Where is the line for a "manager or supervisor"? (Manager in name only, premiums and the late-night premium)

In short: Being a "manager or supervisor" under the Labor Standards Act exempts the person from the rules on working hours, breaks and days off, and no overtime or holiday premium is required (Labor Standards Act, Article 41, item 2). However, the late-night premium (Article 37, paragraph 3) and annual paid leave (Article 39) still apply even to a manager or supervisor. And whether someone qualifies is not decided by the job title. It is judged by the reality of three points — job content and authority, discretion over working hours, and treatment (Notice Hatsuki No. 17 of 13 September 1947; Notice Kihatsu No. 150 of 14 March 1988). Paying only a post allowance to a store manager or section manager and no overtime can, where the reality does not follow, lead to a retroactive claim for unpaid premium wages as a "manager in name only." This article sets out, with a practical eye, how to draw the line and how to arrange work rules and wages.

"We pay a post allowance to store managers, so overtime isn't needed, right?" and "a section manager is a manager, so a late-night premium shouldn't be needed either" — these are questions we often hear from the owners and HR staff of small and medium enterprises. This page is for operators who pay allowances to those in posts but pay no overtime, and sets out the elements for judging manager-or-supervisor status, the treatment of the late-night premium and annual paid leave, the retroactive risk, and how to arrange work rules. Handling an individual unpaid-overtime claim or litigation is outside the scope of this article.

If someone is a manager or supervisor, is no overtime pay at all needed?

"Manager or supervisor = zero overtime" is not the case. Separate what is exempt from what is not.

Item	Treatment of a manager or supervisor
Statutory working hours (8 hours a day, 40 hours a week)	Exempt (no concept of overtime)
Overtime premium (Article 37, paragraph 1)	Not required
Breaks, statutory days off, holiday premium	Exempt
Late-night premium (Article 37, paragraph 3; 10 p.m.–5 a.m.)	Required (not exempt)
Annual paid leave (Article 39)	Required (not exempt)

Article 41, item 2 of the Labor Standards Act provides that the rules on working hours, breaks and days off do not apply to "a person in a supervisory or managerial position." What is exempt here are the rules on working hours, breaks and days off; the late-night premium and annual paid leave are not included. This is also a separate issue from a fixed-overtime-pay arrangement (a lump-sum premium). For the requirements for a valid fixed-overtime-pay arrangement, see the requirements for a valid fixed-overtime-pay arrangement and the difference settlement; for the deemed-working-hours system, see the discretionary work system and the 2024 reform on individual consent.

What do the inspection office and the courts look at to judge manager-or-supervisor status?

The judgment is by the reality, not the job title. Administrative interpretation (Notice Hatsuki No. 17 of 13 September 1947; Notice Kihatsu No. 150 of 14 March 1988) and case law look at roughly the following three elements.

Element	What is looked at
Job content, responsibility and authority	Whether the person, in a position integrated with management, has substantive authority over important matters such as hiring, personnel, labour and budget; whether they take part in the department's policy
Discretion over working hours	Whether the person can decide their own start and finish times at their discretion; whether they are free of strict time management and deductions for lateness or early leaving
Treatment	Whether they receive treatment befitting the position — base pay, a post allowance, bonuses; treatment that sufficiently makes up for the absence of overtime pay

A person is more readily evaluated as a manager or supervisor only when all three are satisfied. In particular, for store managers of stores in multi-location retail, food service and similar businesses, Notice Kihatsu 0909001 No. 1 of 9 September 2008 sets out that elements such as substantively poor authority, no discretion over working hours, and insufficient treatment work in the direction of denying manager-or-supervisor status. In case law too, there is an example in which the manager of a hamburger chain store was held not to be a manager or supervisor (McDonald's Japan case, Tokyo District Court judgment of 28 January 2008).

Why are the late-night premium and annual paid leave required even for a manager or supervisor?

Because what Article 41, item 2 of the Labor Standards Act exempts is limited to the rules on working hours, breaks and days off. Article 37, paragraph 3, which provides for the late-night premium, is placed with the aim of health consideration for late-night work, separately from the regulation on the length of working hours. The Supreme Court has also held that even a worker who qualifies as a manager or supervisor can claim the late-night premium under Article 37, paragraph 3 (Kotobuki case, Supreme Court judgment of 18 December 2009). Accordingly, if a manager or supervisor is made to work at night between 10 p.m. and 5 a.m., a late-night premium of 25% or more must be paid. Annual paid leave (Article 39) is likewise outside the exemption, and must be granted to, and taken by, a manager or supervisor.

What retroactive risk arises if someone is pointed out as a "manager in name only"?

If you pay no overtime to a manager in title only, and manager-or-supervisor status is later denied, the premium wages you had not paid may be claimed retroactively.

• Unpaid overtime, holiday and late-night premiums: the premium wages that should have been paid
• Extinctive prescription: the extinctive prescription of a wage claim is, for the time being, three years rather than five (Labor Standards Act, Article 115 and Supplementary Provisions). Three years' worth may be claimed together
• Additional payment: on an unpaid premium wage, the court may, on the worker's claim, order payment of an additional payment up to the same amount as the unpaid sum (Article 114)

Where the post allowance does not match the actual overtime hours, a shortfall may also arise. The premise is to grasp the reality first, and to prevent problems by putting the work rules and wage regulations in order. For when work rules are mandatory, see from how many employees are work rules mandatory.

