*Editorial Note: This article was written by a Japanese expert in immigration law residing in Japan. It has been directly translated to deliver raw, accurate information.
Taking disciplinary action such as a “demotion” or “pay cut” against an employee due to poor performance or poor business results is a situation that can occur in HR management. However, if the target is a foreign employee, conducting disciplinary action with the exact same mindset as for a Japanese employee risks triggering serious compliance violations.
In addition to the Labor Standards Act, the employment of foreign nationals is subject to a second strict regulation: the Immigration Control Act. In this article, we explain the legal red line that companies must absolutely never cross.
1. The Trap of the “Remuneration Equal to or Greater Than Japanese Counterparts” Rule
One of the absolute conditions for maintaining a work visa (such as Engineer/Specialist in Humanities/International Services) is a clear regulation stating that the individual must “receive no less remuneration than would a Japanese national engaged in comparable work.”
When implementing a pay cut, if the amount falls below the “salary level of Japanese employees performing the same type of work,” or drops below the regional minimum wage, it becomes a violation of the Immigration Control Act. Furthermore, if there is a significant reduction from the salary amount declared to the Immigration Bureau when the visa was acquired, it will be deemed a “disadvantageous modification without justifiable reason” at the next visa renewal, and the risk of the renewal being rejected skyrockets.
2. The Risk of Reassignment to “Unskilled Labor” Following a Demotion
Even more dangerous than a pay cut is a “change in job duties” accompanying a demotion. This is a case where, as a result of removing someone from a management or specialist position, the new job duties deviate from the scope permitted by the visa.
For example, it is prohibited by law to demote an employee in charge of overseas sales and reassign them to “unskilled labor” (duties deemed to lack expertise) such as line work in a factory, picking in a warehouse, or floor staff at a restaurant. The moment this is executed, the employee falls into a state of “engaging in activities other than those permitted (illegal labor),” and the company will be held liable for the crime of facilitating illegal labor.
3. Practical Steps for Lawful Performance Evaluation
In order to lawfully and safely reflect performance evaluations for underperforming foreign employees, the following steps must be taken.
- Objective Evaluation Based on Employment Rules: Make evaluations for logical and objective reasons based on the rules of employment and wage regulations that apply regardless of nationality.
- Verification with Visa Requirements: Confirm in advance that the salary after the pay cut is “equal to or greater than Japanese counterparts,” and that the job duties after demotion are “within the scope of activities of the current visa.”
- Sufficient Explanation and Documented Consent: Accurately explain the details and reasons for the action in accordance with their level of Japanese comprehension, and retain a written agreement (preferably with their native language alongside).
Personnel transfers and salary revisions for foreign employees are always accompanied by the constraint of “visa maintenance requirements.” Before problems become complicated, involving an audit by an expert well-versed in both employment contracts and immigration law is the most reliable defense measure to protect your company.