Unpaid Wages in Japan: ¥12.9 Billion Found in One Year

Unpaid overtime in Japan rarely shows up as a monthly problem. It shows up as a bill for the last three years. An employee resigns, visits the labor standards office on the way out, and two months later the company is ordered to recalculate overtime for that person and a dozen colleagues. In 2025 Japan's Labour Standards Inspection Offices handled 22,605 unpaid wage cases covering 173,016 workers and 12.86 billion yen, and 11.0 billion yen of it was paid within the year after inspectors stepped in. This piece takes that "over ten billion a year" apart and looks at how it accumulates.

What does the 12.9 billion yen count?

It counts every unpaid wage case the inspection offices handled in calendar 2025, and overtime is only part of it. The Ministry of Health, Labour and Welfare's series, titled inspection results for workplaces suspected of unpaid wages, includes unpaid regular salary, pay below the minimum wage, and wages left unpaid when a company went bankrupt or the owner disappeared. There is no minimum amount, and cases carried into the next year are included. The ministry does not split out how much of the 12.86 billion is overtime, so I won't either.

For an overtime-only figure you have to go back to the old series. Until fiscal 2021 the ministry published "back payment of unpaid overtime premiums through inspection guidance," which counted only cases where a single company paid 1 million yen or more, by fiscal year. The last year, fiscal 2021: 1,069 companies, 64,968 workers, 6.51 billion yen. That is 6.09 million yen per company and 100,000 yen per worker, with 115 companies paying 10 million yen or more. Earlier years were 12.45 billion in fiscal 2018, 9.84 billion in fiscal 2019, 6.99 billion in fiscal 2020. Fiscal 2017 was an outlier at 44.64 billion yen, from 1,870 companies and 205,235 workers.

From 2022 the ministry changed the ruler. It dropped the 1 million yen overtime threshold and started counting all unpaid wage cases, by calendar year: 12.12 billion yen in 2022, 10.19 billion in 2023, 17.21 billion in 2024, 12.86 billion in 2025. Both series have years above ten billion, but they count different things. "Over ten billion a year" is true under the new series, true under the old one through fiscal 2018, and false for the years in between.

One more caution. The total is sensitive to a few large cases. In 2024, transport alone accounted for 7.02 billion of the 17.21 billion, 41%. In 2025 the biggest shares by amount were health and welfare at 2.71 billion (21.1%) and manufacturing at 2.60 billion (20.2%), while by number of cases commerce (4,701) and manufacturing (4,370) led. Divide 12.86 billion by 22,605 cases and you get about 570,000 yen per case; by 173,016 workers, about 74,000 yen per person. Most cases are small. A few are very large.

Why does it arrive years later, all at once?

Because the law allows three years of back claims, and the trigger is usually a resignation. Japan's Labor Standards Act was amended effective April 1, 2020, extending the limitation period for wage claims from two years to five, with a transitional rule setting it at three years "for the time being." The period for claiming additional damages, which a court can award up to the same amount as the unpaid wages, also went from two years to three. As of October 2026 it is still three. One person leaving and looking back three years is three person-years. Ten people is thirty.

Where does the inspection come from? Visits by the inspection offices are either regular, complaint-based or follow-up. A complaint means a worker went to the office themselves. There were 20,557 complaint inspections nationwide in 2024, and prefectural bureaus consistently report that unpaid wages dominate. Gifu's labour bureau inspected 300 workplaces on complaints in 2025, and the most common complaint item was unpaid wages, 264 of them. In Okinawa, 64.2% of 2024 complaints were about wages. Few people complain while employed. They go after they leave. So the reckoning comes after the exit.

The same 2020 amendment extended the retention period for wage ledgers and similar records from three years to five, also three for the time being. A company having no records does not mean the employee has none. Inspectors work from whatever proves the hours: time clocks, PC logs, building access, chat timestamps.

Three misunderstandings that each build a bill

First, the fixed overtime allowance. Many foreign subsidiaries copy the Japanese practice of folding "20 hours of overtime" into salary and assume the counting stops there. Among the correction cases the ministry published with its 2025 results is a building materials wholesaler that did exactly this. Hours beyond the 20 and all late-night premiums went unpaid, and the company was ordered to pay. A fixed allowance covers only the hours it names. Anything beyond is calculated on actual time. And if the contract and pay slip don't show which part is base pay and which part is overtime, the whole amount can be treated as base pay, and overtime is recalculated from zero on top of it.

Second, the "supervisory or managerial" exemption. Article 41 of the Labor Standards Act exempts people in positions of supervision or management from the rules on hours, breaks and days off, and some companies put every manager-level title in that box. The ministry's own pamphlet says the status is judged by substance, meaning duties, authority, how the person actually works and how they are paid, and that a title alone does not qualify. In 2008 the Tokyo District Court ruled that a McDonald's Japan store manager was not an exempt manager, and the ministry issued guidance on chain store managers the same year. Even a genuine exempt manager must be paid the late-night premium for work between 10 p.m. and 5 a.m., and still gets annual paid leave.

Third, discretionary work. Foreign executives tend to hear this as "engineers don't track hours." In fact the professional type applies only to 20 kinds of work listed in ministerial ordinance and notice, such as research and development, systems analysis and design, and design work. Sales is not on the list, and routine operations work by engineers may not be either. It requires a labor-management agreement filed with the inspection office, and since April 1, 2024, the individual's own consent, which the ministry says should be taken in writing. Apply it to someone outside the list and it is as if it never existed. Overtime is recalculated from the start.

One more 2025 correction case is worth remembering. An auto parts manufacturer used IC card time clocks but rounded off the first and last 15 minutes of every shift. Half an hour a day is more than a hundred hours a year. The inspectors required payment according to the clock.

Put it on your own spreadsheet

Suppose a 20-person subsidiary where ten people each have ten hours a month of uncounted overtime. Monthly pay of 320,000 yen is roughly 2,000 yen an hour, and at the 1.25 premium that is 2,500 yen. Per person, 25,000 yen a month, 300,000 a year, 900,000 over three years. For ten people, 9 million yen. That is the back pay. If it reaches court, additional damages can double it. These are assumptions, not statistics, but the order of magnitude is right: a small monthly oversight becomes, three years later, a number you have to explain to head office.

I looked at how many labor tribunal cases Japan sees and how likely a foreign subsidiary is to meet one in Japan sees 3,400 labor tribunal cases a year. The going rate when a dispute reaches a settlement is in What it costs to let someone go in Japan. Unpaid overtime claims and dismissal disputes very often arrive together, from the same person, in the same case.

The cheap fixes haven't changed. File the Article 36 overtime agreement. Keep the clock records yourself. Include allowances in the base for the premium. If you use a fixed allowance, state the hours and pay for anything beyond them. For a sense of where your company sits, Overtime in Japan: 13 hours a month, or 21? gives the two official measures of how much Japanese employees actually work overtime.

A last limit on the number. The 12.86 billion yen is only what reached an inspection office. People who never complained, who settled quietly with the company, or who went straight to a labor tribunal or court are not in it. So it is neither the total of unpaid wages in Japan nor the total of unpaid overtime. What it does tell you is narrower: the inspection offices handle more than twenty thousand of these cases a year, and in over nine out of ten the company ends up paying.