Hire in Japan

EOR in Japan

If a lack of speed or local expertise are among your top concerns when expanding to or employing workers in Japan, an employer of record may be the best option for achieving your global growth objectives.

An employer of record, sometimes known as an international PEO, enables you to quickly hire and onboard workers in Japan ―often in as little as two weeks―without having to take on the cost and risk of establishing a local entity.

Learn about the hiring, employment, payroll and benefits requirements for workers in Japan and how our employer of record service, EOR, and local HR experts can help you manage your international employment needs. 

Hiring in Japan

Japan enacted many of its key employment-related laws in the aftermath of World War II, among them the 1947 Labor Standards Act, which governs the employee-employer relationship; the 1946 Labor Relations Adjustment Act, which governs collective bargaining and the 1949 Labor Union Act, which governs labor unions.

Major revisions or additions to employment law include amendments to the Labor Standards Act boosting overtime pay, which went into effect in 2010, and a revised child care and family care law, passed in 2009, designed to help employees better balance work and family responsibilities.

The Labor Contract Act requires that an employment agreement between an employer and an employee be in writing. 

Employment contracts in Japan

As you look to hire employees in Japan, here are some standard regulations you’ll need to know to create a compliant contract, as well as how an employer of record and PEO can provide support for your unique HR needs.

Working hours

The Labor Standards Act sets the regular Japanese workweek at no more than 40 hours and the standard workday at no more than eight hours, subject to certain exceptions relating to flexible work schedules.

Overtime hours are those where an employee works more than 40 hours in a week or eight hours in a day and are limited to 45 hours per month and 360 hours per year.

Employers must provide workers with at least one rest day per week or at least four rest days during a four-week period. Employers also must provide rest periods of at least 45 minutes if the workday exceeds six hours and at least one hour if the workday exceeds eight hours.

Compensation

As you consider the appropriate salary to offer new employees, keep in mind:  

• Effective October 2, Tokyo’s hourly minimum wage is 1,163 yen.
• When an employee’s absence from work is caused by the employer, as in a temporary layoff, the employer must pay the employee an allowance equal to 60% of normal wages. 
• Employers are required to pay an employee an overtime premium of 25% for overtime hours that the employee worked during a month for each of up to 60 overtime hours that the employee worked during the month. If an employee works at least 45 overtime hours in a month but not more than 60 hours during the month, the overtime premium customarily is more than 25% and up to 50% as negotiated between the employer and employee. 

As your employer of record in Japan, we can provide you with resources and insights about employee compensation, so you are better equipped to make a competitive employment offer.

Bonuses

Although not required by law, Japanese companies commonly give a winter and a summer bonus.

If a bonus scheme is set by an employment contract, the payment is legally classified as wages and employers are legally obligated to pay it.

Probationary period

Employers can establish a probationary period of up to one year, but periods lasting between three and six months are more common in practice.

Termination and severance

Methods of termination generally fall into one of three categories:  

• Resignation (mutual agreement between employer and employee) 
• Dismissal based on the Labor Standards Act or civil code 
• Disciplinary dismissal 

An employee’s resignation presents the lowest risk to the employer.

Generally, an employer must give an employee at least 30 days' notice of termination or pay the employee 30 days wages in lieu of such notice.

Severance pay is not mandated by law. If a resigning employee requests, the employer must pay any outstanding wages within 7 days. 

Employee benefits and paid leave in Japan

When negotiating terms of an employment contract with a candidate in Japan, here are some of the statutory benefits and paid leave requirements to keep in mind, as well as how an employer of record can support your company’s benefits strategy.

Maternity leave

A female employee is entitled to take maternity leave for up to six weeks preceding the expected date of birth, up to 14 weeks if she is expected to give birth to more than one child. After childbirth, the mother is required to take eight weeks’ leave.

New mothers are entitled to two 30-minute nursing breaks daily for up to 12 months following childbirth.

