The Japanese Trade Union Confederation (Rengo) has essentially accepted the introduction of a merit-based pay system for "highly professional jobs" under which no overtime allowances would be paid. Rengo's stamp of approval opens the way for revisions to the Labor Standards Act legalizing the erasure of overtime pay for white-collar professionals -- changes so controversial that the legislation, dubbed the "no overtime pay bill" by critics, has been stalled in the Diet for more than two years.
The executive branch of the government is poised to modify the bill to obligate employers to ensure at least 104 days off annually for workers subject to a merit-based pay system and take other measures at Rengo's urging. However, serious questions remain as to whether workers' livelihoods and health can be protected. There are also fears that the no-overtime-pay, merit-based compensation system may be expanded beyond high-skill professionals.
"Highly professional jobs" are defined as those with annual salaries of at least 10.75 million yen in categories including consulting and research and development. Under the bill, there are no restrictions on working hours for people in these jobs, and they are not entitled to overtime pay. Their work hours will certainly lengthen if their employers set high goals for them.
The government and Rengo have agreed to mandate companies to secure at least 104 days off a year and at least four days off per four weeks for every employee in such jobs. However, if they take two days off a week, 104 days is not enough to cover paid holidays. It is hard to believe any consideration has been given to workers' health.
The annual income standards for workers subject to the no-overtime wage system are supposed to be provided for by regulations that the government will enforce under the revised legislation. Thus the scope of job categories subject to the new pay system may very well expand.
When the introduction of a so-called "white-collar exemption" has been debated in the past, some in the business community have insisted on setting the salary threshold for eliminating overtime pay at 7 million per annum, with others pushing for a 4 million yen standard. It is obvious that employers aimed to slash wages for middle-aged and senior workers who cannot increase their productivity despite spending hours of extra time at work. It is easy to imagine the business community demanding that yet more job types be added to the zero-overtime-pay roster.
The bill would require a labor-management panel to approve the introduction of such a system and employers to gain consent from individual employees. However, less than 20 percent of workers now belong to trade unions. Furthermore, it is questionable whether employees who have worked for the same companies for many years can refuse to accept this system even though they are skilled professionals.
Rengo had stubbornly opposed the introduction of a merit-based salary system exactly because these concerns cannot be dispelled. Thus, we cannot help but wonder why Rengo has accepted a no-overtime-pay system now.
One Rengo official explained, "The ruling coalition has an overwhelming majority in the legislature, and it would be intolerable to see a bill passed into law that lacked sufficient protections for worker health." Still, Rengo's decision appears abrupt.
Restrictions on overtime work are at the heart of the Labor Standards Act revision bill, set to be submitted to the Diet during the extraordinary session this autumn. It is thus inconsistent to include in that very same bill measures to kill overtime pay for entire categories of Japan's workers.