Impacts of an Increased Legal Overtime Rate on Overtime Work Hours and Provision/Acquisition of Paid Leave—Analysis on Effects of Partial Revision of Labour Standards Act in 2008—
To reduce long working hours, the revised Labour Standards Act of 2008 was executed
on December 12, 2008, and went into effect on April 1, 2010. In this revision, the
following amendments were implemented: (1) the legal overtime rate to be paid for 60 or
more hours of overtime per month was increased from 25% to 50%; (2) once a
labor-management agreement was executed, it was possible to provide paid leave for
those employees who worked overtime more than 60 hours per month, in place of the
standard 25% increase for overtime; and (3) instead of paid leave that was an
alternative to the overtime rate referenced in Section (2), after the revision of the law,
when a business executed a labor-management agreement, an employee could use any
existing paid leave by the hour up to five days per year.
In this study, to re-verify the effects of the revision, utilizing the existence of
employees who are not covered by the revision, we perform Difference-in-Differences
(DID) analysis by using the Keio Household Panel Survey. We estimate that a total of 55
working hours per week corresponds to 60 hours of overtime work per month, and then
we perform the analysis. As a result, we confirm that the revision of the law reduced the
overtime working hours of the employees who worked more than 55 hours per week on
average before the revision (2004 to 2009). However, we confirm that there is no
statistically significant impact on the provision and acquisition of annual paid leave of
employees who worked more than 55 hours per week each period.
