The Mainichi Shimbun answers some common questions readers may have about companies in Japan putting their employees on furlough as a result of the spread of the novel coronavirus, and what entitlements these workers have.
Question: So what is furloughing?
Answer: It's when a firm instructs their employees to take time off from work, usually in the event of an economic downturn or other difficult circumstances. Under the system, a person's employment at the company is maintained, so it differs greatly from outright termination. It's also different from teleworking, because people being furloughed are expected to stay home without working.
Q: Do people still get their wages paid when they're furloughed?
A: If a worker is furloughed by a company, then in accordance with the Labor Standards Act they must receive 60% or more of their average pay. However, in the event of a natural disaster or other uncontrollable circumstances, employers are not required to pay people.
The Ministry of Health, Labor and Welfare has given an example of "uncontrollable circumstances," which are "cases where a business cannot avoid temporarily stopping after exhausting other avenues including telework" amid the state of emergency declaration and requests for businesses to suspend operations. The labor ministry at the same time says this does not nullify businesses' duty to pay their staff. But the government's interpretation is vague, and there are concerns that many firms might not provide financial relief to furloughed employees.
Q: Isn't it difficult for firms with falling sales to keep paying staff?
A: Companies can make use of the employment adjustment subsidy system. It compensates companies for their expenses in covering employee leave. The novel coronavirus situation is being treated as an exceptional case, and if companies don't let go of employees, then small-to-medium-sized businesses and large businesses can receive subsidies for 90% and 75% of their expenses respectively. Small- and medium-sized businesses that fulfill some specific conditions can get 100% covered.
But uptake of the scheme is low, and the government intends to revise it by increasing the maximum payable amount per day to 15,000 yen, among other changes. As the economy had improved in recent years, in fiscal 2018 the employment adjustment subsidy system paid out just 2 billion yen (about $18.7 million). But in fiscal 2009, after the collapse of Lehmann Brothers had triggered a global financial crisis, some 650 billion yen (around $6 billion) was paid. It's possible that the coronavirus crisis will see even higher numbers than that.
(Japanese original by Daichi Matsuoka, Business News Department)