Guide to Hiring in Japan

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Guide to Hiring in Japan

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As the world’s third-largest economy, Japan is a relatively untapped market. Boasting quality and innovation, the Japanese market continues to offer numerous business opportunities with a high potential for businesses to maximise profits. Home to some of the world’s largest multinational companies, Japan keeps proving why it’s a great place to do business.

Keen to explore the Japanese business market? Links International has compiled a guide for you that includes employment laws and best practices you are required to follow when operating a business in Japan.

Please note that all the information listed below are to be used as a general guideline. For more detailed accounts of Japan employment laws and regulations, please visit the official governmental websites.

Labour Law – Basics

What are the basic requirements for employers in Japan?

For employers to legally employ employees in Japan, they must have the following registered:

  • Establish an entity as corporation, KK (Kabushiki Kaisha), GK (Godo Kaisha), or Branch is common formation, and prepare the corporate registry
  • Initial tax filing (registration) for national and local tax offices
  • Opening local Japanese bank account (in principle, Japanese taxes, social insurance premiums, and Labour insurance premiums can only be paid from a Japanese bank account)
  • Enroll Social Insurance as company (Statutory benefit)
    • Health Insurance
    • Employees’ Pension
    • Employment Insurance
    • Workers’ Accident Compensation Insurance

Upon the onboarding of new employees, employers must submit the respective pension and health insurance forms within 5 days of onboarding. This applies to both local and foreign employees who work in Japan, except for some employees seconded from overseas corporations.

In Japan, the Labor Standards Act stipulates five principles of wage (salary) payment: (1) in currency, (2) directly from employer to the employees, (3) the full amount, (4) at least once a month, and (5) Payment must be made on a fixed date.

In Japan, bonuses are generally paid twice a year during the summer and the winter. However, if payment is stipulated in the rules of employment or the employment contract, it is necessary to pay, but if there is no such provision, there is no problem if payment is not made. In addition, the amount to be paid and the number of payments per year will be determined by each company based on the company’s business performance and employment regulations.

Types of Employment in Japan:

  • Regular Employees –
    • Full-time, permanent contracts
    • Job security, full benefits, standard hours
  • Contract Employees –
    • Fixed-term contracts
    • Benefits similar to regular employees, limited by contract duration
  • Part-Time Employees –
    • Fewer hours than full-time
    • Flexible hours, pro-rated benefits
  • Dispatch Workers –
    • Employed by staffing agencies, dispatched to client companies
    • Benefits and employment conditions managed by the staffing agency
  • Freelancers / Independent Contractors –
    • Self-employed, contract-based
    • High flexibility, responsible for own benefits and taxes

Labour Standards Act vs. Rules of Employment vs. Employment Contract

  • Japan Labour Standards Act – Sets the minimum standards all employers must follow.
    • Japan Labour Standards Act was established in 1947.
    • The purpose of it is to protect workers’ rights and ensure fair working conditions.
    • It covers:
      • Working hours,
      • Wages,
      • Overtime,
      • Safety and,
      • Leave.
    • Mandatory Compliance: Sets the minimum standards all employers must follow.
  • Rules of Employment – Must comply with the LSA and be agreed upon by employees (need to be in Japanese for filing).
    • Company-specific regulations outlining employment terms
    • Company with 10 or more employees must submit to Labour Standard Office
    • Need to create in Japanese for filling purpose
    • Must comply with JLSA and other labour laws
    • Components:
      • Must describe: Hours, Holiday and Leave, Break Time, Wages, Retire/Termination
      • Covers specific details of employment conditions within the company
  • Employment Contract – Must adhere to the LSA and company’s ROE (no need to be in Japanese).
    • Legally binding agreement between employer and employee
    • Necessary to state the working conditions
    • Either languages are fine if the company and employee understand
    • Must comply with the JLSA and company’s Rules of Employment
    • Components:
      • Job title and duties, compensation, working hours, working place
      • Duration of employment, leave entitlements, termination conditions

What is the different work permits and visas in Japan?

