Services & Employer of Record (EOR) in Japan

Employment contracts in Japan

There are four main types of employment contracts: 

• Permanent: These employees (seishain) have open-ended contracts, job security, and full benefits.

• Fixed-term: These contracts (keiyakushain) have a set duration and can be renewed. Qualifying employees can request permanent status after five years’ continuous service, based on the Labor Contracts Act.

• Dispatched: These workers (hakenshain) are employed by agencies and assigned to client companies, subject to the Worker Dispatch Act. They provide flexible and temporary staffing, typically 3–6 months. 

• Part-time: Part-time employees (arubaito) work fewer hours, are paid an hourly wage, and receive prorated benefits, like paid leave, if they qualify. 

An employer of record Japan, like G-P, acts as the legal employer for your global team members. We draft employment contracts that comply with Japanese labor laws and include all mandatory terms.  

Leave entitlements in Japan

Working hours in Japan

Working hours are capped at eight hours per day and 40 hours per week, excluding breaks. 

Overtime is allowed if a written and filed Article 36 Agreement is in place between the employer and employee representatives. Standard overtime is limited to 45 hours per month and 360 hours per year. The 45-hour monthly limit can be exceeded in exceptional cases. The absolute maximum is 720 hours per year, with no more than 100 hours in any single month and an average of 80 hours per month over any 2–6 month period. 

Overtime must be paid at least 25% above the regular wage, increasing to 50% for more than 60 hours per month, 35% for work on public holidays, and 25% for late-night work (10 p.m.–5 a.m.).  

These premiums are cumulative. If more than one overtime pay rule applies at the same time, you combine them. For example, if someone works overtime during late-night hours, they get both the overtime premium and the late-night premium added to their regular pay.

Employees get at least one rest day per week or four rest days in any four-week period. They also get 45-minute breaks for shifts over six hours, or one hour for shifts over eight hours. 

Public holidays in Japan

Japan-based employees get 16 national holidays:

• New Year’s Day

• Coming of Age Day

• National Foundation Day

• Emperor’s Birthday

• 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

• Sports Day

• Culture Day

• Labor Thanksgiving Day

When a holiday falls on a Sunday, employees get the next Monday off. Company policy or CBAs guide whether public holidays are paid days off. Many employers offer paid leave on these days, but it’s not a given. 

Vacation days in Japan

Annual leave depends on the length of service with a company. Employees who’ve worked for at least six months and attended work at least 80% of the time get at least 10 paid vacation days. This increases with each year of service up to a maximum of 20 days after 6.5 years.

Employees can use their vacation days after the first six months on the job.

Employers must ensure that employees with 10 or more days of annual leave take at least five days off a year. 

Leave entitlements in Japan

Sick leave in Japan

There’s no legal requirement for paid sick leave in Japan. However, many companies give paid or unpaid sick leave. Employees can also use annual paid leave for illness. The sickness and injury allowance (shōbyō teatekin) covered by employee health insurance partially replaces wages during long-term illness.

Maternity, paternity, and childcare leave in Japan

Maternity leave: Pregnant employees get 14 weeks of maternity leave (six weeks before and eight weeks after childbirth). During this leave, wage replacement is typically covered by the employee’s health insurance (kenko hoken), usually at two-thirds of their regular wages. This allowance isn't taxable income, so employees don't pay income tax or labor insurance premiums on it.

If an employer chooses to pay additional wages during maternity leave (even if less than the usual salary), those payments are treated as regular income and are subject to income tax and labor insurance.

Paternity leave: Fathers can take up to four weeks’ paternity leave, which can be split into two blocks within eight weeks of the child’s birth. This leave is separate from and can be taken on top of the standard childcare leave entitlement described below. Employees get a partial wage replacement through employment insurance (koyou hoken).

Childcare leave: Both parents get parental leave (ikuji kyūgyō) until the child turns one, with possible extensions. Employees on childcare leave aren’t usually paid by their employer, but they can get benefits through Japan's employment insurance system. The benefit is calculated based on the employee's pre-leave wages. For the first 180 days of leave, the payment is 67% of their wages. After 180 days, the rate is 50%.

