Is Wage Disparity Between In-Office and Remote Work Justifiable?

In March 2021, Tokyo, a city with a high number of remote workers, released a “Survey on Diverse Work Styles”. According to the survey, the percentage of companies with 30 or more employees that had implemented remote work was 6.8% in 2017, but it expanded to 58.8% by December 2020.

Survey on Diverse Work Styles.jn

While remote work has many benefits for employees once they get used to it, many companies are struggling to manage attendance and align it with their employment rules.

Furthermore, in companies where performance has deteriorated due to the COVID-19 pandemic, there have been cases where the salaries of remotely working employees and those who come to the office differ.

In this article, we will clearly explain the fairness of the wage gap between “going to the office” and “remote working” in the COVID-19 pandemic, on a case-by-case basis.

Three Types of Remote Work

Remote working is not a one-size-fits-all concept. It can be classified into the following three types, based on the location where the work is performed.

Home-Based Work

This is a work style where employees perform their duties from home instead of commuting to the office. It has the advantage of reducing the burden of commuting and the risk of infection from the novel coronavirus. Additionally, it allows employees to secure time for household chores, childcare, and caregiving.

Satellite Office Work

This is a work style where employees perform their duties at a satellite office set up separately from the main office, instead of commuting to the main office. If the satellite office is close to home, it can reduce commuting time and provide a work environment equivalent to that of the main office.

Mobile Work

This is a work style where employees use laptops, tablets, mobile phones, etc., to perform their duties in places such as hotels on business trips, inside Shinkansen trains, or cafes in the city. As long as there is an internet environment, employees can freely choose their location, which can reduce travel time and improve productivity.

Salary Reduction When Working Remotely Under Company Directive

Under the Japanese Labor Standards Act, companies are obligated to clearly state the terms of employment when entering into a labor contract with an employee.

Article 15 (Disclosure of Working Conditions)
Employers must clearly state wages, working hours, and other working conditions to workers when entering into a labor contract. In this case, matters concerning wages and working hours and other matters specified by the Ministry of Health, Labor and Welfare must be clearly stated in the manner specified by the Ministry of Health, Labor and Welfare.

The contents of “wages, working hours, and other working conditions” are stipulated in the Enforcement Regulations of the Labor Standards Act, and the following contents related to remote work must be clearly stated:

• Matters concerning the place of work and the duties to be performed
• Matters concerning the start and end times of work, the presence or absence of work exceeding the prescribed working hours, break times, holidays, leave, and the timing of shifts when workers are divided into two or more groups
• Matters concerning the determination, calculation, and payment method of wages (excluding retirement allowances and temporarily paid wages), the closing and payment period of wages, and matters concerning wage increases

To change these “working conditions”, the Labor Contract Act stipulates that individual agreement between the worker and the employer is the principle. However, even if the change is made by agreement, it cannot fall below the working conditions stipulated in the work rules.

Changes to working conditions can also be made by changing the work rules, but in that case, the following requirements must be met:

• Make employees aware of the changed work rules
• The degree of disadvantage to employees due to the change in work rules and the necessity of the change are reasonable

Considering the above, when remotely working under a company directive, unless the work rules stipulate “remote work duty”, it is generally considered that wages cannot be reduced without the consent of the employee.

Salary Reduction When Employees Voluntarily Choose to Remote Work

When a company approves an employee’s request to work remotely, it is possible to change the terms of employment in accordance with Article 8 of the Japanese Labor Contract Act. Typically, in addition to the “place of work,” other conditions of employment such as “job content,” “working hours,” and “wages” are also considered.

For example, if in-office is stipulated in the work rules, there is no problem with a voluntary pay cut if the employee can gain time for childcare or nursing care by working from home. However, caution is needed in the cases introduced below.

Overtime Pay Cut Due to “Off-Site Deemed Labor”

When an employee works outside the office due to remote work, if certain conditions are met, the “Off-Site Deemed Working Hours System” stipulated in the Japanese Labor Standards Act is applied, and it is considered that the employee has worked the prescribed working hours stipulated in the work rules and other regulations.

