Hire employees in Japan

As the third largest economy in the world, Japan offers internationally operating companies great business perspectives. Providing a first-class technological infrastructure and a high-quality business environment, Japan is the perfect place for companies intending to venture into the Asian market.

Yet recruiting in Japan can be quite hard and challenging. The country’s talent pool is relatively small and the available recruits are often hard to win. However, using an Employer of Record, there is no reason why you should not succeed in finding the right talent for your company.

Although employment agreements do not have to be in writing in order to be legally valid, it is best practice to draft a written employment contract detailing the basic terms of employment such as:

• Identification of both parties

• Date of commencement and employment duration

• Workplace

• Job description, duties and responsibilities

• Basic salary as well as other compensation or benefits and payment details

• Working hours and regulations on overtime

• Total number of holidays

• Rules on sick leave

• Notice periods for employment termination and necessary procedures

Employment contracts may either be concluded for an indefinite time or for a fixed period. The latter should not exceed three years – five years maximum in case of repeated contract renewal.

Probation Period

New employees are usually subject to a probationary period between three and six months.

Working Hours and Breaks

A standard working week in Japan is 40 hours with five eight-hour days. However, working hours can be arranged flexibly as long as the average does not exceed standard working hours.

Employees working for more than six hours a day need to have a rest break of at least 45 minutes – 60 minutes if they work eight or more hours within one day. It is mandatory to give each employee at least one rest day per week.

Overtime

Overtime work is permitted but must be remunerated by extra pay. According to Japanese law, the first 60 hours of overtime work per month must be paid at a rate of at least 125% of the employee’s usual hourly pay. Any additional hour must be compensated at a rate of 150%.

Additional compensation is also required for exceptional work on days off (35% more), late night work (25% more) and work on public holidays (60% more). However, these regulations do not apply to employees in manager positions.

It is mandatory to pay employees in Japan at least once a month. In most companies, payments are issued at the 25th of each calendar month.

Minimum Wage

There is no national minimum wage in Japan. Instead, minimum remuneration rates are defined by each region and also differ from one industry to the next. The minimum hourly wage in the prefecture of Tokyo currently (February 2023) stands at JPY 1,072.

Sick Pay

As there are no legal provisions or obligations concerning sick pay, it is up to the employer to introduce adequate rules as to how much sick pay employees will receive and for how long sick pay will be provided. Employers also need to define a maximum period during which employees must return to work in order not to be dismissed.

If absence from work is due to a work-related injury, employees are legally entitled to an allowance equaling 60% of their normal wages – paid by the employer.

Bonuses

Annual bonuses are subject to the individual employment agreement.

Employees and employers in Japan are subject to the following tax and social security contribution rates (last review February 2023):  

Taxes

Employers

up to 34%

---

23.2% corporate tax (30% – 34% including local taxes)

10% VAT (national and local rates combined)

Employees

up to 45%

---

Individual income tax rates: 5% – 45% *

• plus a 2.1% surtax on income tax due

• plus 10% local inhabitant tax

Social security

Employers

around 16.23%

---

Contributions towards unemployment, health, accident and pension insurance average 16.23%

Employees

around 15%

---

around 15% of employee’s salary and bonuses 

Ce guide de pays est destiné à des fins d'information uniquement et ne doit pas être interprété comme un conseil juridique. Le contenu de ce guide contient des informations générales et malgré le fait que nous le mettions à jour régulièrement, il peut ne pas correspondre aux développements juridiques actuels. Lano Software GmbH décline toute responsabilité concernant les actions que vous entreprenez ou vous abstenez d'entreprendre sur la base du contenu de ce guide de pays.

Annual Leave

Employees who have completed at least six months of service with their employer and who have not been absent from work for more than 20% of their scheduled working hours during the previous year are entitled to annual leave. However, the number of paid vacation days depends on the employee’s length of service:

• six months – 10 days of paid leave

• one and a half year – 11 days of paid leave

• two and a half years – 12 days of paid leave

• three and a half years – 14 days of paid leave

• four and a half years – 16 days of paid leave

• five and a half years – 18 days of paid leave

• more than six and a half years – 20 days of paid leave

In addition, there are 16 public holidays in Japan. However, employers can decide whether or not to pay their employees on those additional days off.

Maternity Leave and Paternity Leave

Pregnant employees are allowed to take up to 14 weeks of maternity leave, six weeks before and eight weeks after giving birth. There is no obligation for employers to provide pay during this time since benefits are paid by the employer health insurance. The benefits are equal to two thirds of the employee's normal wages.

A new law entered into force in October 2022 which grants fathers of newborn children the right to take up to 4 weeks of paid paternity leave within the first 8 weeks after birth. During this time, the father is entitled to the same benefits as the child's mother, i.e. 67% of the usual salary. The leave period can be split in two.

Parental Leave

Both mother and father can take childcare leave until the child turns one. Under certain circumstances, the leave can be extended beyond the child's first birthday. Similar to paternity leave, parental leave can be taken in two instalments - previously, it was only one. Parental leave is paid by the government.

Additional Leave and Benefits

All employees who have been working for an employer for more than one year and who are responsible for another family member who is in need of constant nursing are entitled to 93 days of unpaid nursing care leave and five days of leave per year to look after a sick child. Depending on the company policies, additional leave may be granted on occasions such as marriage or death of a family member.

In addition to employment termination by default – i.e. in case of a fixed-term contract – resignation and mutual agreement, Japanese labour law recognises the following reasons for dismissal (non-exhaustive list):

• redundancy or any other reason related to the business’ economic situation

• breach of employment agreement or any other rules and obligations linked to the job position

• summary dismissal due to gross misconduct

• employee’s underperformance or inability to carry out the necessary tasks

• employee’s long-term illness

When dismissing an employee, employers have to give at least 30 days of notice, regardless of the employee’s length of service – not applicable during the employee’s first two weeks at the company. Pay in lieu of notice is possible. There is no legal obligation for employers to provide severance pay.