A Japanese payslip rarely shows one number. Under the base salary sit a series of teate: a position allowance for managers, a family allowance for a spouse and children, a housing allowance, a commuting allowance, allowances for qualifications, shift work or living in an expensive city. Large traditional employers can have a dozen.
They grew out of the seniority era, when pay was meant to cover a household's needs rather than the value of the job. Many companies are now cutting them back, folding housing and spouse allowances into base pay or redirecting family allowances to children only. The law does not require any of them. Once they appear in the work rules or the contract, though, they are wages, and removing them is a change to employees' disadvantage that needs a reasonable justification.
Allowances also matter for equal treatment. In the Hamakyorex case (2018) and the Japan Post cases (2020), the Supreme Court held that several allowances paid to regular staff but denied to fixed-term staff doing comparable work were unreasonable differences.
What it means for a foreign employer
- Ask for the full breakdown. A candidate's base salary can understate pay by a meaningful amount once position, housing and family allowances are added. Compare total fixed cash, not base.
- Decide whether you will replicate them. Most foreign companies pay a single base salary plus commuting costs. That is simpler, but tell the candidate why their payslip will look different and make sure the total is not a cut.
- Watch the overtime base. Family, housing and commuting allowances can be excluded from the overtime calculation; position and most other allowances cannot.
- Treat removal as a change in terms. Cutting an inherited allowance after an acquisition is a negotiation, not an administrative tidy-up.
Sources
- Labour Standards Act, Article 37(5), and Enforcement Ordinance, Article 21 (allowances excluded from the overtime base).
- Labour Contract Act, Articles 9 and 10 (changes to work rules).
- Supreme Court, Hamakyorex case, 1 June 2018; Japan Post cases, 15 October 2020.