By Globalization PartnersJune 2013
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We’re not sure what the economists would say, but given the number of American companies we’ve spoken with recently that are hiring in Japan, the Japanese market is picking up. In case your company is also considering Japan as its next target market, we’ve outlined a list of statutory and market-norm benefits you may wish to consider when you issue an offer letter to an employee in Japan.
Paid leave is usually negotiated on the basis of seniority within a company, however, some executives may negotiate for more.
Paid Vacation Earned (min)
Employees may accumulate up to two years’ unused paid vacation.
Insurance benefits, health care insurance, child care benefits, long term health care, pension and accident insurance are all nationally mandated benefits in Japan. Establishing these benefits is fairly easy and is typically done when setting up payroll. These mandatory benefits do not need to be negotiated with employees, as the candidates are familiar with the national programs, however, it may be useful to budget the employer’s portion of the costs. We recently calculated the employer’s cost of benefits for an individual earning the USD equivalent of $100,000 per year as less than $1,500 per month.
It is a market norm to provide a pension plan to employees over and above the statutorily required pension fund. In addition, most US companies hiring in Japan provide an end-of-service gratuity, which is paid at the end of an employee’s contract in the amount of one month salary per year worked.
It is worth noting that it’s rather difficult for US companies to recruit in Japan, for multiple cultural reasons. Because people feel strong employer loyalty and stay with one employer for a long portion of their career, they typically enjoy working with their colleagues. Brand name is also important in Japan, and US companies naturally do not have an established brand name when they are first hiring in Japan. The collegiality, pride and strong sense of identification with one’s employer makes it harder for US companies to recruit. That said, hiring the “right” country manager is critical to your success in-market. Given these factors, it is worth planning to invest in a long and careful search for the perfect candidate to lead your company’s Japan market-entry.