Work Style Reform (働き方改革): The 2018 legislative package that capped overtime and introduced equal pay for non-regular staff

Work Style Reform is the name the government gave to a set of amendments to several labour statutes, enacted in June 2018 and phased in from April 2019. It was a response to a shrinking workforce, low productivity and a series of high-profile karoshi cases, and it was one of the broadest changes to working-time law since the Labour Standards Act was passed in 1947.

The core changes were these. Overtime under a 36 Agreement became capped by law, with penalties: 45 hours a month and 360 a year as the ordinary limit, and 720 a year as the absolute limit under a special clause. Construction, driving and doctors were given a five-year delay and came under their own caps in April 2024, which is the origin of the "2024 problem" in logistics. Employers must make sure every employee entitled to ten or more days of annual leave takes at least five. Flextime settlement periods were extended to three months. The highly skilled professional system was created, exempting a narrow group of high earners from working-time rules. And regular and non-regular employees doing comparable work must be treated without unreasonable differences in pay.

Other measures were softer: employers are asked to make efforts to introduce minimum rest intervals between shifts, and must keep objective records of everyone's working hours, including managers.

What it means for a foreign employer

Overtime limits are now enforceable. Breaching the cap is a criminal offence for the employer, and inspection offices check.
Leave is no longer optional to take. A senior bilingual employee who never takes holidays is now a compliance problem, not a sign of commitment.
Contract staff pay needs a rationale. Differences in allowances and bonuses between permanent and fixed-term staff must be explainable on request.
Candidates read reform compliance as culture. Long-hours employers find it harder to attract mid-career talent than before 2019.

Sources

Act on the Arrangement of Related Acts to Promote Work Style Reform, enacted 29 June 2018.
Labour Standards Act, Articles 36 and 39, as amended.
Act on Improvement of Employment Management for Part-Time and Fixed-Term Workers.

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General information for employers, not legal advice. Thresholds and dates are checked against the sources listed and dated above; confirm anything you act on with a Japanese employment lawyer or a licensed labour and social security attorney.