Article 38-2, Paragraph 1
When a worker engages in work outside the workplace for all or part of his/her working hours and it is difficult to calculate the working hours, it is considered that the worker has worked the prescribed working hours. However, in cases where it is necessary to work beyond the prescribed working hours to perform the work, it is considered that the worker has worked the hours normally required to perform the work, as stipulated by the Ministry of Health, Labor and Welfare.

When the “Off-Site Deemed Working Hours System” is applied, overtime pay does not occur even if you work longer than the prescribed working hours, except in special cases where it is always necessary to work beyond the prescribed working hours.

However, please note that the “Off-Site Deemed Working Hours System” does not apply unless the following two requirements are met:

• The information communication device is not required to be in a state where it can always communicate at the company’s instruction.
• The worker is not performing work based on the specific instructions of the user at any time.

In other words, unless 1. the employee is allowed to disconnect communication freely and leave the information communication device, 2. the employee is not obliged to respond immediately to the company’s instructions, and 3. the employee is performing work without following the company’s specific instructions, it is not considered difficult to calculate working hours.

Pay Cut Due to “Break Time”

In remotely working such as working from home, the time when employees are away from work for a certain period is called “break time.”

Since the “Revised Occupational Safety and Health Act” made it obligatory for companies to “objectively grasp working hours” from April 1, 2019 (Heisei 31), companies must check the start and end times of each working day and accurately record working hours.

Therefore, if the normal working hours are from 9:00 to 18:00 with a 1-hour break, if there is a “break time,” the working hours will be shorter, so 1. lowering the working hours, 2. taking annual paid leave by the hour, 3. lowering wages, etc. are considered.

However, in cases 1 and 2, changes to the work rules or conclusion of a labor-management agreement are required, and in case 3, individual agreement between the company and the employee or changes to the work rules, etc. are required as it falls under the change of working conditions.

When Avoiding Infection with the New Coronavirus is the Reason

When an employee requests permission to work remotely at the same wage for the purpose of avoiding infection with the new coronavirus, the following points are considered to determine whether there is reasonableness.

• It is objectively clear that the company’s infection control measures are insufficient and there is a high risk of infection with the new coronavirus if the employee goes to the office.
• Even outside the company, a security environment equivalent to the office can be obtained and there is no hindrance to the performance of work.

If the company does not meet the above conditions, such as taking normal infection control measures, it is possible to order office attendance, and if refused, disciplinary action including pay cuts and dismissal may be possible according to the work rules.

However, under a state of emergency, even if the conditions for remote work are not fully met, the safety of life and body is prioritized, and disciplinary action or dismissal against employees who have chosen to remote work may be deemed invalid, so caution is needed.

Summary: Consult a Labor Lawyer for Addressing Wage Disparities in Remote Work

So far, we have discussed the potential cases and related laws and regulations concerning wage disparities between in-office and remote work during the COVID-19 pandemic.

If the working hours and other labor conditions differ between in-office and remote work, it is necessary to add provisions related to remote work to the work rules.

Furthermore, when introducing systems such as “flextime” or “deemed working hours outside the workplace” in relation to the introduction of remote work, not only changes to the work rules but also the conclusion of labor-management agreements may be necessary. Therefore, rather than making judgments on your own, we recommend consulting in advance with a lawyer who has extensive knowledge and experience in labor standards-related laws and regulations.

Introduction to Our Firm’s Measures

Monolith Law Office is a law firm with high expertise in both IT, particularly the internet, and law. With the ongoing COVID-19 pandemic, the usefulness of remote work is expected to continue gaining attention. However, many companies are still in the process of establishing work environments and organizing contractual relationships associated with remote work. Our firm analyzes the legal risks of businesses that have already started or are about to start, taking into account various legal regulations. We aim to legalize businesses as much as possible without stopping them.