In Japan, the “lay-off” or temporary unemployment concept does not exist. Because of this, reduction in the workforce is a last resort when Japanese companies run into difficulties. However, the COVID-19 pandemic raised a new issue for companies being affected by business suspension, a downturn in sales or both, caused by the virus. Under Japan’s Labour Standards Act, an employer must pay 60% of employees’ wages (called the Leave Allowance) if a business closes due to a fault on the part of the employer. In normal times the government subsidizes the Leave Allowance paid by employers through the Employment Adjustment Subsidy.
However, because of COVID-19, many businesses in Japan were directed to close by local authorities. The reason for suspension was not attributable to the employer so the law did not cover the payment of subsidies. This was addressed by the Expanded Employment Adjustment Subsidy put into effect to cover the period from April 1 through June 30, 2020. The expansions allows for the government to subsidize the leave allowance paid by employers to employees regardless of the cause of the suspension of work during the stated time.
All employers affected by the COVID-19 outbreak are eligible for the Expanded EAS. Some key takeaways of the expansion are:
- Employers must be able to show a 5% or more decrease in production or sales on a monthly basis (for the April-June time period) compared to the previous year.
- For retail business work was suspended or their store was closed and they can show a sales decrease due to COVID-19 for the April-June time period.
- The Leave Allowance to an employee of at least 60% of their average wage is paid.
- For small-sized companies with around 20 employees, 80% – 100% of wages paid will be subsidized.
- For mid-sized companies with up to 50 employees (e.g., retail businesses), 80% of total wages paid to the employees are subsidized.
- For large-sized companies, 66% of total wages paid are subsidized.
- For companies keeping all existing employees, with no dismissal during the application period, a bonus increase to the subsidy rate will be granted.
Companies have until August 31st to apply to receive the subsidy.
If you are a business owner of registered entities in Japan seeking local assistance on HR issues, please contact Taylor HR Group. We work with a wide variety of international clients, including businesses based in the UK, Europe and Japan. We help our clients understand HR laws and workplace requirements wherever their offices are based.
In these extraordinary times, we’re here to help you navigate through new and complex COVID-19-related HR issues that many business are encountering in the US and in other countries. We’ve created a Return to Work Action Plan that can help you get your staff back into the office smoothly while complying with all health and safety recommendations.
Contact us to see how we can help you get on course.