G-P’s global growth platform makes it possible to start obtaining services in Japan in minutes via our global entity infrastructure – allowing your company to expand your global footprint without the hassle of entity setup and management. G-P provides services in Japan for its customers through the assistance of one or more professionals capable of meeting the demands expressed by the customer.
Our global employment products, including G-P Meridian Prime™ and G-P Meridian Core™, are backed by the largest team of HR and legal experts in the industry. We handle the growing complexities of global expansion and compliance for you — so you can focus on the global opportunities ahead.
You’ll have peace of mind knowing you have a team of dedicated experts to support your growth. G-P allows you to harness the talent of the brightest people in 180+ countries around the world, quickly and easily.
Hiring in Japan
Employment laws in Japan are designed to manage rights and responsibilities within the workplace as well as protect workers. Employers must adhere to due process when dealing with significant changes to the employment relationship, such as termination, which must be handled in a manner that is “socially acceptable.”
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 Labour Standards Bureau. The Work Rules constitute part of the employment contract and stipulate certain terms of employment such as work hours, holidays, termination of employment, and wages.
Employment contracts in Japan
Employers in Japan must provide employees with certain terms and conditions of employment. It is best practice for an employer to fulfill this requirement by giving employees a written employment contract and provide a copy of the company’s Work Rules.
In Japan, an employment contract should detail the terms of the employee’s compensation, benefits, termination requirements, and any other essential terms of employment. An offer letter and employment contract in Japan should always state the salary and any compensation amounts in the local 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 employment contract 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
- Work in excess of maximum weekly hours — 150% of base hourly wage
- Late night rate (between 10 p.m. and 5 a.m.) — 125% of base hourly wage
- Late night rate plus basic overtime rate — 150% of base hourly wage
- Late night rate on a rest day — 160% of base hourly wage
- Overtime rate in excess of maximum weekly hours — 175% of base hourly wage
- Late night rate in excess of maximum weekly hours — 175% of base hourly wage
Employees in positions of supervision or management or workers handling confidential matters are generally not subject to the regulations on working hours, breaks, and days off (with the exception of regulations on night work).
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 to treat public holidays as days off, but it is quite common for salaried employees of international employers to be given the day off.
Vacation days in Japan
In Japan, employers are required to grant paid annual leave to employees once they have completed 6 months’ employment and have worked at least 80% of all scheduled workdays. The entitlement to paid annual leave increases with the employee’s duration of service, as follows:
- After 6 months — 10 days of paid annual leave
- After 1.5 years — 11 days of paid annual leave
- After 2.5 years — 12 days of paid annual leave
- After 3.5 years — 14 days of paid annual leave
- After 4.5 years — 16 days of paid annual leave
- After 5.5 years — 18 days of paid annual leave
- After 6.5 years or more — 20 days of paid annual leave
Unused annual leave expires after 2 years.
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 6 weeks prior to the expected birth date and 8 weeks after birth. An employer is not allowed to have a pregnant employee work within 8 weeks after giving birth, except if:
- The employee wishes to resume their duties 6 weeks after giving birth.
- The return to work is certified by a doctor.
Non-birthing employees may take paternity leave for up to 4 weeks within 8 weeks of childbirth. This paternity leave can be taken by dividing the leave into 2 separate periods.
An employee is entitled to receive childcare leave the following day after the maternity/paternity leave ends up until the day the child turns 1 year old. However, if certain conditions are met, this period could be extended to the day the child turns 2 years old.
Childcare leave benefits may include:
- Payment of child allowance: Currently, a childcare allowance of JPY 15,000 is paid for every child per month until they reach the age of 3
- Exemption of social insurance premium
- Maternity allowance: About 2/3 of monthly salary during the maternity/paternity leave
- Childcare leave benefit: About 2/3 of monthly salary during the childcare leave
Japan supplementary benefits
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% to 15% on top of the gross salary to allocate the total employer’s cost including benefits in Japan.
There is no legal requirement to give bonuses to employees in Japan in addition to the monthly wages. Sales employees are normally paid commission.
Termination/severance in Japan
Probation periods are common in Japan and will normally range from 3 to 6 months. The option for an employer to extend the probationary period must be set forth in the Work Rules or employment contract. Due to the high level of protections afforded by Japan employment laws, in order to terminate an employee, strict evidentiary and procedural requirements must be met. These evidentiary and procedural requirements apply equally to regular employees as they do employees during a probationary period.
The dismissal of an employee may be invalid and viewed 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.
Acceptable grounds for termination in Japan depend on the individual circumstances of each case, but are generally:
- Significant and prolonged poor performance or loss of the trust relationship due to material fraud in an application for employment.
- The employee has materially breached their responsibilities and duties, orders, internal policies, or Work Rules.
- Redundancy due to business downsizing, economic reasons, corporate dissolution, or other decisions relating to corporate management.
Employers must give at least 30 days’ notice of dismissal or provide payment of base salary in lieu of notice. It is customary for the Work Rules to mandate that employees give 30 days’ notice of resignation.
Paying taxes in Japan
Via the social safety net, all people (including employees) are provided healthcare coverage, pension, unemployment insurance, and other benefits in Japan. Because such benefits are provided by the government, it’s less common for employers 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 10 years. The pension is receivable once an employee turns 65 years old.
In Japan, there is also a National Universal Healthcare 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 to. 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 to. 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 depending on the income amount. Local inhabitants tax applies at a flat rate. The rate is set locally.
At G-P, we help companies unlock the power of the everywhere workforce through our industry-leading Global Growth Platform™. Let us handle the complex and costly tasks involved in finding, hiring, onboarding, and paying your team members, anywhere in the world, with the speed and guaranteed global compliance your business needs.
Contact us today to learn more.