Globalization Partners provides consultation and project-based services for customers in Japan (Customer) to ensure the development of the Customer’s activities in-country through the assistance of one or more professionals (Professionals) capable of...
Globalization Partners provides consultation and project-based services for customers in Japan (Customer) to ensure the development of the Customer’s activities in-country through the assistance of one or more professionals (Professionals) capable of meeting the demands expressed by the Customer (Services). Globalization Partners contracts with Customers to provide Services on a project basis and assigns Professionals to provide assistance in connection with these project-based Services. The Professional is employed by Globalization Partners in accordance with local labor law obviating the need for the Customer to establish a branch office or subsidiary in Japan in order to hire employees to provide requisite services.
Globalization Partners provides consultation and project-based services for customers in Japan (Customer) to ensure the development of the Customer’s activities in-country through the assistance of one or more professionals (Professionals) capable of meeting the demands expressed by the Customer (Services). Globalization Partners contracts with Customers to provide Services on a project basis and assigns Professionals to provide assistance in connection with these project-based Services. The Professional is employed by Globalization Partners in accordance with local labor law obviating the need for the Customer to establish a branch office or subsidiary in Japan in order to hire employees to provide requisite services.
Our Service Provider Model enables Customers to obtain requisite services and complete projects in Japan with the support and assistance of designated Professionals who have relevant skills and expertise to perform such tasks, and without the Customer being burdened with legal, HR, payroll, tax, and compliance matters in connection with the establishment of legal presence in-country and the employment of Professionals.
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Hiring in Japan
Japanese employment law is very focused on the individual and protecting his or her rights. Termination is extremely difficult and must be considered “socially acceptable”. Maintaining a set of “Work Rules” that govern the terms of employee service is critical in Japan.
In Japan, most of the terms and conditions of employment are stipulated in the Work Rules (shuugyou kisoku). Employers with 10 or more employees are required to create and file Work Rules with the Labor Standards Inspection Bureau. The Work Rules will constitute part of the employment contract and will stipulate certain terms of employment such as work hours, holidays, termination of employment and wages. Professionals are covered under our local team work rules.
When negotiating terms of an employment contract and offer letter with an employee in Japan, it may be useful to keep the following standard benefits in Japan in mind.
Employment Contracts in Japan
The Japan Labour Standards Law does not specify a format of employment contracts, but employers in Japan must provide employees with certain terms and conditions of employment in writing. An employer can fulfill this requirement by giving employees a written employment contract and/or providing the employee with a copy of the company’s ‘work rules’ (shuugyou kisoku). All Professionals engaged via Globalization Partners have entered into a locally compliant employment contract with Globalization Partners.
It is best practice is to put a strong employment contract in place in Japan which spells out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in Japan should always state the salary and any compensation amounts in Yen rather than a foreign currency.
Working Hours in Japan
The standard workweek in Japan begins on Monday and ends on Friday, 40 hours per week, unless otherwise agreed with a union or via a representative of the local employees. The agreement must set out the maximum hours of overtime work.
Minimum overtime rates are:
Basic overtime rate – 125% of base hourly wage
Work on a “rest day” – 135% of base hourly wage
Late night overtime (between 10:00pm & 5:00am) – 150% of base hourly wage (25% added)
Late night overtime on a “rest day” – 160% of base hourly wage (25% added)
Overtime work in excess of 60 hours/month – 150% of base hourly wage
Late night overtime in excess of 60 hours/month – 175% of base hourly wage
Small to mid-size companies are currently exempt from the last two rates above. In addition, “persons in positions of supervision or management or persons handling confidential matters” are generally exempt from overtime.
Holidays in Japan
Japan celebrates 16 public holidays for which employees are given the day off, including:
New Year’s Day
Coming of Age Day
Foundation Day
Vernal Equinox Day
Showa Day
Constitution Memorial Day
Greenery Day
Children’s Day
Marine Day
Mountain Day
Respect for the Aged Day
Autumnal Equinox Day
Health and Sports Day
Culture Day
Labour Thanksgiving Day
The Emperor’s Birthday
With the exception of New Year’s Day, if a holiday falls on a Sunday, the following day is treated as a holiday instead. It is not a legal requirement that public holidays are specified as days off but would be highly unusual for salaried employees of foreign employers to not be given the day off.
Vacation Days in Japan
In Japan, employers are required to grant annual paid leave of at least 10 days upon completion of 6 months’ employment. The entitlement increases by 1 day per year for the following 2 years and by 2 days per year thereafter, up to a maximum of 20 days per year. Unused annual leave expires after 2 years if not used.
Japan Sick Leave
An employer is not generally required to grant paid leave to an employee who is absent from work as a result of illness or injury, unless the work rules or employment contract provide otherwise.