Who is responsible for arranging the work rules and for handling an unpaid-wage dispute?

The situations around a manager or supervisor divide by responsibility.

What is done	Whose responsibility
Designing posts, authority and treatment; putting in order work rules and wage regulations; designing the operation of the late-night premium and annual leave; attendance management	Shakai Hoken Roumushi (this office)
An individual unpaid-overtime claim, collective bargaining, labour tribunal proceedings and litigation	Attorney
Advice on the policy for responding to a labour standards inspection	Shakai Hoken Roumushi (responding to guidance; putting ledgers in order)

Designing manager-or-supervisor status and putting the work rules in order is the work of a Shakai Hoken Roumushi. This office handles sorting out the authority and treatment of a post, putting in order the work rules and wage regulations, operating the late-night premium and annual leave, and building the attendance-recording structure. An individual claim, litigation and collective bargaining are handled by an attorney, so they are separated as different roles.

What can 四葉社会保険労務士事務所 do?

四葉社会保険労務士事務所, in Kohinata, Bunkyo City, handles sorting out the reality of manager-or-supervisor status, designing posts, authority and treatment, putting in order work rules and wage regulations, designing the operation of the late-night premium and annual leave, and designing attendance management. For the duty of power-harassment prevention measures, see power-harassment prevention measures are mandatory for SMEs too; for the approach to payroll, see how much does it cost to entrust payroll to a Shakai Hoken Roumushi. Consultation is free. For fees, see the fee schedule; for frequently asked questions, see the FAQ.

Frequently asked questions

Q. Since store managers and section managers are "managers," do we not need to pay them overtime?
A. The title alone does not decide it. To be a manager or supervisor under the Labor Standards Act, the person must satisfy, in reality, three points: authority in a position integrated with management, discretion over start and finish times, and treatment befitting the position. If these are not met, the duty to pay overtime and holiday premiums remains.

Q. If someone qualifies as a manager or supervisor, is the late-night premium also unnecessary?
A. No. The late-night premium (10 p.m.–5 a.m.; 25% or more) applies even to a manager or supervisor. The Supreme Court has held that a late-night premium can be claimed even by someone who qualifies as a manager or supervisor (Kotobuki case, 18 December 2009). Annual paid leave must likewise be granted and taken.

Q. If we are pointed out as having a "manager in name only," how far back can claims go?
A. The extinctive prescription of a wage claim is, for the time being, three years (Labor Standards Act, Article 115 and Supplementary Provisions). If manager-or-supervisor status is denied, in addition to three years' worth of unpaid premium wages, the court may, at its discretion, order an additional payment up to the same amount (Article 114).

Q. If we pay a post allowance, does it substitute for overtime pay?
A. To treat a post allowance as fixed overtime pay (a lump-sum premium), you must meet requirements such as being able to distinguish the ordinary wage from the premium part and settling any shortfall. This is a separate issue from manager-or-supervisor status; simply adding an allowance is not enough.

Sources

• Labor Standards Act (Act No. 49 of 1947), Article 37 (premium wages; paragraph 1 = overtime/holiday, paragraph 3 = late-night 25% or more), Article 39 (annual paid leave), Article 41, item 2 (exemption for a person in a supervisory or managerial position), Article 114 (additional payment), Article 115 and Supplementary Provisions (extinctive prescription of wage claims; three years for the time being)
• Administrative interpretation on the scope of managers and supervisors = Notice Hatsuki No. 17 of 13 September 1947; Notice Kihatsu No. 150 of 14 March 1988 (the three elements of job content, responsibility and authority; work arrangements = discretion over working hours; treatment)
• On the appropriate scope of managers and supervisors at stores of multi-location retail, food service and similar businesses = Notice Kihatsu 0909001 No. 1 of 9 September 2008 (it does not change the basic judgment criteria, but organizes the elements that deny the status)
• The judgment that a late-night premium can be claimed even by one who qualifies as a manager or supervisor = Kotobuki case, Supreme Court Second Petty Bench judgment of 18 December 2009
• The general approach that denied manager-or-supervisor status of a store manager = McDonald's Japan case, Tokyo District Court judgment of 28 January 2008. Whether an individual case qualifies is judged differently depending on the circumstances
• The late-night premium rate and the requirements for granting annual paid leave are confirmed from materials published by the Ministry of Health, Labour and Welfare (as of September 2026)

This article does not decide whom to consult. Designing posts, authority and treatment, putting in order work rules and wage regulations, operating the late-night premium and annual leave, and designing attendance management are the work of a Shakai Hoken Roumushi. An individual unpaid-overtime claim, collective bargaining, labour tribunal proceedings and litigation are the work of an attorney. For fees when consulting 四葉社会保険労務士事務所, see the fee schedule; for frequently asked questions, see the FAQ.

This article is general information. A judgment on individual circumstances is made by a qualified professional after a consultation. Written by Joji Uramatsu (Shakai Hoken Roumushi, Gyoseishoshi, Registered Real Estate Transaction Specialist).