Employer of Record in Japan

Businesses can only operate smoothly in Japan if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Japan below, to avoid any compliance issues.

Employment Contract Requirements

While it is not mandatory for employment agreements to be documented to be legally binding in Japan, it is advisable to create a written employment contract that outlines key terms of the employment relationship. This includes:

• Identification of both the employer and the employee
• Commencement date and expected duration of employment
• Specification of the basic salary, additional compensation or benefits, and payment details
• Comprehensive job description, outlining duties and responsibilities

Onboarding Process

We can help you get a new employee started in Japan quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Japan

The standard working hours in Japan are 8 hours per day, 40 hours per week.

Overtime in Japan

Limits on overtime are set at a maximum of 45 hours per month, and 365 hours per year. Managers and supervisors, as defined by the Labour Standards Act, are exempt, but late-night work allowance still applies. Overtime payment rates are additional percentages of the normal hourly wage, with different rates as follows:

• Overtime (typically over 8 hours a day): additional 25.00%
• Nights (22:00 - 05:00): additional 50.00%
• Weekends and Holidays: an additional 35.00%

Probation Period in Japan

Probation is not mandatory in Japan. However, they are commonly practiced and are limited to a duration of three to six months, with an upper limit of one year.

Fiscal Year in Japan

1 April - 31 March is the 12-month accounting period that businesses in Japan use for financial and tax reporting purposes.

Payroll Cycle in Japan

The payroll cycle in Japan is usually monthly, with employees being paid by the last day of the month.

Minimum Wage in Japan

The minimum wage for employees in Japan is typically 1,064 JPY per hour, amounting to ~187,264 JPY per month for a typical 40 hour work week.

Bonus Payments in Japan

Although not mandatory, many employees get an extra paycheck, a 13th-month salary, given in June and December. Whether employees receive this bonus depends on the company's choice, and this applies to both part-time and full-time workers.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 16.2% on top of the employee salary in Japan.

Employee Payroll Tax Contributions

In Japan , the typical estimation for employee payroll contributions cost is around 15.34%.

Individual Income Tax Contributions

Japan's individual income tax ranges from 5% to 45% based on a progressive scale, influenced by factors like household status. Non-residents face a flat 20.42% national income tax with no deductions and potentially a 10% local inhabitant's tax if registered as residents by January 1st.

Pension in Japan

The retirement age is 65, and Japan has two pension programs: the National Pension and the Employees' Pension systems. Contributions from employers, employees, and the government collectively fund retirement benefits.

Mandatory Leave Entitlement in Japan

The annual leave entitlement in Japan is 10 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Japan

Japan observes 16 public holidays. While technically employers aren't legally obligated to pay employees on national holidays, in practice, the majority of employers do provide payment for these days.

Paid Time Off in Japan

The allocation of paid leave is specified in employment contracts and is based on the length of employment and unused days expire after two years. The entitlements are as follows:

• Up to six months of service: 10 days of paid leave
• Up to one and a half years of service: 11 days of paid leave
• Up to two and a half years of service: 12 days of paid leave
• Up to three and a half years of service: 14 days of paid leave
• Up to four and a half years of service: 16 days of paid leave
• Up to five and a half years of service: 18 days of paid leave
• Up to six and a half years of service: 20 days of paid leave

Maternity Leave In Japan

Female employees are entitled to 14 weeks of paid maternity leave. A mandatory 6-week period must be taken before the child's birth. During maternity leave, the employee will receive approximately 2/3 of their salary, and Social Security is responsible for providing this payment.

Paternity Leave In Japan

Although not mandatory, most companies offer fathers four weeks off after their child is born, known as Childcare at Birth Leave. They can take it all at once or in two parts within eight weeks of the birth. Social security pays 67% of their salary during this time.

Sick Leave In Japan

Sick leave is not mandatory by law. While some companies may implement their own sick leave policies, it is not a universal requirement. Employees usually resort to using their vacation days to cover sick leave or make claims through social insurance systems.

Parental Leave In Japan

Parental leave, known as childcare leave, is available to both mothers and fathers in Japan. It begins the day after the conclusion of maternity leave for a maximum of one year. Labour insurance provides coverage, allowing employees to take this leave until their child reaches one year of age. Companies with 1,000 or more employees are obligated to disclose annually the rate at which their staff takes childcare leave

Bereavement Leave

Employees are entitled to paid leave of five days for the death of a 1st-degree relative, three days for 2nd-degree relatives, and two days for 3rd-degree relatives.

Menstruation Leave

Female employees have the right to unpaid time off during their menstrual period for health reasons. This is a statutory leave mandated by government legislation.

Termination Process in Japan

Termination depends on factors such as the employment agreement, collective agreement, contract type, job role, region, and the reason for termination. Given the complexity of termination procedures, they usually occur through mutual agreement and often involve additional compensation.

Notice Period in Japan

The standard notice period for termination is typically 30 days. If notice is not given, the employer can compensate with a payment in lieu of notice. However, this rule doesn't apply to employees serving a probationary period of 14 days or less.

Severance in Japan

There are no legal obligations for employers to provide severance payments. However, due to the strict regulations on terminating employees, many employers choose to offer severance payments as a way to secure a waiver and encourage voluntary resignation from the employee.