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Japan Inc. prepares to square overtime cap with labor crunch

Logistics and construction sectors likely to receive brunt of the impact

TOKYO -- Corporate Japan is looking to balance hard limits on overtime with economic growth -- a task that will have to be accomplished within what is becoming a crippling labor shortage.

The government revealed work-reform proposals Tuesday limiting overtime to an average of 60 hours per month within a calendar year. The move is in response to the growing public outcry against karoshi, or death from overwork.

The Japanese business community has acknowledged the need for specific overtime caps. "There are no objections to the introduction of the restrictions," said Akio Mimura, chairman of the Japan Chamber of Commerce and Industry.

Mimura also addressed the current problem of large companies pressuring smaller contractors to work exceedingly long hours. "I would like to request a review of business practices and a rectifying of contract terms," he said.

Merit pay

There are concerns that imposing overtime limits, absent improved productivity, would impede economic activity. Consequently, the Japan Business Federation, or Keidanren, and other groups have lobbied for white-collar exemptions, which would allow skilled workers to be paid based on merit and unbound by overtime rules. The Japan Association of Corporate Executives also prepared a written opinion Tuesday saying that the implementation of new overtime rules should be conditioned on the creation of white-collar exemptions.

A proposal to allow workers to determine their own working hours has long been shelved. And whenever the government presents to the Diet proposed amendments to the labor law containing white-collar exemptions, the opposition impugns the bills as promoting karoshi. Currently, neither the central government nor the ruling ranks are eager to make the system a reality.

Labor Minister Yasuhisa Shiozaki believes there would be no inconsistencies if white-collar exemptions are added to the work-reform amendments. "I definitely wish to see them through to passage," he said. But those provisions will likely face a long, rocky path.

Truck drivers wanted

Current labor laws exclude drivers and construction workers from overtime restrictions due to the nature of their work. But the government plans to apply the new limits to those positions as well, after a grace period.

All business sectors likely will face a painful adjustment period. Land-based transporters not only face a shortage of capable truck drivers, but also a growing volume of packages bought by online shoppers. Workers in that industry are thus taking on longer hours.

"If the rules are made applicable without any measures to solve the labor shortage, the logistics [industry] will fall apart," warned Toshio Murakami, a secretary-general at the Japan Association for Logistics and Transport.

Yamazaki Baking transports goods to outlets and plants on its own. "Subcontractors handling outsourced logistics operations are turning down work due to worker shortage," said President Nobuhiro Iijima. "If the regulations further prevent [those companies] from taking on work, they will have to deal with [the deliveries] on their own even at the expense of profit."

Within the construction industry, a senior manager at a major general contractor said, "we will need to raise productivity in order to shrink working hours, but a lot of workers depend on daily wages, and an increase in downtime would eat into take-home pay and have a direct impact on their lifestyle." The manager also pointed to the "vexing" need for contractors to improve working conditions as well.

Leading by example

Some corporations are taking the lead in limiting overtime hours. Nidec aims to authorize no overtime for roughly 10,000 domestic employees by 2020. The technology multinational also plans to invest 100 billion yen ($875 million) in robots, software and other applications that boost productivity. Panasonic this month started enforcing its 8 p.m. general deadline for about 100,000 domestic workers.

The labor ministry found in a 2013 survey that 16% of businesses signed overtime agreements with employees that contain special provisions allowing for over 60 hours of overtime. Among major corporations, the rate is 60%. Many companies will be forced to take action.


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