Japan’s work permits and visas are divided into different categories:

  • Highly skilled professional visa:
    • Highly skilled professional – Those who are regarded as “highly-skilled human resources” within the range of the existing conditions.
    • Special Highly skilled professional – Highly skilled foreign professional with certain level of educational background, work history and annual income.
    • Highly skilled foreign professional – Dependents of the highly skilled professional.
  • Working visa:
    • Available for: Professors, artists, religious activities, journalists, business managers, legal/accounting services, medical services, researcher, instructor, engineer/specialist in humanities/international services, intra-company transferee, nursing care, entertainer, skilled labor, specified skilled worker and technical intern training.
  • Start-up visa:
    • Entrepreneur supported by municipalities in Japan and the spouse or children of the entrepreneur.

What to remember when hiring new employees?

  • Background checks:
    • The Act on the Protection of Personal Information (2003) states that personal information such as race, creed, social status, medical history, criminal records and having suffered damage by a crime must not be collected, unless an applicant’s consent has been taken.
    • The Employment Security Act states that an employer is prohibited from acquiring information which may become a cause for social discrimination including race, ethnicity, social status, family origin, domicile or birthplace, creed, personal beliefs, or history of union membership.
  • Restrictions on employee interview questions: During an interview process, employers should not ask the following:
    • Domicile of origin or birthplace
    • Family members’ status such as social status, education, etc.
    • Housing situation
    • Life and home environment
    • Religion
    • Political party support
    • Philosophy and personal creed
    • Person to respect
    • Personal beliefs
    • Union membership or activities
    • Preferred newspaper, magazines, and books.

 

What are the different discrimination laws in Japan?

Japan’s Labor Standards Act includes:

  • Principle of Working Conditions
  • Determination of Working Conditions
  • Equal Treatment
  • Principle of Equal Wages for Men and Women
  • Prohibition of Forced Labour
  • Elimination of Intermediate Exploitation
  • Guarantee of the Exercise of Civil Rights

In addition to the Labor Standards Act, there are the following provisions in the Act on Securing, Etc. of Equal Opportunity and Treatment between Men and Women in Employment.

  • [Article 5] With regard to the recruitment and employment of workers, employers shall provide equal opportunities for all persons regardless of sex.
  • [Article 6] With regard to the following matters, employers shall not discriminate against workers based on sex.
    • (I) Assignment (including allocation of duties and grant of authority), promotion, demotion, and training of workers;
    • (ii) Loans for housing and other similar fringe benefits as provided by Ordinance of the Ministry of Health, Labor and Welfare;
    • (iii) Change in job type and employment status of workers; and
    • (iv) Encouragement of retirement, mandatory retirement age, dismissal, and renewal of the labor contract.

 

What are the working hours in Japan?

Working hours are stipulated by the Labor Standards Act of Japan as follows.

  • Article 32:
    • (1) An employer must not have workers work more than 40 hours per week, excluding break periods.
    • (2) An employer must not have workers work more than 8 hours per day for each day of the week, excluding break periods.

However, if the following agreement is established between labor and management, it is possible to work overtime (so-called 36 agreements).

  • Article 36(1) Notwithstanding the provisions on working hours in Articles 32 through 32-5 and Article 40 (hereinafter in this Article referred to as “working hours”) and the provisions on days off in the preceding Article (hereinafter in this Article referred to as “days off”), if an employer has concluded a written agreement with the labor union that has been organized by a majority of the workers at that workplace, if there is one, or with a person representing a majority of the workers at that workplace, if there is no such union, and has filed a notification of this agreement with the relevant government agency pursuant to the provisions of Order of the Ministry of Health, Labor and Welfare, the employer may extend the working hours or have a worker work on a day off, in accordance with the provisions of that agreement.

Regarding break time, The Labor Standards Act stipulates the following.

  • Article 34(1) An employer must provide a worker with at least 45 minutes of break periods during working hours if working hours exceed 6 hours, and at least one hour of break periods during working hours if working hours exceed 8 hours.

Overtime Pay (Allowance) – Increased Wages for Overtime Work, Work on Days Off and Night Work (Article 37)

In case an employer requires a worker to work overtime, at night (10:00 p.m. to 5:00 a.m.) or on a statutory day off, the employer must pay the worker an increased wage in accordance with the following increase rate:

Different type of overtime pay:

Overtime WorkAt least 25%
Night WorkAt least 25%
On a statutory day offAt least 35%

Due to a revision of the Labour Standards Act, the rate of increased wages for work exceeding 60 hours of OT per month is 50% (1 April 2023).

