Japanese Companies Will Be Able To Pay Salaries Via Apps

Just about two weeks ago the Labour Policy Council discussed paying digital salaries to workers instead of traditional cash through bank accounts.

Despite the fact that Japanese law permits only cash payments for salaries, businesses are allowed to use accounts at financial institution as recipients of the salary. Now that there is an initiative to go digital in this area, the government has opened up an opportunity to make remittances to cashless accounts. However, a survey conducted by Works Human Intelligence found that less than 30% of companies are considering implementing digital salary payment due to high system and operational costs.

The balance in employee’s cashless account will be limited to ¥1 million; any sum exceeding the stated amount will be remitted elsewhere designated by the recipient beforehand - it might be a transfer to a bank account or a payment in cash.

The major representatives of cashless payment apps, who are called money transfer business operators, are PayPay, d-barai, and Rakuten Pay. In total, 85 operators were registered to provide such services. Although Japan stays rather cash-based with cashless payment ratio 32.5% (the ratio includes credit and debit cards), mobile payment platforms have developed rapidly in the country. PayPay alone has 47 million registered users as of 2021.

However, there are worries that such apps might not be safe, and there is no guarantee that money transfer business operators don't become bankrupt.

“Wages support workers' lives, and, therefore, their safety and certainty must be guaranteed. We can't easily accept something with questionable safety just because it is convenient.” Yuko Tomitaka, head of the general policy promotion department at Rengo (the Japanese Trade Union Confederation)

That is why the ministry has taken on the responsibility to compensate all funds to victims in case any digital accounts' providers go down. Moreover, it is impossible to shift an employee to digital salary without their written consent.

The main advantages of such method of payment are lower fees for international remittances and free monthly cash withdrawals.

The labour ministry promises to launch the pilot of this project by the end of March 2023, at the earliest. Can’t wait to see the first results!