Employing in Japan
Employment in Japan is primarily governed by the Japanese Civil Code and the Labor Standards Act of 1947, which collectively establish comprehensive protections and rights for the country’s workforce. These laws ensure minimum standards for working conditions, including regulations on working hours, overtime, and paid leave, while also safeguarding employees against discrimination based on age, religion, sexual orientation, gender expression, and race.
Onboarding time
Minimum Wage
Employer costs
Employee costs
Onboarding time
Team APAC can onboard your talents within an average of 72 hours.
Minimum Wage
As of October 2024, the minimum wage in Japan has seen a record increase of JPY 50, raising the national average from JPY1,004 to JPY1,054 per hour. The minimum wage varies by prefecture, with Tokyo having the highest at JPY1,163, followed by Kanagawa at JPY1,162 and Osaka at JPY1,114. In 16 other prefectures, primarily in major metropolitan areas, the minimum wage exceeds JPY1,000, while 12 prefectures in regions like Tōhoku, Kyūshū/Okinawa, and Shikoku have wages below JPY950.
Employer costs
- Health Insurance – 4.95%
- Pension Insurance – 9.15%
- Unemployment insurance – 0.95%
- Long Term Care insurance (over 40 only) – 0.80%
- Workers Compensation Insurance – 0.30%
- Contributions to Childcare – 0.36%
- Asbestos Contribution – 0.002%
Employee costs
- Health Insurance (Shakai Hoken) – 4.95% (which may differ depending on the insurance provider and the employer’s location).
- Welfare Pension Insurance (Kosei Nenkin) – 9.15%
- Employment Insurance (Koyo Hoken) – 0.3%
- Long-Term Care Insurance (Kaigo Hoken) – 0.865%
Payroll
The payroll process in Japan involves a structured approach to calculating and disbursing employee salaries, adhering to strict local labor laws and tax regulations. Bonuses, commonly paid in June and December, are also factored into payroll calculations. Detailed payslips are mandatory, breaking down gross salary, deductions, and net pay.
Payroll cycle
Salaries are typically paid monthly, often on a fixed date like the 25th, via direct bank transfer.
Payroll calculations
Employers must withhold income taxes, social insurance premiums (including health insurance, pension, and employment insurance), and resident taxes from gross salaries, which include base pay, overtime, and allowances.
Compliance requirements
Employers are required to maintain comprehensive payroll records for at least three years and submit periodic reports to tax and social insurance authorities.
Additional payments
13th Salary
The nation does not have a mandated 13th-month bonus.
Bonuses
Bonuses in Japan are typically semi-annual, with summer bonuses (often referred to as the 13th-month salary) paid in June or July and winter bonuses (14th-month salary) in December. These bonuses are not guaranteed and are often tied to the company’s performance and profitability. The amount can range from one to six times the monthly salary, depending on factors such as company size, industry, and individual performance. Bonuses are deeply ingrained in Japanese corporate culture and are often seen as deferred payments rather than discretionary rewards.
Commissions
Some roles, particularly in sales, may include performance-based incentives. These are often tied to team or company performance rather than individual achievements.
Other allowances
Businesses based in urban areas usually provide a commuting stipend. Others opt to give housing allowances and holiday bonuses.
Taxes
In Japan, employee income taxation operates under a combination of a withholding tax system and a self-assessment system. Employers withhold income tax from employees’ salaries and wages, along with deductions for social insurance contributions, and submit these amounts to the tax authorities. Most employees do not need to file a tax return, as their employers handle year-end adjustments to ensure accurate tax payments.
Employee Income Tax
The tax rates are progressive, ranging from 5% to 45%, depending on taxable income, which is calculated by subtracting various deductions and exemptions from total income.
Income Tax
- 5% 0 JPY – 1.95 million JPY
- 10% 1.95 million JPY – 3.3 million JPY
- 20% 3.3 million JPY – 6.95 million JPY
- 23% 6.95 million JPY – 9 million JPY
- 33% 9 million JPY – 18 million JPY
- 40% 18 million JPY – 40 million JPY
- 45% 40 million JPY and over
Employment eligibility
Foreign workers seeking employment in Japan must first obtain a Certificate of Eligibility (COE), issued by the Ministry of Justice, which requires a sponsor such as an employer. The COE is a prerequisite for applying for a work visa, which must be done at a Japanese embassy or consulate in the worker’s home country. Foreign workers must adhere to their visa’s permitted activities and notify local authorities of their residence upon arrival.