What is the legal probation period in Japan?

While a probationary period is not mandatory, they typically last about three to six months for full-time employees.

 

What are the minimum wage requirements in Japan?

As of October 2023, Japan’s minimum wage increased to JPY 1,04 (USD6.5) per hour. However, this is a nationwide average, and the actual minimum wage varies by prefecture, ranging from JPY 893 to Tokyo’s JPY 1,113 (e.g. JPY 1,112 for Kanagawa, JPY 1,065 for Osaka).

In Japan, the Labour Standards Act stipulates five prinicples for wage (salary) payment:

  1. In currency
  2. Directly from employer to employee
  3. The full amount
  4. At least once a month payment
  5. On a fixed date

 

What to note for existing employees?

Firstly, the public insurance that employees will be enrolled in is divided into the following categories:

Labour InsuranceWorkers’ Accident Compensation InsuranceUnemployment Insurance
Social InsuranceHealth InsuranceEmployees’ Pension (Insurance)
  • Public Pension –
    • Category II insured persons in National Pension scheme in Japan are where regular employees and employees working shorter times at big companies are classified into. This is covered by the Employees’ Pension Insurance Plan.

 

  • Old-Age Pension Benefit –
    • Employees are eligible for the following benefit at the age of 65 years.

 

  • Disability Pension –
    • If an employee becomes disabled, he/she is eligible to receive a disability benefit in the form of a payment. The 3 classes of disability include:
      • Class 1 – Total disability requiring constant attendance.
      • Class 2 – Degree of disability restricting one’s ability to live independently.
      • Class 3 – Degree of disability restricting one’s ability to work.

 

  • Survivors’ Pension –
    • If an employee with an eligible dependent pass, the employee’s pension will be paid to the dependent.

 

  • Workers’ Accident Compensation Insurance –
    • Administered by the Japanese government, it is mandatory for most employes to have a workers’ compensation to cover their employees. This coverage includes medical care, loss of income, disability, or death of an employee due to occupation causes or accidents during the employee’s commute.

 

  • Unemployment Insurance –
    • Administered by the Japanese government, this employment insurance covers all employees and provides an allowance in case of unemployment, having trouble continuing employment, or receiving job-related educational training.

 

  • Health Insurance –
    • All Japanese employees whose most recent monthly scheduled working hours are less than three-quarters of the monthly scheduled working hours of ordinary workers employed at the same place of business are eligible for health insurance. If an employer has one or more employees, all employees who are eligible must be enrolled for health insurance.

 

Since Japan is a country with universal health insurance, the medical insurance system can be roughly divided as follows.

  • National Health Insurance – For self-employed, retired employees and their dependents.
  • Health Insurance for Employees – For employees and their dependents.
    • Long-Term Care (Nursing care) Insurance –
      • All employees aged 40 years or older must have long-term care (nursing care) insurance. The insured can receive long-term care services such as home-visit services by care attendants or at nursing homes.

Payroll Contributions – Employer vs. Employee:

ContributionsEmployerEmployee
Pension9.15%9.15%
Health InsuranceThe legal premium rate is set between 1.5% and 6.5%, but the premium rate varies depending on the insurer’s organization.The legal premium rate is set between 1.5% and 6.5%, but the premium rate varies depending on the insurer’s organization.
Nursing Care InsuranceThe insurance premium rate varies every year depending on the expenditure related to nursing care of the elderly and the financial situation.

In recent years, the rate has remained between 1.6% and 1.9% (half between EE and ER).

The insurance premium rate varies every year depending on the expenditure related to nursing care of the elderly and the financial situation.

In recent years, the rate has remained between 1.6% and 1.9% (half between EE and ER).