Special leave in Japan

Employers can offer additional leave, such as bereavement, marriage, or jury duty leave. These aren’t mandated by law and depend on company policy.

How an employer of record helps manage leave entitlements in Japan

You don’t have to manage employee working hours and leave entitlements alone. A Japan EOR can do it for you. EORs also handle the complexities of maternity, paternity, and childcare leave, so you stay compliant, and your team members are supported. 

Health and employment insurance in Japan

Employers and employees contribute monthly to Japan’s mandatory public health insurance and employment insurance systems.

Kenko hoken is Japan’s national health insurance for employees. It covers most medical costs, such as doctor visits, hospital stays, and prescriptions. The insured person usually pays 30% of the bill, and the insurance covers the rest. Kenko hoken also provides benefits like a maternity allowance and an injury or sickness allowance if an employee can’t work due to childbirth or illness.

Koyou hoken is Japan’s employment insurance system. It provides financial support if an employee loses their job (unemployment benefits) and also pays benefits during childcare leave.

Supplementary benefits and bonuses in Japan

Japan salary packages often include supplementary benefits such as commuting allowances, housing allowances, and annual bonuses. These are typically paid twice a year, called “summer” and “winter” bonuses. Some companies also offer meal subsidies or wellness programs.

These benefits are generally taxable. When budgeting, you should plan for additional costs over and above gross salary to cover social insurance and statutory benefits.

How an employer of record helps with benefits in Japan

An employer of record Japan manages these contributions and ensures employees are properly registered to access healthcare and employment benefits. An EOR administers these benefits on your behalf — so you can focus on running your business.

Termination and severance in Japan

Probationary periods are allowed, but once regular employment begins, legal notice periods apply. Employers must give at least 30 days’ notice of termination or pay in lieu of notice, regardless of seniority.

Severance pay isn’t legally required, but it may be given based on company policy or employment contract. Dismissals must be for objectively reasonable and socially acceptable reasons. 

Payroll and payroll taxes in Japan

Japan’s tax system is progressive. Tax rates range from 5–45%, depending on income. Employers and employees contribute to social insurance (for health, pension, unemployment, and long-term care insurance). Employee contributions are typically around 15% of standard monthly salary. Employer contributions vary by insurance type.

Employers must pay into several types of social security and insurance for their employees: 

Employers and employees contribute to most of these programs through payroll deductions. A Japan EOR manages it all for you, including accurate payroll calculations, tax withholdings, and timely payments to authorities. 

How to choose the right EOR in Japan

 Consider these factors when selecting an EOR in Japan: 

• Compliance expertise: Your EOR must have a deep understanding of Japanese labor laws and requirements. A partner with a dedicated team of local HR and legal professionals can proactively manage changes to ensure you’re always compliant.

• Comprehensive service offering: The right partner offers a range of global employment products and EOR solutions. Our global employment platform delivers everything you need to manage the employee lifecycle, from drafting compliant employment contracts and managing payroll to administering benefits and offboarding.

• Technological capabilities: Confirm that the EOR integrates with your existing HCM, PEO, or payroll systems to avoid operational delays. 

• Transparent cost structure: Look for transparent costs so you can accurately budget for your global employment goals.

• Reputation and industry leadership: Research the EOR's market reputation. G-P is the recognized leader in global employment and is ranked #1 according to all industry analyst reports . Customer testimonials and case studies are also important when choosing an EOR.

Use G-P EOR for global hiring in Japan

G-P EOR is the award-winning, AI-enabled global hiring solution that empowers startups , SMB s, and enterprise businesses to build global teams with ease. G-P EOR handles everything from onboarding to paying top talent in over 180 countries. With us, you bypass the complexity of local entity setup. 

G-P EOR is the preferred partner for leading HCM, PEO, and payroll platforms . Bring your workforce data together in one place to maintain existing workflows while keeping consistent and accurate data across your integrated systems.

Request a proposal to start hiring in Japan today.