When a Japanese employee is promoted to a post such as section chief or department head, the most visible change on the payslip is often a new position allowance rather than a jump in base salary. The amount usually rises with the level of the post and is paid for as long as the person holds it. In the Ministry of Health, Labour and Welfare's 2020 survey, covering pay for November 2019, position allowances were the second most common allowance after commuting, paid by 86.9% of companies, with an average of 41,600 yen a month to those who received one.
The allowance is closely tied to overtime. Managers in a genuine supervisory position are exempt from the overtime rules, so many employers pay a position allowance on promotion and stop paying overtime at the same time. If the "manager" does not have real authority, control over their hours and pay befitting the role, courts treat them as an ordinary employee owed back pay for overtime. The leading example is the McDonald's store manager case decided by the Tokyo District Court in January 2008, which made "nominal managers" a public issue. The size of the allowance is one of the factors courts weigh.
Unlike family, housing and commuting allowances, a position allowance cannot be excluded from the base for calculating overtime, so it raises the overtime rate of anyone who holds a post but is not exempt.
What it means for a foreign employer
- Promotion can cut pay. A non-manager earning heavy overtime who is promoted into an exempt post with a modest allowance may take home less. Candidates moving into their first management role know this; show them the numbers.
- The allowance does not make someone exempt. Paying a manager title and an allowance to a team lead who has no hiring, budget or schedule authority leaves you exposed to overtime claims.
- Translate it when comparing offers. A candidate's base salary may exclude a meaningful position allowance. Ask for it and include it in total fixed cash.
- Removing it on a role change needs care. If someone leaves a post, the allowance usually ends with it, but only where the work rules say so clearly.
Sources
- Ministry of Health, Labour and Welfare, General Survey on Working Conditions 2020 (pay for November 2019).
- Labour Standards Act, Articles 37 and 41(ii).
- Tokyo District Court, Japan McDonald's case, 28 January 2008.