Labor and management together can freely determine and adjust wages through labor contracts, employment rules, and collective agreements. An employer unilaterally cutting wages has no effect. Reductions, freezes, or wage returns are unfavorable changes to working conditions, so legal procedures must be adhered to by the labor and management before taking such steps.

1. Wage Increases and Wage Reductions
Wage increases are decided through collective bargaining if there is a labor union. Wages have generally been raised every year through collective bargaining between labor and management, and if negotiations do not result in wage increases, the labor union increases the pressure through strikes. Employers generally increase their workers’ wages to the minimum extent acceptable to the labor union. Wages can also be reduced through collective bargaining if the economy is bad or the company is in trouble. In this case, if the union consists of a majority of the workers concerned, non-union members are also affected by the wage adjustment concluded by the labor union due to the general binding force of the workplace (Article 35 of the Labor Union Act). In workplaces without a labor union, wage increases are determined unilaterally by the company within an appropriate range through changes to the employment rules or labor contract. However, since wage reductions are regarded as an unfavorable change working conditions, an agreement between labor and management is necessary.
Wage reductions refer to a lower wage than before being paid at a certain point in the future. The total wages paid is lowered by reducing or abolishing the basic wage and/or various allowances, with the process carried out in a manner decided in collective decision-making. If there is a majority union, this is done through a collective agreement, but if there is no majority union, it is necessary to go through the procedures required to make unfavorable changes to the employment rules. Even if labor and management have agreed, wages cannot be reduced below the minimum wage level, and additional rates or legal allowances (such as overtime/night/holiday work allowances, weekly holiday allowance, annual paid allowance, etc.) are not subject to reductions, in accordance with the Labor Standards Act.167) Also, the reduced wage is not included in the calculation of average wage.

2. Wage Freezes
Freezing wages refers to keeping wages the same for future work as was paid for past work of the same type. In cases where a company regularly increases regular wage, ceasing or additionally restricting this regular increase in wage is an unfavorable change to working conditions. The company can freeze wages through amendment of the collective agreement or following the procedures for changing the employment rules disadvantageously. However, it is not a disadvantageous change to working conditions if wages are frozen when there is no regular salary increase.

3.        Wage Returns
Wage returns refer to the return of wage bonds (wages, bonuses, etc.) already incurred for previous work based on the free-will consent of the individual worker. Due to the waiver of the right to claim wages that occurred legally, wages can only be returned through due process. Since a unilaterally-determined wage deduction by the employer violates the principle of paying full wages, individual workers' written consent is required.168) However, even in this case, any waiver of the right to claim severance pay is invalid because it violates the Labor Standards Act.169)
For procedures to be deemed reasonable, individual workers’ consent is required. Since the return of wages is effective only if it is the individual workers’ voluntary decision, individual workers must recognize the purpose of wage returns and sign a return consent form in their own name.170) While the court holds that it is desirable to obtain consent for each individual worker when returning wages, it is also possible to obtain individual consent by having workers sign a name list of workers if the company has sufficiently explained the difficult situation to the workers.171) An agreement to return wages in the collective agreement has no effect. This is because the return of wages involves wages that already belong to individual workers, and the union cannot be forced to abandon individual member property rights. Wages returned by workers come from the workers' income and are returned voluntarily, and the employer is not obligated to return them again to the worker.172) Returned wages are included in the calculation of average wages as they are wage bonds that were given to the employee and then returned to the employer by the employee.