CRA Insights

Japan’s push for workplace equality

June 6, 2023
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Three months after the conclusion of the 2022 fiscal year, employers with 301 or more employees in Japan (including US companies with locations in Japan) are required to report female-to-male pay ratios, among other metrics. This reporting requirement is a part of the 2015 “Act on the Promotion of Women’s Active Engagement in Professional Life.” The pay gap reporting requirement comes from “the Grand Design and Action Plan for a New Form of Capitalism,” which the Cabinet of Japan (chief executive body of the government) approved and immediately enacted on June 7, 2022.[1]

For background, Japan had the highest gender wage gap among the G7 countries (political forum consisting of seven countries: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) according to the Organization for Economic Co-Operation and Development (OECD), with a gender wage gap of 22.1% in 2021. Furthermore, Japan had the fourth highest wage gap of the OECD member countries, only more favorable to women than Latvia, Israel, and Korea.[2]

Employers with at least 301 employees in Japan are required to report the female-to-male pay ratio calculated as the average pay for women relative to the average pay for men in percentage terms. The average male or female pay is computed as the sum of all wage payments earned by male or female employees divided by the number of male or female employees during the fiscal year. The pay ratio should be reported for three populations: 1) across all employees working in Japan, 2) for permanent[3] employees only, and 3) for non-permanent employees only. Wages should include all payments employees received during the fiscal year as compensation for labor and services (i.e., earnings documented on tax withholding slips).[4] Companies have the option to exclude retirement contributions, reimbursements, etc., but the decision must be consistent for both men and women.

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