Labor Law Japan: Revisiting the Compulsory 5-days Paid Leave Rule
Reasons for Japanese employees not taking paid leave
The same study by Expedia reveals why Japanese employees are hesitant to take holidays. The most often stated reason was “I am saving them for an emergency”, followed by “We’re understaffed” and “I don’t want others to think I am lazy”.
Many Japanese employees hesitate to take leave due to concerns like “If I take time off, nothing gets done,” “I have nobody I can ask to take over,” or “Everybody else looks so busy, so I don’t dare to take time off.” This pressure often results in unused annual leave that eventually expires.
Best practices for encouraging employees to take annual leave
We’ve seen companies following different approaches to making sure that their employees take the holidays they’re entitled to:
- Creating specific systems
- Linked with performance review cycle
- Professional communications from Managers and/or HR
1. Here are some examples of systems companies have successfully introduced:
- An IT company replaced fixed summer holidays with a system allowing employees to take five consecutive days off at their convenience, increasing actual time off to nine days when combined with national holidays.
- A chemical company offered an extra day off for every two consecutive leave days taken, encouraging longer breaks and reducing unclaimed leave.
- A retail company introduced a “Family Support” system, allowing employees to take up to six days in one-hour increments, easing concerns over family-related emergencies.
2. Examples of companies who paired their holiday policies with performance assessments and goal setting
- An IT company made employees’ holiday usage a KPI for managers, prompting proactive discussions on leave planning.
- Another firm incorporated holiday discussions into performance assessments, ensuring employees could plan, prepare for handovers, and take leave with confidence.
3. Examples of companies that implemented a successful communication system
- A major IT company encouraged managers to ask employees about taking leave after project completions, ensuring rest after busy periods.
- Another IT company empowered HR to track leave quarterly, notifying department heads if employees weren’t taking enough holidays and setting mandatory leave periods.
- A manufacturer conducted annual management training on work-life balance, teaching leaders how to encourage employees to take time off.
Summary
The recent labor law reforms have brought paid leave issues to the forefront, yet many employers still struggle with implementation. Legal changes alone are not enough to encourage employees to rest.
Some companies place the burden on individuals, but research suggests the real issue lies within workplace culture. Employers must foster an environment where employees feel comfortable requesting time off. Negative remarks like “We can’t function without you” should be avoided, as they discourage leave-taking. Companies also have a responsibility to help employees prepare for their absence. Strong leadership and clear messaging from the top are essential for driving cultural change.
While creating a leave-friendly workplace takes effort, the cost of neglecting employee well-being—stress, mistakes, and reduced productivity—is far greater. Compliance with labor laws is just the first step; shifting mindsets requires strategic communication from HR and leadership, who play a key role in setting the tone for lasting change.
Do you have more questions or concerns regarding the compulsory 5-day Leave Rule? Here are some answers to questions we’ve been hearing frequently.
Frequently Questions Asked
Q: Is there an expiration date for paid annual leave?
A: Yes, there is. Paid annual leave needs to be taken within 2 years of the date they were granted otherwise it will expire (Article 115, Labor Standards Act). This means that employees are allowed to carry their annual leave over to the next year if they haven’t used it in the year they received it.
Q: Taking days off will put me at a disadvantage at work.
A: Employers are obliged to ensure that no employee will be disadvantaged due to taking paid annual leave (Article 136, Labor Standards Act). This includes becoming the target of negative interventions such as reducing compensation or preventing employees to take leave.
Q: I was told that my company is too small to provide annual leave.
A: Regardless of company size, industry or other circumstances, employers are obliged to provide all employees who are eligible under labor law with paid annual leave.
Q: I was told that my company will pay me out for my holidays and that’s why I can’t take them.
A: Preventing employees from taking paid leave by paying them out for their paid leave is illegal.
Here’s why: The goal of providing annual leave is to allow workers who have been with the company for a certain period of time to rest and take care of their physical and mental wellbeing. If a company keeps their employees from taking their paid leave by buying those days from them, they put their workers wellbeing and health at risk. This defeats the original purpose of annual leave and is therefore illegal.
However, there are three exceptions where companies are allowed to pay out annual leave. Companies may pay out holidays if:
- it applies to days that are beyond the legally required number of paid annual leave
- if these are days that have expired (over 2 years)
- if the employee has resigned and there are days of unused annual leave left
Japan Labor Law
As part of their efforts to improve workplace conditions, the Japanese government implemented the Revised Labor Standards Act in April 2019, which includes the compulsory 5-day Paid Holiday Rule. This legislation mandates that companies across all industries and sizes ensure that employees receiving 10 or more days of paid annual leave take at least five of those days each year.
Although the Revised Labor Standards Act is approaching its second anniversary, many businesses still struggle with full compliance.
In this article, we will revisit the specifics of the 5-day leave rule, examine the current state of holiday usage in Japan, address common questions, and highlight best practices that organizations can adopt with ease.
Compulsory 5-Day Annual Paid Leave Rule – An Overview
Before delving into the specifics of this rule, let’s first review what Paid Annual Leave entails under Japanese labor law.
Paid Annual Leave represents the right to “rest,” which employers are required to grant to individuals who meet the definition of an “employee” under Japanese labor law. Since this leave is a legal entitlement, companies generally cannot refuse an employee’s request for paid time off. However, employers hold the right to adjust the leave period—they may ask employees to reschedule their time off to prevent disruptions in business operations.
Under the Labor Standards Act, companies must provide employees with at least 10 to 20 days of annual paid leave, depending on their length of service. Importantly, this requirement also extends to part-time workers, including those who work fewer than 20 hours per week, 4 days a week, or 216 days per year.
Key Takeaway:
Part-time employees are entitled to the same paid annual leave rights as full-time workers!
Eligibility Criteria for Paid Annual Leave:
- The employee must have worked at the organization for at least six months.
- The employee’s work attendance rate must be at least 80%.
The Compulsory 5-Day Annual Paid Leave Rule
With the enactment of the revised Labor Standards Act in April 2019, employers are now responsible for ensuring that workers entitled to more than 10 days of annual paid leave take at least five of those days each year. If an employee has not used the required five days, the employer must direct them to take the leave and ensure compliance.
This rule was introduced to encourage employees to take their allotted leave and improve work-life balance. Additionally, companies that fail to comply may face penalties under the Act.
Quick summary of the law
- WHO: Employees (including manager level) who are entitled to 10 days of paid annual leave
- WHEN: Employees have to take at least 5 days of leave within 1 year after they were given the right to take annual leave. The time of absence can be discussed individually between the employer and the employee.
- PENALTIES: In case of non-compliance a maximum 300,000 JPY fine or a maximum 6 months of imprisonment can be imposed on the employer.
Takeaways
If all of your employees take at least 5 days of leave each year there’s no need to worry.
The penalty applies to each employee equally. So, if 10 of your employees haven’t taken the mandatory number of days you could be forced to pay 3M JPY. If it’s 100 employees, the fine would be 30M JPY.
Current Status of taking holidays in Japan
Employees in Japan take less days off than employees in any other country
According to the “Taking Paid Leave – An International Comparison”, a study conducted by Expedia, Japanese employees take only 10 days off per year, which equates to 50% of their annual paid leave, leaving Japan at the very bottom of the list of surveyed countries. Even compared with other Asian countries such as Korea where employees take at least 75% of their annual holidays, Japan comes in last.
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