Japan Work Visa: The Legal Red Lines of Demotions and Pay Cuts for Foreign Employees

This article is written by a Japanese local.

In personnel management, it is possible for a company to issue “demotions” or “pay cuts” to employees due to poor performance or business downturns. However, when the subject is a foreign employee, applying disciplinary actions with the exact same mindset used for Japanese employees risks triggering severe compliance violations.

The employment of foreign nationals is governed by a second, strict set of regulations known as the “Immigration Control and Refugee Recognition Act” (Immigration Act), in addition to labor-related laws. This article thoroughly explains the legal red lines that companies must never cross and the practical approaches for reflecting personnel evaluations legally.

1. The Trap of the Absolute Rule: “Equal or Greater Remuneration Than Japanese Nationals”

One of the absolute conditions for maintaining and renewing a work visa (such as Engineer/Specialist in Humanities/International Services) is a clear provision stating that the foreign national must “receive no less remuneration than would a Japanese national engaged in comparable work.”

Salary Comparisons and the Minimum Wage Barrier

When executing a pay cut, if the revised amount falls below the “salary level of Japanese employees performing similar duties” or drops below the regional minimum wage, it immediately constitutes a violation of both the Immigration Act and the Minimum Wage Act.

Furthermore, if there is a significant reduction from the salary amount declared to the Immigration Services Agency when the visa was originally obtained (upon joining the company), it will be deemed a “disadvantageous change without justifiable reason” during the next visa renewal, drastically increasing the risk of denial. The salary amount is a fundamental element of visa screening, and careless reductions directly result in stripping the individual of their status of residence.

2. The “Double Bind” of the Labor Contract Act and Immigration Act

In practice, the most common pitfall companies fall into is a discrepancy regarding “the employee’s consent.”

Under the Japanese Labor Contract Act, even for a pay cut, if the company explains a rational reason and the worker signs a “consent form,” the procedure itself may be validly established. However, clearing labor laws does not necessarily mean clearing the Immigration Act.

Even if the employee agrees, stating, “I want to work at this company even if my salary is reduced,” the Immigration Services Agency will mercilessly deny the visa renewal if the post-reduction amount does not meet the aforementioned “equal or greater than Japanese nationals” standard. In foreign employment, it is always necessary to clear both the “Labor Law” and “Immigration Law” hurdles simultaneously.

3. The Risk of Reassignment to “Unskilled Labor” Following Demotion

Even more dangerous than a pay cut is a “change in job duties (reassignment)” accompanying a demotion. This occurs when an employee is removed from management or professional roles, and the new duties deviate from the scope of activities permitted under their current visa.

Falling into Activities Outside the Scope of Permitted Status (Illegal Employment)

For example, it is strictly prohibited by law to demote an employee who was in overseas sales or marketing due to poor performance and assign them exclusively to “unskilled labor (duties deemed to lack advanced specialized skills),” such as factory line work, warehouse picking, or restaurant hall staff.

The moment this is executed, the employee enters a state of “engaging in activities other than those permitted (illegal employment),” and the company can be charged with the crime of promoting illegal employment (punishable by up to 3 years in prison or a fine of up to 3 million JPY). Even after a demotion, the employee must be assigned “specialized or technical duties” that conform to their visa.

4. Practical Steps for Legally Executing Personnel Evaluations

To safely and legally reflect personnel evaluations for underperforming foreign employees and prevent trouble before it occurs, the following steps must be strictly followed:

• Objective Evaluation Based on Work Rules: Conduct evaluations based on reasonable and objective facts (records of tardiness, operational errors, poor performance) in accordance with the rules of employment and wage regulations applied equally regardless of nationality.
• Prior Verification with Visa Requirements: Before deciding on disciplinary action, you must verify that the reduced salary is “equal to or greater than Japanese nationals” and “above the minimum wage,” and that the demoted job duties fall “within the scope of activities of the current visa.”
• Thorough Explanation and Documented Consent: Accurately explain the reasons for the action and the improvement plan in accordance with the individual’s level of Japanese comprehension. Always create a written agreement (including a translation in their native language if necessary) and have both parties keep a copy.

Personnel transfers and salary revisions for foreign employees are always accompanied by the absolute constraint of “requirements to maintain the status of residence.” Implementing a logical and highly transparent process, incorporating legal compliance checks across both labor and immigration laws before issues escalate, is the most reliable defense measure to protect both the company and the employee.