Japan to allow businesses to pay salaries into app accounts

I feel the guiding hand of Kono Taro: Japanese businesses will soon be able to pay salaries into app accounts!

As Japan slowly shifts away from cash, the government is expected to allow businesses to pay salaries into cashless payment accounts, which have gained widespread use in the age of the smartphone. A subcommittee of the Labor Policy Council, which advises the labor minister, discussed the so-called digital salary payments at a meeting Tuesday. At the meeting, the labor ministry presented a plan to put a ¥1 million cap on the amount of digital salary payments that can be made at one time and the balance of funds in cashless accounts used for such salary payments.

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Under the plan, companies will be allowed to pay wages to cashless accounts such as PayPay, d-barai, or Rakuten Pay. Operators of such digital accounts are called money transfer business operators. The balance in an employee's cashless account will be capped at 1 million yen ($6,923). Any amount beyond the threshold will be paid the usual way, including through the employee's bank account. Digital wage payment enables employees to use cashless payments without depositing funds into their digital accounts. Foreign employees may be able to transfer funds to those in their home countries with lower fees through digital accounts compared to traditional bank accounts.

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Kind of sounds like a pain in the arse for a company's payroll officer. Its OK if the payments are always below 1,000,000 yen (which probably accounts for 90% of the payments), but if you have a payment or a bonus over 1 million yen, and the company has to remember which account to pay into, it starts to be a bit of an administrative issue.

Its a step in the right direction, I guess, but might as well go the full way and make all payments acceptable. This "allowed but limited" ends up being more trouble than its worth, so companies self-select out of the system. Its and efficiency and accountability issue. No HR person or accounts payable person wants to be responsible for paying into multiple accounts depending on the amount, especially with a big company. I don't get what they are trying to prevent by limiting the amounts.

It reminds me of the time in the early (mid) 90s, when the government announced that stores could accept payment in US dollars. It got a ton of coverage on the news, but nobody actually pays in dollars because its too much of a pain for retailers and taxi drivers, etc.. to deal with. Plus, who would pay in dollars when everyone's salary and income is all in yen.

It's like a symbolic liberalization of accounting rules, without really relaxing any accounting rules. Like announcing everyone can now use a hanko with purple ink instead of red ink, but there is no ink maker who dares make purple ink because there is no market for it.

Majestic said:

I don't get what they are trying to prevent by limiting the amounts.

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I wouldn't be surprised if its a limitation imposed by the payment apps. I would suspect that once you hit a certain amount things become "more complicated" for them. Like special government reporting for "large" transfers or something. Could even be tax related.

Yes, I'm sure you are right. It just feels like its a not-very-well thought out measure. It feels that if they were going to the trouble to partially de-regulate it, they may as well have gone the whole way to deregulate, and coordinate with the payment providers to clear any reporting requirements there may be. 1,000,000 feels just annoyingly low enough to make companies want to avoid offering this to employees. But maybe I'll be proven wrong. Maybe this is aimed at the casual labor (gig, part-time, arubaito) who will only get small-ish amounts, and not for company employees who are likely to get 1M at least once a year.

According to the Ministry of Health, Labour and Welfare, Japanese companies will be allowed to pay wages to digital payment apps like PayPay and Rakuten Pay from April 2023. As stated above, the maximum balance of such digital wallets will be set to 1 million JPY (USD 6,800), with employees able to use the funds to make purchases or remittances directly.

The upper limit was determined amid concerns that app users cannot be protected sufficiently. Unlike banks, operators of the apps are not subject to the nation's deposit insurance system, which covers principal of up to 10 million yen in case of bankruptcy. [...] While the revised ordinance is expected to come into effect in April, its implementation is unlikely to begin until several months later. Screening of app operators must be completed first, and companies considering digital wage payments also have to obtain consent from employees, the ministry said. The operators will be required to immediately transfer balances exceeding 1 million yen to bank accounts and to fully compensate losses incurred due to bankruptcy or unauthorized transactions, among other conditions.

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