On April 5, 2024, the Ministry of Health, Labor and Welfare issued a notice regarding the exclusion of telework allowances from the calculation of premium wages.
◆Wages as the basis for premium wages
The premium wage is calculated by multiplying the hourly wage by the premium rate. However, family allowances, commuting allowances, living apart allowances, child education allowances, housing allowances, temporary wages, and wages paid for a period exceeding one month are not included in the wage base, as stipulated by law.
So-called telework allowances are generally included in the base wages for premium wages if the telework allowance falls under wages under the Labor Standards Law.
◆Cases in which telework allowances are not included in the premium wage base
However, if the telework allowance is considered as reimbursement for actual expenses necessary for business management, the telework allowance does not constitute wages and is not required to be included in the wages as the basis for premium wages.
According to this notice, in order for a telework allowance to be treated as reimbursement for actual expenses, it must be clear from its external appearance that the telework allowance is intended to identify and reimburse the amount of expenses actually incurred by the worker for the work.
◆A method of reimbursement of actual expenses
Among telework allowances, those that could be considered as reimbursement of actual expenses include the cost of purchasing office supplies, etc., communication expenses (telephone charges, communication charges for Internet connection), electricity charges, and charges for using rental office space. For the method of reimbursement of these business use portions, please refer to the method indicated in the National Tax Agency’s “FAQ on Cost Sharing for Telework (related to withholding income tax)”.
Excluding telework allowances from the calculation of premium wages constitutes a disadvantageous change in working conditions, and should be discussed carefully between labor and management in accordance with the law.
