Overtime Rules and the 36 Agreement in Japan

Most international companies setting up in Japan hear about the "36 agreement" (サブロク協定, saburoku kyotei) at some point during their first few hires — usually when a Japanese co-founder, HR partner, or sharoushi (labor and social security attorney) mentions that it needs to be filed before anyone can legally work overtime. The name itself is a clue: it refers to Article 36 of Japan's Labor Standards Act, the provision that makes overtime work possible in the first place.

Understanding this one agreement, and the overtime framework behind it, matters more than most first-time employers in Japan expect. Get it wrong and the exposure isn't just paperwork — unpaid or unauthorized overtime is one of the more common triggers for labor inspections and employee complaints in Japan, and the rules are stricter than what many international employers are used to at home.

The default: no overtime without an agreement on file

Japan's Labor Standards Act sets a default working time limit of 8 hours a day and 40 hours a week. On its face, this means an employer cannot legally require (or even allow) an employee to work beyond those hours at all, unless it has filed a 36 agreement with the local Labor Standards Inspection Office (Rōdō Kijun Kantokusho).

The 36 agreement is a formal document, negotiated with either a labor union (if one exists) or an employee representative chosen by the workforce, that sets upper limits on how much overtime and holiday work the company may require. Without a valid 36 agreement on file, overtime work is technically unlawful even if the employee is willing and the company intends to pay for it.

For a company making its first hire in Japan, this is often the first indication that "we'll just pay overtime when it happens" is not a workable approach. The agreement has to exist before overtime happens, not after.

What the agreement actually limits

A 36 agreement does not give an employer unlimited room to request overtime once it's filed. Japanese law sets statutory caps on how much overtime a 36 agreement can authorize, and those caps were tightened as part of the work-style reform (働き方改革) legislation that phased in starting in 2019. In general terms, the law caps standard monthly and annual overtime, and allows a higher limit only for a defined number of months per year under "special circumstances" provisions, with an even stricter upper boundary on total overtime plus holiday work in any single month. There are also rules that effectively require employers to look at overtime over rolling multi-month windows, not just a single month in isolation, to prevent long stretches of heavy overtime from becoming normalized.

The exact numeric limits, the special-circumstances carve-outs, and a handful of industry-specific transitional rules are detailed enough that getting them right by memory is risky. Any company setting these limits — or negotiating a 36 agreement for the first time — should confirm the current figures and any applicable exceptions with a qualified sharoushi or Japan labor attorney rather than relying on a general summary, since the thresholds are specific and the penalties for exceeding them (including potential criminal liability for the employer) are real.

Overtime pay still applies on top of the agreement

A 36 agreement authorizes overtime to happen; it does not change the separate requirement to pay a statutory overtime premium on top of base wages. Japan requires a premium for hours worked beyond the standard daily/weekly limits, an additional premium for late-night work (work performed in the late-night hours defined by law), and a separate premium for work on legally mandated rest days. These premiums can stack — late-night overtime, for example, typically carries a higher combined premium than daytime overtime.

This is a common area of exposure for international employers because compensation structures built for other markets — a flat monthly salary with "overtime included," for instance — often don't satisfy Japanese requirements unless very specific conditions are met and clearly documented in the employment contract and work rules. Treating overtime pay as something that can be absorbed into a general salary band without a compliant structure is one of the more frequent sources of back-pay claims against foreign employers in Japan.

The managerial exemption is narrower than it sounds

Many international companies assume that anyone with "Manager" in their title is automatically exempt from overtime rules, the way exempt classifications work in some other markets. Japan's equivalent concept — kanrikanshoku (管理監督者), often translated as "managerial or supervisory personnel" — is defined by actual authority and working conditions, not job title. Regulators and courts have repeatedly found that employees given a management-sounding title, but who don't have real authority over hiring, discipline, or their own working hours, and who aren't compensated meaningfully above the standard pay scale for their role, do not qualify for the exemption.

This matters directly for a company's first few Japan hires, where it's common to give an early employee a senior-sounding title (Country Manager, Head of Japan) without necessarily building out the authority or compensation structure that would hold up as a genuine management exemption. If that classification is later challenged, the company can be liable for unpaid overtime going back across the employment relationship, plus statutory penalties. Discretionary work systems exist for certain professional categories as well, but they come with their own narrow eligibility rules and documentation requirements, and shouldn't be assumed to apply without specific legal review.

What this means for hiring and workforce planning

A few practical implications follow directly from the overtime framework, even before getting into the exact numeric limits:

• The 36 agreement needs to exist before day one of meaningful operations, not be treated as back-office paperwork to handle later. A company without a valid agreement on file is not legally able to ask employees to work overtime, which can be a real operational constraint for an early-stage team trying to move fast.
• Job titles should be chosen with overtime-exemption consequences in mind. A title alone won't create a lawful exemption, and assuming otherwise can turn into a compensation liability.
• Compensation structures that rely on "overtime baked into salary" need specific legal review before they're used in Japan, since a structure that works in the US or UK often won't satisfy Japanese requirements without deliberate design.
• Overtime limits affect realistic workload planning for a small team. A two- or three-person Japan launch team working under Western-style startup hours may be approaching or exceeding statutory overtime limits faster than head office assumes, which has real consequences if discovered in an inspection or a dispute.

The bottom line

The 36 agreement is easy to treat as a filing requirement and move on from, but it sits on top of a broader overtime framework — statutory limits, stacked premiums, and a genuinely narrow managerial exemption — that shapes how a Japan team can actually be run day to day. None of this replaces a proper HR and legal setup: any company making its first Japan hire should work with a sharoushi or Japan-qualified labor attorney to put a compliant 36 agreement, work rules, and compensation structure in place before — not after — the team starts working extended hours.