Unemployment Insurance0.95%0.60%
Work Injury0.25% – 8.8%
Family Allowance0.36%
Total Employment Cost13.01% – 26.66%12.05% – 17.15%

 

Employee Income Tax:

5%Up to 1.95 million JPY
10%1.95 million – 3.3 million JPY
20%3.3 million – 6.95 million JPY
23%6.95 million – 9 million JPY
33%9 million – 18 million JPY
40%18 million – 40 million JPY
45%Over 40 million JPY

Termination of Employment – Understanding Employee Rights and Employer Obligations

Employment Considerations:

Employment is not at-will in Japan and the vast majority of terminations are a negotiated voluntary resignation. Circumstances for termination for cause or even economic factors are very limited and careful consideration and preparation are required before deciding on termination.

Notice Period:

  • Employers must provide a minimum of 30-day notice before dismissing an employee.
  • Employers can opt to pay the employee’s salary in lieu of notice if they prefer the employee not to work during the notice period.

Grounds for Termination (limited circumstances and needs to be well documented):

  • Inability to work due to disability, illness, injury, or permanent damage.
  • Breach of work responsibilities, orders, or workplace disciplines.
  • Loss of job responsibilities.
  • Economic circumstances.

 

What is the retirement age in Japan?

As of April 2023, the retirement age of Japan’s national and local civil servants is 64 years old. The retirement age will be raised by one year every two years until it reaches 65 years old in fiscal 2025

In addition, it should be noted that there is an obligation to make efforts to continue employment until the age of 70.

 

Employment Dispute Channels

Employees can take action using the Labour Bureau.

 

Is employment insurance compulsory in Japan?

Known as ‘Labor Insurance’ in Japan and covering both the Labor Accident Insurance and the Employment Insurance. The Employment Insurance has two main functions:

  • Unemployment Benefits – Provide employees with cash benefits incase the employee loses the job.
    • This is inclusive of:
      • Job Applicants’ Benefits
      • The Study and Training Benefits
      • The Employment Continuation Benefits
  • Support employers to prevent them from laying off their employees.
    • The following consists of three components:
      • Services for employment stabilization
      • Services for developing human resources
      • Services for employees’ welfare

 

  • Employment Insurance System:
    • The Basic Allowance for the Job Applicants:
      • Commonly referred to as the ‘Unemployment Benefits’.
      • It is mandatory for employees to have been insured for at least 12 months within two years prior to leaving the job.
        • (Retirement due to company reasons will be shortened to at least 6 months within one year)
    • Old Age Continuous Employment Benefits:
      • For older aged employees between 60 and 65 years who must be insured for at least 5 years before receiving the benefit.

Source: National Institute of Population and Social Security Research

 

  • Rise of Part-time and temporary employment in the young and the women:
    • The 2001 Reform of the Employment Insurance abolished some criteria for part-time and temporary workers:
      • Part-time and temporary workers who work at least 20 hours per week and have worked at the same workplace for more than 30 days is eligible for the Employment Insurance.

Labour Law - Leave

All full-time employees are entitled to a minimum of 10 days’ statutory annual paid leave per year. As an employee spends more time in the company, they are entitled to more vacation days each year.

Years of ServiceAnnual Leave
0.5 (6 months)10 days
1.511 days
2.512 days
3.514 days
4.516 days
5.518 days
6.5 or more20 days

Source: Labour Standards Act

 

For part-time employees:

Source: Labor Standards Act

 

Special Leave:

  • Additional leave provided by employers for special circumstances.

In Japan, there are no statutory guidelines for sick leave. However, it’s common for employees to use their annual paid leave days when they are sick. Some companies in Japan do offer sick leave as a special benefit to their employees.

Because there are no legal provisions regarding sick leave, the salary during sick leave may be unpaid or paid.

The principle of “No work, No pay” applies in Japan.

Working moms are guaranteed to 6 weeks prior to expected birth date of maternity leave and 8 weeks after the child is born. If the mother wishes to, she can return to work earlier after 6 weeks from birth date, however, she will need to provide her employer with proof of approval from her doctor.

  • The employee’s salary will be paid by the Social Insurance with a limit of 2/3 of the employee’s fixed base salary.
    • It is calculated by dividing the average monthly salary per financial year before the start of the leave by 30 days and multiplying by 2/3.
  • If in any case the employer decides to make a payment to the employee during the maternity leave, the amount covered by Social Insurance will automatically be decreased.

