Photo/Illutration A shop in Kawagoe, Saitama Prefecture, shows the cashless payment methods it accepts on Sept. 13. (Toru Nakagawa)

Companies are expected to be allowed to digitally pay their employees’ wages to their cashless accounts in the next fiscal year, at the earliest.

A panel of representatives from trade unions and employers within the labor ministry broadly agreed on the plan at its meeting on Sept. 13.

However, Yuko Tomitaka, head of the general policy promotion department at Rengo (the Japanese Trade Union Confederation), said discussions on this topic will continue.

“Wages support workers’ lives, and, therefore, their safety and certainty must be guaranteed," Tomitaka said. "We can’t easily accept something with questionable safety just because it is convenient.”

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.

However, experts have argued that employees who are paid their wages digitally could be at risk of losing money if money transfer business operators go bankrupt or if their digital accounts are used for fraudulent transactions.

To prevent such a risk, the labor ministry will establish a system to compensate, as a general rule, all lost funds in such circumstances.

In that system, money transfer business operators could be required to deposit a guarantee as funds to compensate employees in case such problems occur.

The government is expected to amend relevant legislation or ordinances as is necessary by the end of this fiscal year.

The Labor Standards Law requires employers to pay wages to their employees in cash.

However, it allows employers to pay wages to employees’ bank accounts or through other means in exceptional cases.

The government will add digital accounts to the means that employers can use to pay wages in exceptional cases.

A total of 85 money transfer business operators were registered with local finance bureaus across Japan as of the end of August.

The labor ministry will designate those meeting certain conditions as ones whose cashless accounts can be used to pay wages.

To digitally pay wages, companies must strike an agreement with trade unions or something similar regarding the scope of employees eligible or money transfer business operators to be used.

After such agreements are signed, companies will be allowed to pay all or part of the wages to digital accounts if the employee so chooses.

To prevent companies from digitally paying wages against their employees’ wishes, employees must submit a written consent.

Labor standards inspection offices or other authorities will instruct companies if they don’t comply with this rule.

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