A Japanese salary is usually expressed as a monthly figure, and kihonkyu is the core of it. Above it sit allowances (teate), overtime, and the summer and winter bonuses. In the Ministry of Health, Labour and Welfare's 2020 survey, covering pay for November 2019, average scheduled monthly pay was 319,700 yen, of which base salary was 272,200 yen and allowances 47,500 yen.
At traditional Japanese companies base salary is built from components that reflect the employee rather than the job: a grade-based amount under the ability grading system, sometimes an age or tenure element, and annual increments. Each year it moves through two mechanisms, the regular increment and any across-the-board base-up agreed in the spring wage round. Because the bonus is often set as a number of months of base, and the retirement allowance is commonly calculated from final base salary or a points system tied to it, a rise in kihonkyu carries through to much more than monthly pay. That is one reason Japanese employers have historically preferred to add allowances or one-off payments rather than raise base.
Base salary also anchors several legal calculations. Overtime premiums are calculated on base plus most allowances. The minimum wage test looks at base and most fixed allowances but leaves out family, commuting and attendance allowances, bonuses and overtime.
What it means for a foreign employer
- Base is a smaller share of pay than you expect. At a Japanese company base salary is often only half to two-thirds of annual pay once bonuses and allowances are counted. Compare total cash, not base.
- But base is what the candidate negotiates from. Japanese candidates think in monthly base and months of bonus. Showing an offer in that shape, as well as in your annual format, avoids misreadings.
- Raising base has knock-on costs at Japanese companies, less so at yours. If your structure has no months-of-base bonus or retirement allowance, a higher base is cheaper for you than it looks to the candidate's current employer, and can be a strong lever.
- Fold allowances in deliberately. If you pay a single base instead of allowances, make sure the new base covers the allowances the candidate loses.
Sources
- Ministry of Health, Labour and Welfare, General Survey on Working Conditions 2020 (pay for November 2019).
- Labour Standards Act, Article 37; Minimum Wage Act, Article 4, and its Enforcement Regulations (items excluded from the minimum wage test).