Labor IssuesLawyer-Reviewed
Q.My employer is not paying my wages. What can I do?
A.
Non-payment of wages breaches the Labour Standards Act. Demand payment in writing, then consider reporting to the labour inspection office or a labour tribunal. Claims are time-barred after three years for now.
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If your wages are not paid, first confirm in writing how much is owed and when it was due, then make a written demand to the employer. If payment still does not come, the usual next steps are a report to the Labour Standards Inspection Office, a labour tribunal, and a lawsuit, in that order. Failing to pay wages in full on the due date breaches Article 24 of the Labour Standards Act and is punishable by a fine of up to JPY 300,000 (Art. 120(i)). For the time being, unpaid wages become time-barred three years after each payday (Art. 115 and Supplementary Provisions Art. 143(3)), so it pays to act early.
When this becomes an issue
- Payday has passed with no payment and no explanation from the employer.
- A former employee has sent a written demand for their final month's pay and other unpaid amounts.
- Cash flow is tight and the company is unsure whether it can pay this month's wages in full.
- Part of an employee's pay is being withheld "because they are still in training" or "because they missed a sales target".
1. The rules employers must follow when paying wages
Wages must be paid in currency, directly to the employee, and in full (Labour Standards Act, Art. 24(1)). They must also be paid at least once a month on a fixed date (Art. 24(2)). Together these are often called the five principles of wage payment.
Because of the full-payment principle, an employer cannot make deductions unilaterally. Deductions are allowed only where a law provides for them, such as taxes and social insurance contributions, or where there is a written agreement with a union representing a majority of the workforce (or, if there is none, a majority representative) (proviso to Art. 24(1)). Deducting a "penalty for missing a target" or "compensation for broken equipment" from pay without such an agreement risks breaching this principle.
When an employee leaves or dies, the employer must pay wages within seven days of a request by the person entitled (Art. 23(1)). Even if the amount is disputed, the undisputed portion must be paid within that period (Art. 23(2)).
An employer that breaches these rules may be fined up to JPY 300,000 (Art. 120(i)).
2. Steps to take when wages are unpaid
The options range from negotiation to court proceedings. They are usually taken in the following order.
- Written demand to the employer: State the period, amount and basis of the unpaid wages and ask for payment. Sending it by certified content mail (naiyo shomei) creates a record of when and what you demanded.
- Report to the Labour Standards Inspection Office: Where there is a breach of the Labour Standards Act, an employee may report it to the Labour Standards Inspection Office (Art. 104(1)). The office investigates and, if it finds a breach, instructs the employer to correct it. The employer must not dismiss or otherwise disadvantage the employee for making the report (Art. 104(2)).
- Labour tribunal: A court procedure in which a labour tribunal committee made up of a judge and experts in labour relations hears the case (Labour Tribunal Act, Art. 1). Unless there are special circumstances, the hearing must be concluded within three sessions (Art. 15(2)).
- Lawsuit: Used where the labour tribunal does not resolve the dispute, or where a party wants a judgment from the outset.
If the amount claimed is JPY 600,000 or less, the small claims procedure at a summary court is also available (Code of Civil Procedure, Art. 368(1)). There is, however, a limit on how many times a person may use it at the same summary court in one year (proviso to Art. 368(1)), and no appeal to a higher court lies against a small claims judgment (Art. 377).
Which procedure suits you depends on the amount owed, how much evidence you have, and whether you want to keep working with the employer. The right choice differs, for example, between someone still employed who does not want to damage the relationship and someone who has already left and disputes a large amount.
A party dissatisfied with a labour tribunal decision may file an objection within two weeks of service or announcement of the decision (Labour Tribunal Act, Art. 21(1)). A valid objection makes the decision lose its effect, and a lawsuit is deemed to have been filed at the time of the original application (Arts. 21(3) and 22(1)). If no objection is filed, the decision has the same effect as a judicial settlement (Art. 21(4)).
3. Late-payment damages and interest
Late wages carry late-payment damages. Damages for a delay in paying money are calculated at the statutory interest rate at the time the delay began (Civil Code, Art. 419(1)). The statutory rate is 3% a year and is reviewed every three years (Art. 404(2) and (3)). According to the Ministry of Justice, the rate remains 3% a year from 1 April 2026 to 31 March 2029.
A special rule applies to employees who have left. If the employer has not paid wages by the date of departure (or, for wages that fall due after departure, by the due date), it must pay late-payment interest at 14.6% a year from the day after departure (or, for wages falling due after departure, the day after the due date) until payment (Act on Securing Wage Payment, Art. 6(1); Enforcement Order, Art. 1). Retirement allowances are excluded. The rule does not apply for any period in which the delay is due to a natural disaster or other unavoidable cause (Art. 6(2)).
4. When an "additional payment" can be ordered
A court may order an employer to pay an "additional payment" (fukakin) equal to certain unpaid amounts, on top of the unpaid amount itself (Labour Standards Act, Art. 114). This applies only to the following four items.
