Japan PEO

Hiring in Japan

One of the most technologically advanced countries in the world, Japan can be a valuable location for organizations looking to capitalize on the Japanese people’s unmatched skills in data science, robotics, artificial intelligence (AI), software and app development, cybersecurity, and related fields. For other companies, Japan is a cornerstone of their expansion into the Asian market, or new business takes them there. No matter what reason organizations find themselves in Japan, they’re likely to benefit from its workforce’s high level of education, commitment to team harmony, and renowned dedication to the job.

Employment law in Japan is guided the Labor Standards Act (1957), the Equal Employment Opportunity Act (1985), the Part-Time/Fixed-Term Employment Act (1993), the Labor Contract Act (2007) and many other codes, regulations, and legal precedents. Some professions may also be governed by collective bargaining agreements. In addition to being aware of all employment laws and regulations before employing in Japan, you should be well-versed in Japanese business culture, which often contains unspoken hierarchies and methodologies that are important to follow.

With Safeguard Global as your employment partner, get personalized guidance on employment laws, contracts, and customs in Japan. Employ workers in Japan with the confidence that every contract for every worker meets all legal requirements. We can also provide you with guidance about cultural norms and hiring best practices, and keep you up to date with employment regulations in Japan as they change.

Relying on an employer of record (EOR) in Japan

An employer of record (EOR) provides an easier way for organizations to hire and pay local talent in Japan. Because of its in-country presence, the EOR can employ the workers a company needs and lease them to that company, taking care to comply with Japan’s labor laws. As a result, the organization doesn’t have to establish a legal presence or manage compliance in Japan.

The EOR can hire and onboard employees in as little as two weeks and manage ongoing responsibilities such as payroll, benefits, and taxes. A full-service EOR can also manage recruitment. Together, these EOR services significantly reduce the administrative burden for an organization.

Visit our Employer of Record services page to learn how we can help you meet your international employment needs in Japan.

Doing business in Japan

Global PEO Services (GPS) helps companies hire employees in Japan without establishing a legal entity. All human resources, benefits, payroll, and tax needs for the employees are managed by the Global PEO, while the new hires and headquarter teams focus on your business goals.

When hiring employees in Japan, establishing a subsidiary or branch office is not always the best route, as it’s often a lengthy and expensive process. Hiring via a Professional Employer Organization (PEO), or Employer of Record (EOR), is a faster and often more effective option – especially when starting up in a new country.

Global PEO Services hires the employees on your behalf, legally contracting them through our subsidiary in accordance with German labor laws. As a result, the burden of compliance is on us and the employees can begin work for your company in a matter of days. PEOs/EORs provide you with a streamlined option for hiring employees, testing markets, and responding to growing business needs in Germany. With Global PEO Services, you get control without taking on legal entity liabilities, contractor risks, or sacrificing on talent or speed to market.

Country Overview

Japan is located in the Northern Hemisphere, west of the Pacific Ocean, and has a diverse geography and cultural heritage. Japan is a commercial center with several high-tech and specialized hubs, such as the electronic and automotive industries. The electric bullet trains that connect the islands represent technological advancement and progress.

Capital City

Tokyo

Currency

Japanese Yen (JPY)

Language

Japanese

Government

Parliamentary Constitutional Monarchy

In Japan, a labor contract can either be in writing or verbal. Written employment contracts are not mandatory in Japan, however, the Labor Contracts Act advises employers to enter into written agreements whenever possible.

Some of the details typically mentioned in the written contract include:

Employment rules
Other working conditions
and more

The different types of employment relationships are:

Permanent Employment – Per Japan’s Labor Contracts Law, employment contracts concluded indefinitely are considered permanent.
Fixed-Term Contracts – Fixed-term contracts in Japan cannot be longer than three years unless the employee has the expert knowledge, advanced skills, or experience, or is 60 years of age or older. The contract may be valid for up to 5 years in such cases.
Temporary Employment – The Worker Dispatching Act governs temporary employment in Japan. Temporary employment contracts with the same employer in the same job can be valid for a maximum of 36 months. Employers can hire temporary workers through temporary staffing agencies, which set their wages.