Paternity Leave:

  • In Japan, the length of paternity leave depends on the father’s agreement on the employment contract with the company. The “Papa Kyuka” (existing childcare leave for fathers) system states that employees can take up to 4 weeks of leave following 8 weeks of the child’s birth. Post-postnatal period, the fathers are still entitled to childcare leave up until the child turns one which can be taken in multiple periods or a continuous block.
  • To be eligible for paternity leave, the father would have had to be employed with the company for at least one year and must provide a proof of the child’s birth certificate.
  • The employee can engage in work temporarily during the leave; however, a labour-management agreement is required for it. The following procedure would need to be followed:
    • An employee presents conditions on working during childcare leave to the employer.
    • The employer proposes dates and hours within the scope of the conditions presented by the employee.
    • The employee agrees on the dates and hours.
    • The employer officially notifies the dates and the hours to the employee.

 

Paternity Leave and Parental Leave:

Paternity leave after childbirth (Oct 1, 2022~) The leave can be taken aside from Childcare Leave.Childcare Leave (Oct 1, 2022~)Childcare Leave (Current Program)
Leave period, the number of timesUp to four weeks within an eight-week period after the birth of the childUntil the child turns one. (The period can be extended to until the child turns two)Until the child turns one. (The period can be extended to until the child turns two)
Application due dateTwo weeks prior to the leaveOne month prior to the leaveOne month prior to the leave
Splitting of the leaveCan be split into two portions. (The application for the two portions must be submitted in advance)Can be split into two portions. (The application can be submitted each time)Not possible- by principle
Work during leavePossible within the scope agreed by the employee. A labour-management agreement is requiredNot possible- by principleNot possible- by principle
Extension of leave after the child turns oneThe start day can be set more flexiblyLeave can be started on the day the child turns one years old or one years and six months old in age.
Second leave after the child turns onePossible under special circumstancesNot possible- by principle

Family Care Leave:

  • Leave to care for a family member with a serious condition.

It is mandatory for employers in Japan to provide their employees with at least 1 rest day per week or at least 4 rest days during a four-week work period.

What are the upcoming public holidays in Japan?

Japan Public Holidays 2024

Employees are entitled to public holidays as follows:

HolidayDate
New Year’s Day1 January
Coming of Age Day8 January (Second Monday in January)
National Foundation Day11 February (Observed on 12 February)
The Emperor’s Birthday23 February
Vernal Equinox Day20 March
Shōwa Day29 April
Constitution Memorial Day3 May
Greenery Day4 May
Children’s Day5 May (Observed on 6 May)
Marine Day15 July (Third Monday in July)
Mountain Day11 August (Observed on 12 August)
Respect for the Aged Day16 September (Third Monday in September)
Autumnal Equinox Day22 September (Observed on 23 September)
Sports Day14 October (Second Monday in October)
Culture Day3 November (Observed on 4 November)
Labour Thanksgiving Day23 November

 

Japan Public Holidays 2025

Employees are entitled to public holidays as follows:

HolidayDate
New Year’s Day1 January
Coming of Age Day13 January
Foundation Day11 February
The Emperor’s Birthday23 February (Observed on 24 February)
Vernal Equinox Day20 March
Shōwa Day29 April
Constitution Memorial Day3 May
Greenery Day4 May
Children’s Day5 May (Observed on 6 May)
Sea Day21 July (Third Monday in July)
Mountain Day11 August
Respect for the Aged Day15 September (Third Monday in September)
Autumnal Equinox Day23 September
Sports Day13 October (Second Monday in October)
Culture Day3 November
Labor Appreciation Day23 November (Observed on 24 November)

 

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While you’re at it, stay informed on the latest Labour Law updates throughout the year via our Labour Law Insider. Looking for more news and insights into the market? Don’t forget to subscribe to our blog so you don’t miss out on the latest HR news!

Please note that all the information listed below are to be used as a general guideline. For more detailed accounts of Japan employment laws and regulations, please visit the official governmental websites.

Interested to explore the idea of payroll outsourcing, EOR, or Visa application services?

Links International is a leading payroll outsourcing provider across Asia Pacific and supports payroll in over 19 locations. Please do not hesitate to contact us.

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