"Average wage" refers to the average amount of wages paid over a certain period, and serves as the basis for calculating severance pay and business suspension allowance.
What is "average wage"?
- The term "average wages" means the amount calculated by dividing the total amount of wages paid to a relevant employee during 3 calendar months immediately before the day grounds for calculating his or her average wages occurred by the total number of calendar days during the three months.(Main text of Subparagraph 6, Article 2(1),「Labor Standards Act」)
Salaries and allowances to which the average wage is applied
- The average wage is the basis for calculating the following allowances or salaries.
· Retirement allowance (Article 8(1),「Act on the Guarantee of Employee’s Retirement Benefits」)
· Shutdown allowances (Article 46, 「Labor Standards Act」)
· Annual paid leave (Article 60(5), 「Labor Standards Act」)
· Accident compensation (Articles 79 to 85,「Labor Standards Act」)
· Punitive wage cut (Article 95,「Labor Standards Act」)
· Job search benefits (Article 45,「Employment Insurance Act」)
· Industrial accident compensation insurance benefits (Article 36 and 52, etc.,「Industrial Accident Compensation Insurance Act」)
The average wage is calculated by dividing the total wage for the 3 months prior to the date of occurrence of the reason for calculation by the total number of days in that period.
How to calculate average wage
- The average wage is calculated by dividing the total wage for the 3 months prior to the date of occurrence of the reason for calculation by the total number of days in that period.(Main text of Subparagraph 6, Article 2(1), 「Labor Standards Act」)
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Method of calculating average wage for bonuses with a calculation period of one year
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Q: In the case of bonuses with a calculation period of one year, how should the period be included in the calculation of the average wage? A: In the case of bonuses, if payment conditions are specified in advance in collective agreements or employment rules, or if the fact that they have been paid continuously is recognized as customary, regardless of whether the bonus was paid for the 3 months prior to the occurrence of the reason for calculating the average wage, you can divide the full amount received during the 12 months prior to the occurrence of the cause by 12 months and include 3 months' worth into the calculation range of the average wage.
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Periods and wages excluded from the calculation of the average wage
- Where a period for the calculation of average wagesincludes any of the following periods, such period and wages paid during that period shall be subtracted respectively from the period and the total amount of wage serving as the basis for the calculation of average wages. (Article 2(1),「Enforcement decree of the Labor Standards Act」)
· Within 3 months from the date on which a worker who is under probation after entering into a labor contract commences probation
· When a business shuts down due to a cause attributable to the employer. (Article 46, 「Labor Standards Act」)
· Maternity leavebefore and after childbirth and miscarriage/stillbirth leave. (Article 74,「Labor Standards Act」)
·An employer shall provide necessary medical treatment at his or her expense or bear corresponding expenses for an employee who suffers from an occupational injury or disease. (Article 78,「Labor Standards Act」)
· The period of childcare leave. (Article 19, 「Equal Employment Opportunity and Work-family Balance Assistance Act」)
· The period of industrial actions. (Subparagraph 6, Article 2, 「Trade Union and Labor Relations Adjustment Act」)
· A period of absence or absence from work to fulfill military services, reserve forces, or civil defense obligations. However, it is not excluded if wages are paid during the period
· Period of work suspension with the approval of the employer due to injury, illness, or other reasons other than work
Minimum limit of average wage
- When the amount calculated is lower than that of the ordinary wages of the employee concerned, the amount of the ordinary wages shall be deemed his or her average wages. (Article 2(2),「Labor Standards Act」)
The average wage to be applied when calculating the compensation for suspension of work and disability is adjusted according to changes in wages of workers in the same type of occupation.
Adjustment of average wage
- The average wage applicable to the calculation of compensation such as compensation for suspension of work (Article 79, 「Labor Standards Act」), disability(Article 80, 「Labor Standards Act」), survivors (Article 82, 「Labor Standards Act」), funeral expenses(Article 83, 「Labor Standards Act」), and installment compensation (Article 84, 「Labor Standards Act」). etc. shall, when the average amount of monthly ordinary wage per employee (hereinafter referred to as the "average amount") paid to employees in the same business category in the same business or workplace to which the relevant employee belongs has changed by at least 5/100 from the average amount paid in the month when an injury or a disease occurs, be such amount increased or decreased at the a foresaid rate of change, but such rate shall apply to the month immediately following the month of occurrence of grounds for change and the months subsequent thereto. (Main text of Article 5(1), 「Enforcement decree of the Labor Standards Act」)
- Provided, that the second or latter adjustment of average wages shall be calculated based on the average amount of the month in which a cause for immediately preceding change occurred. (Proviso to Article 5(1),「Enforcement decree of the Labor Standards Act」)
Where the business or workplace is permanently closed down
- Where the business or workplace to which the relevant employee belongs is permanently closed down, the adjustment of average wage shall be based on a business or workplace with the same business type and scale as at the time when an occupational injury or disease was inflicted on the employee. (Article 5(2),「Enforcement decree of the Labor Standards Act」)
When there is no employee engaged in the same occupational category
- If there is no employee engaged in the same occupational category as the relevant worker, the adjustment of the average wage as described above shall be based on employees engaged in the occupation of similar category. (Article 5(3), 「Enforcement decree of the Labor Standards Act」)
Calculation of the retirement benefits which shall be paid to an employee who suffers from an occupational injury or disease
- The average wage applicable to the computation of the retirement benefits which shall be paid to an employee who suffers from an occupational injury or disease in accordance with Article 8, 「Act on the Guarantee of Employee’s Retirement Benefits」, shall be the average wage adjusted in accordance. (Article 5(4),「Enforcement decree of the Labor Standards Act」)