The Hidden Intentions of the Ministry of Health, Labor and Welfare Behind the Start of Digital Salary

PayPay is also used to send money to ……

Izumi Maruko, who runs a “Life and Money” consultation office in the Tokyo metropolitan area, has a student daughter. She says, “I ask my daughter what she wants to send home, and depending on the month, I sometimes send money to her via PayPay instead of to my bank account. Unlike sending money to a bank account, there are no fees, and if her daughter plans to use PayPay, it is convenient. Some of her daughter’s friends also use PayPay to send money from their parents.

Mr. Maruko, a first-class financial planning technician, also said.

Some young people say they use PayPay to pay for all of their part-time jobs. There is a generational difference in how familiar they are with electronic money. Younger people who don’t have a bank account will welcome PayPay payments.”

PayPay has an app on the smartphone, and there are several ways to charge (deposit) money, such as cash at a designated bank or from an account. When paying for a purchase, the user pays by scanning a QR code with his/her smartphone. With a smartphone, there is no need to carry a wallet.

Even in Japan, which has been a cashless backward country, people are increasingly using QR payments and other forms of electronic money to pay for purchases and services. Contactless is gaining popularity in favor of the COVID-19 crisis, and some e-money offers attractive rewards such as points awarded based on the amount spent.

The ban on “digital payroll” will be lifted in August. …… “Who says it has to be electronic money?”

With the spread of electronic money, the system was recently revised to allow workers to receive their salaries not only in cash but also in electronic money. PayPay was approved in August of this year as an accepted form of electronic money, and SoftBank Group companies began offering the “PayPay Payroll Receipt” service to their employees.

Digital payroll payment is subject to the wishes and consent of the employee. Other e-payments that can be received include Rakuten Pay, which is awaiting review and is likely to expand its coverage. What are the benefits of digital payroll to workers?

According to the Ministry of Health, Labor, and Welfare (MHLW), which has jurisdiction over the introduction of digital payroll, the introduction of digital payroll is in response to the spread of cashless payment and the need for diversified means of remittance, and in particular, it will eliminate the need to charge electronic money by oneself.

A person in charge of wage-related matters at the Ministry of Health, Labor and Welfare’s Labor Standards Bureau commented, “There is a certain need for digital salary, and it is one of the options. If there are people who want to have their wages transferred as salary, they can use it,” he said. Furthermore, for part-time workers and day laborers, who until now have been paid in cash on a daily basis, electronic money will also be an option for payment in the future.

Regarding the introduction of digital payroll, Mika Koizumi, Product Manager and Director of Financial Liaison at Free Corporation (Shinagawa-ku, Tokyo), which supports human resources, labor, and accounting operations, said, “It is an option because it eliminates the need to charge (to electronic money). Not only ordinary workers, but also a growing number of foreign workers may not be able to immediately open a bank account in Japan, and receiving wages not only in cash but also in electronic money may be desirable, she said. In order for foreigners to open a bank account, they need to reside in Japan for a certain period of time or have a residence card and a certificate of residence.

Companies are also showing interest in introducing digital wages. In addition to the Softbank Group, which has already introduced the system, Koizumi said, “Sakai Moving Center and NICHIGAS are also considering it,” and he believes it will appeal to industries with many part-time workers when hiring.

For companies that have introduced the digital salary system, “it will appeal to young people and others who understand digital technology,” said Eiji Taniguchi, chief researcher at the Japan Research Institute. The spread of digital payrolls will depend on the extent to which e-payroll operators “conduct campaigns,” he said. On the other hand, he also wonders, “Are there people for whom this (electronic money) is the only way? It is difficult to predict how many people will want to be paid digitally, he said.

PayPay’s “balance held” is capped at 200,000 yen.

Regarding digital salaries, Maruko mentioned above said, “When I asked people around me, the overwhelming majority of them wanted their paychecks transferred to their bank accounts. On the other hand, “some wanted the money transferred via PayPay, and some said they would welcome a monthly amount of 20,000 yen, as it would save them the trouble of recharging the account,” he said.