Maternity/Paternity Leave in Japan
Pregnant employees are entitled to maternity leave within 6 weeks of the expected birth date, and 8 weeks after birth. An employer is not allowed to have a female employee work within 8 weeks after giving birth, except if both:
She wishes to resume her duties after 6 weeks after giving birth.
The resumption of the work will not cause any problems, as certified by a doctor.
It is not required that employers pay for maternity leave, unless the employment contract or work rules state otherwise.
Employees are eligible for family care leave of up to 93 days per family member. These absences are not paid unless otherwise stipulated in the Work Rules.
Childcare leave: An employee is entitled to receive childcare leave from the following day after maternity/paternity leave ends to the day before a child becomes one year old. On a certain condition, the period could be extended to the day a child becomes one and a half years old.
Childcare leave benefits:
1) JPY 420,000 of Lump-sum benefit for Childbirth
2) Exemption of social insurance premium
3) Maternity allowance: About 2/3 of monthly salary during the maternity/paternity leave
4) Childcare leave benefit: about 2/3 of monthly salary during the childcare leave.
Japan Supplementary Benefits
Providing a safe and harmonious workplace is important in Japan. Employers are required by law to provide annual physicals and checkups for all employees. Depending on the type of work, employers may also be required to provide stress checkups.
Generally, we recommend budgeting 10%-15% as benefits cost on top of the gross salary to allocate the total employer’s cost including benefits in Japan.
Bonuses
There is no legal requirement to give bonuses to employees in Japan, in addition to the monthly wages. Sales employees are normally paid commission, in a similar structure to US sales compensation packages.
Termination/Severance in Japan
Probation periods are common in Japan and will normally range from 3 to 6 months, and should not exceed 1 year. During the probationary period, an employee can be dismissed if the employer has objectively reasonable grounds to do so, and the dismissal would not be considered unreasonable. It is considered somewhat easier to validly dismiss an employee in their probationary period than afterward. The option for an employer to extend the probationary period must be set forth in the work rules and/or employment contract.
Employees have a very high level of legal protection in Japan. Once hired, the employer’s right to dismiss an employee is severely restricted and it is very difficult to terminate employees. A dismissal will be invalid as an abuse of rights under local law if it lacks objectively reasonable grounds and is not considered to be appropriate in general societal terms. Practically, it is very difficult for an employer to satisfy these requirements. Termination of employees must be for ‘cause.’
Acceptable grounds for termination in Japan depend on the individual circumstances of each case, but are generally:
Theft or violence
Serious insubordination – must be egregious
Serious and on-going poor performance after formal warnings have been given, corrective training provided and other potential positions explored
False information regarding skills or background that impacts performance or makes the fulfillment of duties impossible
Employers must give at least 30 days’ notice of dismissal or provide payment of base salary in lieu of notice. It is customary for work rules to specify that an employee must give 30 days’ notice of resignation.
Paying Taxes in Japan
The Japan social security system is excellent. Via the social safety net, all people (including employees) are provided with excellent health care coverage, pension, unemployment insurance and other benefits. Because such excellent benefits are provided by the government, it’s less common for employers in Japan to provide supplemental insurance benefits.
The social security system in Japan includes a pension plan that both employers and employees pay into. The plan pays benefits to an employee if the employee has been paying into the system for at least 25 years. The pension is receivable once an employee turns 65 years old.
In Japan, there is also National Universal Health care system. Employees generally receive 4 basic types of insurance:
health insurance
welfare pension insurance
workers’ compensation
unemployment insurance
Health and welfare pension insurance are “social insurance,” to which directors are also entitled. Premiums are borne 50% by the employer and 50% by the employee.
Workers’ compensation and unemployment insurance are “labor insurance,” to which directors are not entitled. The employer is responsible for 100% of workers’ compensation premiums and more than 50% of unemployment insurance premiums.
Employment income, such as salary income, is subject to national income tax and local inhabitants tax. National income tax applies at progressive rates of depending on the income amount. Local inhabitants tax applies at a flat rate. The rate is set locally.
Why Globalization Partners
Establishing a branch office or subsidiary in Japan to engage a small team is time-consuming, expensive and complex. Japanese labor law has strong worker protections, requiring great attention to detail and an understanding of local best practices. Globalization Partners makes it painless and easy for the Customer to develop its activities in Japan through Globalization Partners’ Service Provider Model, which allows the Customer the assistance of one or more Professionals capable of meeting the requirements expressed by the Customer in completing a project or assignment. . We assign suitable Professionals to facilitate the provision of Services, handle all employment, HR and payroll matters relating to the Professionals, while ensuring compliance with local laws, sparing you the burden of setting up a foreign branch office or subsidiary to hire qualified labor. Our Service Provider Model provides you peace of mind so that you can focus on running your company.
If you would like to discuss how Globalization Partners can provide the Service Provider solution for you in Japan, please contact us.