An employer need not pay wages during maternity leave unless its work rules require it. Employment insurance provides compensation of 60% of the employee’s wages for six weeks of maternity leave prior to childbirth, 14 weeks if the mother expects more than one child, and eight weeks after. If the employer wishes to pay the employee while she is on maternity leave, its social insurance liability will be reduced by the amount paid.

Vacation

Employees who have been employed for at least six months and who have reported for work on at least 80% of their working days during that time are entitled to 10 days of paid annual leave.

Employees are entitled to an additional day of vacation for each of the following two years of employment and an additional two days of vacation for each of the subsequent four years of employment. The maximum amount of paid vacation is 20 days.

Leave may be taken consecutively or incrementally and up to two years of unused vacation may be carried forward.

Employers must ensure that employees entitled to 10 or more days of annual paid leave take at least five of these each year.

Employees are not entitled to paid annual leave for any year in which they do not report for work at least 80% of their working days.

Holidays

The national holidays typically set by the government each year are as follows: 

• New Year’s Day 
• Coming of Age Day (Second Monday in January) 
• National Foundation Day 
• Emperor’s Birthday 
• Vernal Equinox (date in March varies) 
• Showa Day 
• Constitution Memorial Day 
• Greenery Day 
• Children’s Day 
• Marine Day (Third Monday in July) 
• Mountain Day 
• Respect for the Aged Day (Third Monday in September) 
• Autumnal Equinox (date in September varies) 
• Health and Sports Day (Second Monday in October) 
• Culture Day 
• Labor Thanksgiving Day 
• Emperor’s Birthday 

A national holiday that falls on a Sunday is celebrated the next day. Government offices, banks, and most nonretail businesses are closed on national holidays, but many restaurants and stores remain open.

Sick leave

Employers are not required to provide sick leave, but it may be included in an employer’s work rules or in collective bargaining agreements. Japan’s national health insurance program entitles employees to two-thirds of the applicable standard wage as sick leave allowance after three days of absence for 18 months.

Health coverage

Health insurance premiums also are shared equally between the employer and the employee. They depend on the employer’s location and the health insurance in which the employer participates. Workers’ accident compensation insurance is paid by the employer, at rates that vary depending on the type of business.

Additional benefits

In addition to healthcare benefits, employees in Japan are entitled to pension, which is funded by government tax revenues, as well as workers compensation, which is covered through mandated employer insurance.

Employer social costs will cover a large portion of employee benefits in Japan, but we can consult with you about supplemental coverage options, such as additional pension contributions or life insurance if needed.

Updated: October 03, 2024 

Employee onboarding with an employer of record in Japan

We write and validate all local employment contracts, streamlining the onboarding process for you and your Japan employees—all you have to do is provide relevant information and review and approve the employment agreement. As your employer of record in Japan, we will:   

• Schedule a welcome call to discuss HR and employment information for Japan, as well as answer any questions 
• Prepare a customized employment contract in English or other local language 
• Share the employment contract and benefits information with the new employee for signature and review 
• Gather tax and banking information from the employee to set up payroll 
• Provide a local point of contact to the employee to answer any questions regarding their employment, local HR or payroll 

The entire onboarding process for the employee is often completed in as little as two weeks. 

Partner with Safeguard Global as your Japan employer of record and PEO

With over a decade of service, we are the longest-serving employer of record and PEO provider in the international market. Organizations around the world rely on EOR, our employer of record solution, to expand and hire in 170+ countries around the world, quickly and compliantly.

We’ve seen just about every global employment circumstance imaginable—and with our extensive knowledge of local law and culture, we know what it takes to get employment right in Japan. We provide written contracts in the local language, salaries in the local currency and HR support in your employees’ time zone.

Additionally, as a global payroll provider we support payroll administration—including payments, filings and other calculations— all around the world and can accommodate the payroll outsourcing needs of any size organization.

Whether you’re looking to hire as part of a strategic expansion or to meet specific talent needs, our global solutions advisors can walk you through your international hiring options so you can make the right choice for your organization. Contact us today.