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The Health, Labor and Welfare Ministry has decided to lift the ban on e-money salary payments in which employees’ wages will be transferred to smartphone payment apps.
The main prerequisite is to ensure that workers receive their wages because they are an important foundation for their livelihood. Safety must be a top priority in the creation and operation of this system.
The Labor Standards Law stipulates that companies must pay wages in cash in principle. Paying wages into accounts at financial institutions has been allowed as an exception. This time, paying into accounts of payment apps will be newly added to this exception. The new payment method is scheduled to begin in April next year.
Among e-money service providers, businesses that offer money transfer services — such as PayPay and Rakuten Pay — are expected to be used in the new system. This is expected to increase convenience for those who use cashless payments frequently and for foreign workers who may have difficulty opening bank accounts.
Banks are covered by the public deposit insurance system, which protects mainly principal up to ¥10 million in the event of a bank failure and ensures prompt payments. However, e-money businesses do not have such a safety net in place.
If e-money salary payments are to be allowed, it is essential to assure the protection of salaries and to dispel workers’ concerns.
The government stated in its growth strategy compiled in July 2020 that e-money salary payments would be institutionalized promptly within fiscal 2020. However, concerns were raised by labor unions at expert panel meetings, resulting in a significant delay.
The labor ministry has decided to limit the maximum balance in the app accounts into which salaries are transferred to ¥1 million under the new system.
It has also proposed that e-money salary payments will be limited to cases in which an individual worker agrees to it, and that a mechanism will be established to guarantee the full amount up to ¥1 million and pay it within four to six business days, in principle, even if a fund transfer business operator goes bankrupt.
With these proposals, the ministry gained agreement from labor unions. However, the creation of a guarantee mechanism in the event of the failure of a fund transfer business operator will be left to the business side, so concerns remain.
For companies to pay salaries in e-money, the procedure is likely to be easier and cheaper than bank transfers in many cases, and there are fears that workers in a weaker position may be forced to accept e-money salary payments. Careful consideration must be given to ensure that workers are not forced to give consent.
When designating a fund transfer business operator to handle e-money salary payments, the government is said to be examining eight criteria, including the ability to pay promptly and a system that can accurately report payments and financial status in the event of bankruptcy. The labor ministry alone is unlikely to have sufficient knowledge in the financial field.
The ministry needs to work closely with the Financial Services Agency to rigorously inspect these companies.