Probationary Period

In Japan, a probationary period lasts up to 3 months.

Work/Time Regulations

Employers cannot allow employees to work more than 8 hours per day (or 40 hours per week), except for rest periods. These hours, however, may be extended in exceptional circumstances, up to a maximum of 10 hours per day. In such cases, the employer must first obtain permission from the appropriate government agency.

Leaves

Employees in Japan are entitled to the following leaves:

Annual leave – Employees in Japan are entitled to at least ten days of paid annual leave if employed for a minimum of six months. Employees who have been with the same company for at least a year after the 6-month completion date are entitled to an additional day of statutory annual leave.
Maternity leave – Maternity leave in Japan is 14 weeks long, with six weeks of prenatal leave and eight weeks of postnatal leave.
Sick leave – Employees in Japan are only entitled to sick leave if they are ill or injured at work, and the employer is required to cover the costs of medical treatment.

Public Holidays

The following are the statutory national holidays observed in Japan:

January 1 – New Year’s Day
January 11 – Coming of Age Day
February 11 – National Foundation Day
February 23 – Emperor’s Birthday
March 20 – Spring Equinox
April 29 – Shōwa Day
May 3 – Constitution Memorial Day
May 4 – Greenery Day
May 5 – Children’s Day
July 22 – Sea Day
July 23 – Sports Day
August 8 – Mountain Day
August 9 – Day off for Mountain Day
September 20 – Respect for the Aged Day
September 23 – Autumn Equinox
November 3 – Culture Day
November 23 – Labor Thanksgiving Day

Benefits

The National Pension Law governs Japan’s national retirement system. The National Pension Scheme is available to all residents of Japan, including foreigners, and divided into the following three categories:

Category I consists of Japanese citizens aged 20 to 59
Category II consists of people covered by Employees’ Pension Insurance or Mutual Aid Pensions
Category III consists of dependent spouses of Category II insured people

Social insurance, often known as social welfare, is a government-mandated insurance program that provides financial help to the elderly, disabled, injured, and unemployed.

Some examples of social insurance programs are:

Dependents’/Survivors Benefit – If a person insured under the National Pension System dies, the surviving spouse who takes care of the deceased’s dependent children, as well as the dependent children themselves, are eligible for a survivor’s pension. To be eligible, children must be 18 years old or younger, or up to 20 years old if they have a disability.
Life and Disability Insurance/Benefit – A person who suffers a work-related illness or injury and remains disabled after treatment and recovery is entitled to compensation under the Labor Standards Act.
Unemployment Insurance – In Japan, anyone who has been unable to find work may be eligible for unemployment benefits, including job applicant benefits (basic allowance, skill acquisition allowance, lodging allowance, injury, and disease allowance).

Termination

Employers must offer at least 30 days’ notice prior to terminating an employee, or offer a severance payment in lieu of notice, regardless of the length of the employee’s service. Employees on probation who have worked for less than 14 days are exempt from the notice period requirement.

Visa/ Work Permits

There are typically the following categories of visas:

Working visas
Non-working visa
Family-related visas
Tourist visa

In Japan, there are usually four types of work permits:

Highly skilled professional visa
General work visa
Working holiday visa
Specified skills work visa

Accounting

Accounting standards must adhere to Japanese Generally Accepted Accounting Principles (GAAP). It is necessary to prepare annual financial reports.

Taxes

Corporate Tax

The standard corporate tax rate in Japan is 23.2%.

Value Added Tax (VAT)

Consumption Tax (CT) is similar to the European-style value-added tax (VAT).

The standard VAT rate in Japan is 10%. It applies to most goods and services.

It is 8% and even 0% for certain items in certain circumstances (e.g., export transactions).

Filing Dates

Typically, a branch or a corporation must file a final tax return and pay any outstanding taxes within two months of the financial year-end.

Penalties

If taxpayers underreport their total tax due and fail to submit tax payments and tax returns on time face various penalties. In Japan, punishments are not deductible for tax purposes.