Electronic money is about paying for what you use for daily consumption and is not intended to be held in arrears,” said the aforementioned Koizumi. The amount and frequency of use of electronic money differs from person to person, and furthermore, the amount used can fluctuate greatly depending on the time of year. Even if a person receives a portion of his or her salary electronically in a fixed amount once a month, if the amount used is low, the electronic money retention (balance) will grow.

There is a limit of up to 1,000,000 yen in the remaining balance held for digital salary payments. Within that limit, the full or partial amount of salary can be received in digital payroll. Ordinary electronic money cannot be converted back to cash once it is charged, but electronic money that is recognized as digital salary can be converted back to cash. When the amount in arrears reaches 1 million yen, the excess is transferred to a designated bank account. PayPay, which has already been approved, limits the maximum balance held to 200,000 yen.

Even if the salary is paid in electronic money, the excess amount over the retention limit will be converted into cash and transferred to the bank account, thereby eliminating the meaning of digital salary. On the other hand, if the e-money received in the digital salary is set lower than the monthly usage amount, the applicant will have to recharge additional funds by him/herself.

It is likely that many people who wish to receive a digital salary will receive a portion of their salary instead of the full amount, and businesses that pay their employees will have to take the trouble of spreading the money transfer between their bank accounts and electronic money.

I thought you said, “Why not just auto-charge?” Some said: ……

When Mr. Taniguchi, mentioned above, asked his wife if she would use digital payroll if it were introduced, she replied that she would not. He said he would not, because some electronic money has an auto-charge function that automatically recharges from a bank account or other source, and if he could make good use of this function, he would not need to receive a digital salary.

Some e-money has an auto-charge function that works in conjunction with a bank account or credit card to deposit the money. For example, if a balance is set, it will be automatically recharged when the balance drops below that level after use. The amount of the charge can also be set. The availability and mechanism of the auto-charge function varies from e-money to e-money.

Mr. Maruko, aforementioned, says, “I recharge without auto recharge, but I don’t think it is a hassle. It is a hassle to go all the way to a convenience store to recharge, but I can do it in the middle of the night with an app on my smartphone,” he said.

Digital pay depends on how the e-money is used, so it is difficult to say that it is beneficial to all workers. Some e-money can be linked to a bank account and can be recharged automatically or at hand, and if you use it in a way that suits you with convenient features, you do not need a digital salary. On the other hand, there is a possibility that digital payroll will become popular among the younger generation and others who are accustomed to using it, such as those who live on e-money.

One of the reasons for the introduction of digital salaries, according to Koizumi, is to allow not only banks and other financial institutions, which are strongly regulated by the financial authorities, but also “fintech companies” that handle electronic money and other forms of payment to participate. Fintech is a term coined by combining finance and technology, and technological innovation is progressing by combining financial services and information technology (IT), and the financial community is providing new services such as money transfers via PCs and smartphones. This is where fintech companies are trying to find business opportunities.

What is the hidden agenda of the “Ministry of Health, Labor and Welfare”? ……

RENGO (Japanese Trade Union Confederation) states that “Wages are compensation for labor, and the account to which wages are paid must be secure and reliable. The e-money operators that are eligible for digital wages are limited to those that meet certain requirements and have mechanisms in place, such as prompt guarantees in the event of bankruptcy and compensation in the event of losses to workers due to unauthorized use.

Recently, e-money operators have been enclosing consumers by granting points and other means, forming their own “economic blocs. Koizumi says, “I think that e-money operators who are working in economic spheres will target digital salaries.

If recognized by the MHLW as eligible for digital salary, the e-money will be seen as having high social credibility. For e-money operators, the fact that their e-money is eligible for digital salary will be a plus for their business development.

The MHLW, which has been promoting the introduction of digital salaries, will also be in a position to recognize e-money operators, not only in the medical industry, as they will have a point of contact with them and be recognized as eligible for digital salaries. The financial industry, including banks, is under the jurisdiction of the Financial Services Agency, but the Ministry has also established connections with fintech companies that play a role in this growing industry.

There are many aspects of the digital salary system that are not clear to what extent it will benefit ordinary workers, but it is certain that it will at least benefit e-money operators and the Ministry of Health, Labor, and Welfare.