Globalpedia

Payroll in JpJapan.

Population

125,416,877

Languages

1.

Japanese

Country Capital

Tokyo

Currency

Japanese yen (¥) (JPY)

Japan’s economic climate hosts a thriving business culture, which makes it an ideal place to expand your company. However, the country also has complex payroll and employment laws that often favor employees. Therefore, it is best to know all the ins and outs of these laws before setting up payroll in Japan.

Taxation rules in Japan

Japan’s progressive tax system increases with an employee’s salary. Salary income is subject to the national income tax and a local inhabitant tax, which is a flat rate that varies based on location. The national income tax ranges from 5% to 45%.

Both employers and employees also contribute to Japan’s social security system, which provides healthcare, pension, unemployment insurance, and more. Since the system is so comprehensive, many employers choose not to offer additional insurance benefits. Employers and workers each pay 50% of the premiums for health and welfare pension insurance.

How to establish payroll in Japan

Setting up your Japan payroll largely depends on your corporate structure. The 4 most common include:

  • Godo-KaishaSimilar to a limited liability company (LLC)
  • Goshi-Kaisha: A limited partnership company
  • Gomei-Kaisha: A general partnership company
  • Kabushiki-Kaisha: Japan’s version of incorporation

Before setting up payroll, all businesses must set up bank accounts in Japan and complete numerous payroll registrations. You’ll also have to register for withholding tax, social insurance, and national labor insurance.

Entitlement/termination terms

Required entitlement and termination terms are one of the most fundamental things to understand before beginning the hiring process. Entitlements include anything from medical leave to paid vacation and maternity leave.

Outline your termination terms in a written employment contract, which should include a clause that requires employers to give 30 days’ notice of dismissal as well as a stipulation of legally permitted grounds for termination. It is worth noting that unilateral termination of an employee is extremely challenging in Japan. Japan does not have a mandatory statutory severance pay, unless otherwise stipulated in the Work Rules.

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Disclaimer

THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

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