The Act of Protection of Personal Information (APPI) regulates the protection of data privacy concerns.

Bribery of public officials (komuin) is regulated under Articles 197 and 198 of the Japanese Criminal Code. Penalties (for individuals and legal entities) include imprisonment for up to 3 years, a monetary fine of JPY 2.5 million, and cancellation of business license.

The Penal Code does not identify bribery of private sector officials as a crime, though the presence of the Companies Act does punish both parties involved. The penalty for individuals includes imprisonment for up to 5 years and a monetary fine of JPY 500,000.

There is no penalty for business and legal entities.

With our Global PEO/Employer of Record services, companies can expand into Japan and hire their employees without having to establish a branch office or subsidiary in Japan.

Your candidate is hired via our Japan PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services.
Your new employee begins work quickly as we take care of employment contracts, statutory and non-statutory benefits, and running their payroll – all in full compliance with Japan laws.
Global PEO Services experts manage all day-to-day operational issues such as employee expenses, and severance/termination if required.
With no contractor risks, pass on the compliance burden to Global PEO Services.

Spin Off/M&A Support

Ensure continuity of payroll, benefits and HR support when acquiring or spinning off a business with employees overseas.

24/7 Support in 150+ Countries

Empower your teams with 24/7 support and a single point-of-contact model in which experienced client services directors are in continuous communication with information and advice.
We are backed by a mix of 300+ multidisciplinary experts from HR, Payroll, Finance, Tax, and Legal domains who are ready to respond to the expected and unexpected needs of your business on the shortest notice.

Easy Visibility into Your Employee Time & Attendance and Benefits Data
With our Global PEO, you get access to Mihi, our proprietary SaaS solution for time and attendance, vacation, leave management, and benefits enrollment and management. Mihi enables clients to have easy access to employee data in real-time. It is designed specifically for companies with a global workforce, especially when working in multiple countries with a low headcount.

Ready for Growth When You Are
When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance, and staffing support. Learn more about our end-to-end international expansion services.

Contact Us

Ready to hire in Japan?

Tell us your hiring plans and a Global PEO specialist will map out the right path, with full compliance, no obligation.

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How to hire in Japan

With a GDP of almost $4.2 trillion, Japan is the fourth-largest economy in the world. The nation presents a dynamic and attractive market for businesses looking to expand their operations. With a diverse and skilled workforce, Japan offers significant opportunities across various sectors. And for any business looking to expand, hiring in Japan presents unique opportunities.

Motor vehicles, electronic equipment, and steel are among the nation’s largest exports. The service sector accounts for the highest percentage of the nation’s GDP and employment. Japan ranks 6th in best for countries open for business and 29th for ease of doing business. Hiring in Japan can be challenging, but a successful start can help your company grow and expand.

How can businesses hire in Japan?

With a robust and resilient economy, Japan is becoming an increasingly popular destination for foreign direct investment (FDI). The country’s robust economic framework and commitment to quality make it an appealing destination for international expansion. Japan is also a hub for innovation, technology, and the third-largest automobile manufacturing country.

Business surveys and economic indicators confirm Japan’s dominance as a business location. To grow in Japan, businesses should know the market, rules, and economy to make strategic decisions to set them up for success. As a result, businesses can capitalize this opportunity by integrating into the international market.

The three options for employers planning to hire employees in Japan are:

Leverage independent contractors
Hire direct employees with your own entity
Partner with a global Professional Employer Organization (PEO)

We’ll break down each option to help you make the best decisions for your business growth.

Independent Contractors

Hiring independent contractors in Japan is a flexible way to expand. However, not following Japan’s employment law can lead to misclassification and result in fines and legal issues. Each country is different, but as a general guide, contractors should adhere to the following criteria:

Contractors can work for several companies together and cannot be limited to working entirely for your business.
Contractors are liable for their working status and schedule, the business cannot determine specific hours of operation.
Contractors must be project-based, or they must work for shorter periods. If a contractor extends their time with a company, they run the risk of being classified as an employee.