- Pay in lieu of dismissal notice (Art. 20)
- Shutdown allowance (Art. 26)
- Premium pay for overtime, holiday and late-night work (Art. 37)
- Wages for annual paid leave (Art. 39(9))
Unpaid ordinary monthly or daily wages are not covered. For the time being, a claim for an additional payment must be made within three years of the breach (proviso to Art. 114 and Supplementary Provisions Art. 143(2)).
5. Watch the limitation period
Under the main text of the Labour Standards Act, wage claims become time-barred after five years (Art. 115). For the time being, however, the period is three years for wages other than retirement allowances (Supplementary Provisions Art. 143(3)). Retirement allowances remain at five years.
The period runs separately from each payday, so the oldest months are lost first. If you notice unpaid wages, it is important to claim them promptly.
6. If the employer goes bankrupt: the advance payment scheme
Where an employer becomes subject to a decision to commence bankruptcy proceedings or a similar event, the government will pay part of the unpaid wages on the employer's behalf under the unpaid wage advance payment scheme (Act on Securing Wage Payment, Art. 7). Qualifying events include bankruptcy, the commencement of special liquidation, civil rehabilitation or corporate reorganisation, and, for small and medium-sized employers, a finding by the Labour Standards Inspection Office director that the business is in a de facto insolvent state (Enforcement Order, Art. 2(1)).
The scheme covers employees who left during the two years beginning six months before the date of the bankruptcy or similar application (or the application for the finding) (Enforcement Order, Art. 3). The government pays 80% of the total unpaid wages. The total taken into account is capped according to age on the date of departure: JPY 1.1 million for those under 30, JPY 2.2 million for those aged 30 to 44, and JPY 3.7 million for those aged 45 or over (Enforcement Order, Art. 4(1)).
7. Points for employers
Even when cash is tight, wage payments cannot be pushed to the back of the queue. Unilaterally deciding to pay in instalments or to move the payday risks breaching the full-payment and fixed-date principles (Labour Standards Act, Art. 24). Remember too that late-payment interest of 14.6% a year applies to wages owed to employees who have left.
When a written demand for unpaid wages arrives, do not ignore it. Check attendance records, the wage ledger, the employment contract and the work rules, and work out the amount that is actually owed. Even where the amount is disputed, there are situations in which the undisputed portion must be paid first (Art. 23(2)).
Steps you can take now
- Check the wage amount and payday in your employment contract, written statement of working conditions and work rules (wage regulations).
- Put your payslips side by side with your bank statements and list which months are unpaid and by how much.
- Keep records showing the hours you worked, such as time cards, daily reports and email timestamps.
- Make your demand in writing (email or certified content mail), not orally, and keep a copy.
- Check whether three years from the payday of the oldest unpaid amount is approaching.
- For employers: reconcile the wage ledger with attendance records, and confirm that each deduction is based on a law or a labour-management agreement.
When to consult a lawyer
- You made a written demand and received no reply, or the employer refused to pay.
- The amount is large or the period is long, and the limitation period is approaching.
- The unpaid amounts include items for which an additional payment may be ordered, such as overtime pay or pay in lieu of dismissal notice.
- The employer is in financial difficulty and may go bankrupt or stop trading.
- For employers: you have received a demand letter or a labour tribunal application from a former employee or an employee's lawyer.
Frequently asked questions
Q. Can I still claim unpaid wages after I have left the company?
Yes. For the time being, wages other than retirement allowances become time-barred three years after each payday (Labour Standards Act, Art. 115 and Supplementary Provisions Art. 143(3)). Wages owed to employees who have left carry late-payment interest at 14.6% a year from the day after departure, or the day after the due date for wages falling due later (Act on Securing Wage Payment, Art. 6(1)).
Q. Could my employer treat me unfavourably for reporting to the Labour Standards Inspection Office?
The law provides that an employer must not dismiss or otherwise treat an employee unfavourably for making such a report (Labour Standards Act, Art. 104(2)).
Q. Is an "additional payment" added to unpaid wages?
Not for unpaid ordinary monthly or daily wages. Additional payments are limited to pay in lieu of dismissal notice, shutdown allowances, premium pay and wages for annual paid leave (Labour Standards Act, Art. 114).
Q. If my employer goes bankrupt, will I lose my wages?
In bankruptcy and similar cases, the government's advance payment scheme may pay 80% of the total unpaid wages, subject to an age-based cap (Act on Securing Wage Payment, Art. 7; Enforcement Order, Art. 4).
Q. What interest rate applies to late wages?
For employees still in employment, the statutory rate of 3% a year applies (Civil Code, Arts. 404 and 419). For wages owed to employees who have left (excluding retirement allowances), the rate is 14.6% a year from the day after departure, or the day after the due date for wages falling due later (Act on Securing Wage Payment, Art. 6(1); Enforcement Order, Art. 1).
This article provides general legal information and does not constitute legal advice. For specific legal issues, please consult with a qualified attorney.
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