement (労使協定) must be filed with the Labor Standards Inspection Office.
- The employee must be informed in writing of the deemed-hours figure.
- Even then, deemed hours exceeding 8/day or 40/week attract overtime premium.
Conclusion: Kenji's machine-operation work does not qualify for either the professional or planning-type scheme. The correct path is proper overtime management, not reclassification. Misapplying the scheme exposes the employer to unpaid-wage claims and criminal penalties under the LSA.