The government considers it a misclassification if an employee does not meet the above standards. And if that happens, the contractor can sue the company for benefits, overtime, and holiday pay, since they were technically functioning as an employee

If an employment contract is not followed or clear, the government will often support the contractor claims. The business may also face fines and penalties for the breach.

U.S. companies hiring in Japan need international contractors to fill out the IRS Form W-8BEN. This certifies their foreign worker status in the U.S. government’s eyes. Although this step will resolve tax compliance for the employer in the U.S., the business will still need to abide by Japanese labor law.

Hiring an independent contractor in Japan can be a great solution for one-time projects or to help stabilize a team in the short term.

Direct Employees

If you plan to hire part-time or full-time employees in Japan, you will need a legal entity. Establishing a legal entity is expensive and time-consuming and can take two to four months.

Legal entities are the foundation of all business operations within a country. They can influence every aspect of a business, including IT, accounting, finance, and other supply chain functions. If your business chooses this option, it is recommended to work with an incorporation expert to help you through the process. This ensures that the structure isn’t ineffective or costly to retain.

Outsource to a Global PEO/EOR Provider

If your company wants to grow in Japan without creating a legal entity, outsourcing employment is the top choice. A global Professional Employer Organization provider (PEO) is also known as an Employer of Record (EOR).

A global PEO will hire employees in Japan on your behalf using its own network of established entities. Because the employees are technically hired under their entity, the PEO shoulders much of the administrative burden related to the HR function of a business. This reduces the potential risks and liabilities for the client company. A PEO helps companies manage their employees’ daily tasks, allowing them to focus on other important activities.

Employers can use a PEO to manage hiring, benefits, payroll, and compliance through a network of legal entities. Here are some of the administrative services a PEO offers:

Fast international hiring
Payroll management
In-country compliance
Reduced risks with international contractors
Global talent acquisition
Best-in-class HR technology for the international workforce
Japanese employment contracts

Related: Japan employer of record

Understanding Japan’s Workplace Culture

Key Aspects of Japanese Workplace Culture

Seniority and Hierarchy: Respect for seniority and hierarchical structures are deeply ingrained in Japanese workplaces. Understanding and respecting this can facilitate smoother interactions.
Collectivism: Japanese culture emphasizes group harmony and collective decision-making. Team cohesion and consensus are often prioritized over individual achievements.
Dedication and Hard Work: Japanese employees are known for their dedication, often working long hours. However, there is a growing awareness of work-life balance and mental health.

General Etiquette in Japanese Business Settings

Business Cards (Meishi): Exchange business cards with both hands and a slight bow. Treat the received card with respect, as it reflects the person you are interacting with.
Bowing: Bowing is a common form of greeting and shows respect. The depth of the bow varies depending on the situation and the person you are greeting.
Punctuality: Being punctual is crucial in Japan and arriving late to meetings or appointments can be seen as disrespectful.
Politeness and Formality: Politeness is key in Japanese business etiquette. Use formal language and titles. Avoid overly casual behavior in professional settings.
Silence and Listening: Silence can be a part of the conversation and should not be rushed. Listening attentively without interrupting is a sign of respect.

Key Hiring Sectors in Japan

Several sectors in Japan are experiencing substantial growth and demand for top-tier talent. These include:

Technology and IT: With advancements in artificial intelligence, robotics, and software development, the tech industry is booming.
Healthcare: An aging population is driving the demand for healthcare professionals and innovations in medical technology.
Finance and Banking: As a global financial center, Tokyo remains a critical hub for banking, investment, and financial services.
Manufacturing and Engineering: Known for high-quality manufacturing, Japan continues to seek skilled engineers and production experts.
Education: The emphasis on quality education and international exchange programs creates opportunities for educators and administrative staff.

Employment Law in Japan

Japan’s Employment Contracts

Both employers and employees, under the Labor Contract Act, are required to enter an employment agreement in writing. Usually, the written employment contract reflects the employer’s work rules for detailed terms of the employment relationship.

