90% of companies in favor of revising the 1,030,000 yen barrier

◆What is the "1,030,000 yen barrier"?

In a corporate survey conducted by Teikoku Databank (1,691 validly responding companies) on raising the "1.03 million yen barrier," it was revealed that nearly 90% of the responding companies were in favor of revising the "1.03 million yen barrier.

The "1,030,000 yen barrier" refers to the fact that income tax is incurred when annual income exceeds 1,030,000 yen and is excluded from the spousal deduction. Some companies make it a requirement that this barrier not be exceeded in order to provide a spousal allowance. As a result, many part-time workers are conscious of this barrier and refrain from working, contributing to labor shortages for companies.

In this survey, 67.8% of companies agreed that the "¥1,030,000 barrier" should be raised, while 21.9% said it should be eliminated. This means that a total of 89.7% of companies are calling for a review of the current system.

◆Main opinions in the survey

Many companies have commented that raising the barriers will help to relieve the labor shortage by eliminating the need for part-time workers to work less. The recent increase in the minimum wage has also had the effect of shortening the working hours up to 1,030,000 yen. There is also an expectation that if the increase is realized, "consumption activity will be stimulated by the tax reduction effect. On the other hand, some are concerned about how to secure financial resources, saying, "Since there is also the 1.06 million yen and 1.3 million yen barrier for social insurance premiums, people will remain reluctant to work if only the income tax is reviewed.

◆Keep an eye on the latest trends and take action

There is a possibility of accelerated movement toward legal reform regarding the "barrier to annual income," including the 1.03 million yen barrier. It is important for companies to keep a close eye on the latest developments and take appropriate measures to ensure that employees can work with peace of mind.

Criteria for Determination of Managerial Supervisory Status

The applicability of a managerial supervisor as defined in Article 41 of the Labor Standards Law is determined by comprehensively considering the following points. 

1. duties, responsibilities and level of authority

2. working style - existence and extent of discretionary working hours and working time management

3. wages and other benefits

◆duties, authority and level of responsibility

Whether or not a person is considered a managerial supervisor is not determined solely by his/her position or title within the company. It is determined based on whether or not the employee is actually in a "position that is integral to management.

◆working style

The following provisions apply to the working style.

"The actual working conditions must also be such that they do not conform to the regulations on working hours, etc."

Managers and supervisors need to have discretion in their own work. This is because strict time management is not conducive to management decisions and responses.

◆wages and other benefits

"Wages and other benefits appropriate to the position."

Managers and supervisors must be treated appropriately for their position. Due to the importance of their duties, they need to be treated appropriately in terms of salary, bonuses, position benefits, etc., compared to regular workers. Even if the annual salary is 6 or 7 million yen, it may be argued that the employee is not a managerial supervisor.

Thus, the requirements for "supervisors" under the Labor Standards Law are quite strict for companies, and it is extremely rare for a manager of a small or medium-sized company to fall under this category if the case goes to court.

◆Scrutiny from the Labor Standards Inspection Office

The Labor Standards Inspection Office will take immediate action in cases of ordinary unpaid overtime. However, as the issue of managers and supervisors is considered to be a matter of the company's personnel rights, the officer may urge the matter to be resolved in court or to implement improvements in the form of guidance. 

It is therefore important for a company to provide clarity on how it positions its managers and supervisors within the organization and to set out its stance on overtime payment to employees other than managers and supervisors.