The different types of employment relationships are:

Permanent Employment – Per Japan’s Labor Contracts Law, employment contracts concluded indefinitely are considered permanent.
Fixed-Term Contracts – In Japan, fixed-term contracts cannot last more than three years. Some employees may be exempt if they have specialized knowledge, advanced skills, or experience, or are 60 years old or older. The contract may be valid for up to 5 years in such cases.
Temporary Employment – The Worker Dispatching Act governs temporary employment in Japan. Temporary employment contracts with the same employer in the same job can be valid for a maximum of 36 months. Employers can hire temporary workers through temporary staffing agencies, which set their wages.

Some of the details typically mentioned in the employment contract include:

Employment rules
Other working conditions
and more

Working Hours

Pet Japan’s Labor Standards Act, the regular workweek is 40 hours and the standard workday is eight hours. There may be some exceptions relating to flexible work schedules. Any hours worked beyond these limits are considered overtime.

Probation Period

The probation period in Japan can last up to one year, but more often, it lasts between three and six months.

Minimum Wage

In different areas, the minimum hourly wage increased to 1002 JPY in 2023.

Bonuses

Although not required by law, Japanese companies commonly give a winter and a summer bonus.

Holiday Entitlement

Employees in Japan receive at least ten days of paid annual leave if employed for at least six months. Employees further receive an additional day of vacation for each of the following two years of employment. Also, an additional two days of vacation for each of the subsequent four years of employment. The maximum amount of paid vacation is 20 days.

In addition to the annual leave, the paid public holidays set by the government are:

New Year’s Day
Second Monday in January: Coming of Age Day
National Foundation Day
Emperor’s Birthday
Vernal Equinox (date in March varies)
Showa Day
Constitution Memorial Day
Greenery Day
Children’s Day
Third Monday in July: Marine Day
Mountain Day
Third Monday in September: Respect for the Aged Day
Autumnal Equinox (date in September varies)
Second Monday in October: Health and Sports Day
Culture Day
Labor Thanksgiving Day
Emperor’s Birthday

Japanese employees also receive:

Maternity leave
Paternity leave
Sick leave
Childcare leave
Sick child leave
Family care leave
Menstruation leave
Bereavement leave
Leave for marriage
Civil rights and public duty leave

Payroll & PEO in Japan

Japan Payroll Outsourcing & Management Services

Hire and pay employees in Japan without setting up a legal entity. With our Japan payroll and PEO services, you select the candidate, and we handle the rest.

After successfully hiring and onboarding your employees, we manage all aspects of the payroll process, ensuring your employees are always paid accurately and on time.

Our Japan payroll experts have an in-depth understanding of local payroll requirements and provide you with in-depth guidance and compliance support.

Our Japan PEO Payroll Solutions Cover:

Struggling to Manage Payroll for Independent Contractors?

Global PEO Services eliminates the complexity and liabilities associated with employing and paying independent contractors. We allow you to hire your contractors as employees through our Japan PEO. The individual continues to work for you, while we manage all aspects of payroll, HR, tax, and compliance.

The Solution to Low Headcount Payroll

Finding a payroll option for countries where you have low headcounts can be a challenge. Global PEO Services provides the solution. By using our Japan PEO to manage your payroll, you leverage our pre-existing payroll infrastructure, teams, and processes, even if you only need payroll for just one employee. Stay flexible, save time, all while getting the payroll services and support you need.

Want to learn more about our PEO Payroll Services? Reach out to us today!

Work with Global PEO Services

Global PEO Services, a Safeguard Global company, can help reduce the risks and challenges of international expansion to ensure you are successful in any market. We also help you stay in control of your daily operations, without the added administrative burden.

Staying updated on the laws and regulations in Japan can be difficult. This can make hiring employees in Japan a time-consuming and challenging process due to the need to comply with legal and tax requirements.

We manage all the legal requirements and payroll, while you manage the international team on their daily tasks. For companies hoping to hire and pay in Japan, GPS can help you grow and remain compliant.

Quick facts