Visa
Japan offers various work visa types tailored to different professional roles and qualifications. There are specific work visas for various occupations, including options for artists, instructors, journalists, professors, skilled laborers, and more. The type of permit an employee applies for will determine how long they can remain in Japan. Typically, the length ranges from 3 months to 5 years.
Visa types
Japan recently introduced specific skills visas, including:
- Specified Skilled Worker Visa SSW-2: intended to fill employment gaps in certain labor sectors.
- Specified Skills Visa 1-SSV1: applicable only to industries, such as shipbuilding, agriculture, nursing care, among others and requires Japanese language tests and technical exams.
- Specified Skills Visa 2-SSV2: may be renewed indefinitely; includes privilege to bring family members to Japan.
Compliance requirements
- Job offer from a Japan-based company
- Passport
- Visa application form
- Photograph
Background check
In Japan, background checks for work visa applicants are conducted with strict adherence to privacy laws and ethical practices. Employers must obtain explicit written consent from candidates before initiating any checks, as mandated by the Act on the Protection of Personal Information (APPI). The process typically involves verifying identity, educational qualifications, employment history, and criminal records, with additional checks like professional licenses or financial stability depending on the industry.
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Benefits
Employee benefits in Japan are a mix of mandatory and supplemental perks designed to support workers’ health, well-being, and financial security. Employers often provide supplemental benefits such as housing allowances, commuting subsidies, family allowances, and annual health check-ups. Additionally, companies may offer group life insurance, long-term disability insurance, and medical top-up plans, with perks like dietary assistance and condolence benefits being common.
Private health insurance
Employers offer private medical insurance coverage to provide additional benefits beyond the coverage of the public healthcare system.
Team APAC providers
- SafetyWings
- Henner
- IMG/ ALC Global
Mandatory benefits
Mandatory benefits include health insurance, retirement pensions, disability pensions, workers’ compensation, unemployment insurance, and paid leaves, all of which are governed by national labor laws.
Mandatory benefits in Japan
- Health Insurance
- Pension Insurance
- Unemployment insurance
- Long Term Care insurance
- Workers Compensation Insurance
Working hours
The standard workweek is 40 hours, the standard workday 8 hours. Employers must provide workers with at least one rest day per week or at least four rest days during a four-week period. Employers also must provide rest periods of at least 45 minutes if the workday exceeds six hours and at least one hour if the workday exceeds eight hours.
Working hours per day
Standard working hours are 8 hours per day. The standard workweek is from Monday to Friday.
Working hours per week
The standard workweek is 40 hours.
Overtime pay
Overtime payment is mandatory for non-exempt employees (excluding exempt managers) with hours worked beyond standard work hours classified as overtime, limited to 45 hours per month and 360 hours per year. These standard maximum numbers of overtime hours can be exceeded for a limited period only if an employee and employer sign an agreement allowing the employee to work extended overtime hours. Overtime hours are those that an employee works in excess of 40 hours in a week or eight hours in a day.
The compensation rates for overtime work are as follows: 25% for work exceeding statutory working hours, 50% for work exceeding statutory hours by more than 60 hours in a month, 35% for work on statutory days off, 25% for late-night work between 10 p.m. and 5 a.m., 50% for late-night work exceeding statutory hours, 75% for late-night work exceeding statutory hours by more than 60 hours in a month, and 60% for late-night work on statutory days off.
Leave
In Japan, employees are entitled to paid annual leave. In addition, the country offers parental leave, with maternity and paternity leaves available in case of childbirth. Public holidays further supplement the leave benefits in Japan.
Annual leave
Employees become eligible for paid vacation after completing six months of service, with the number of vacation days increasing based on their tenure: starting at 10 days after six months, 11 days at 1.5 years, 12 days at 2.5 years, 14 days at 3.5 years, 16 days at 4.5 years, 18 days at 5.5 years, and capping at 20 days after 6.5 years or higher.
Sick leave
Unlike some countries, Japan does not have a statutory sick leave policy.
Parental leave
An employee, male or female, is entitled to up to one year of child care leave after maternity leave ends (see Paternity care leave below). Both parents have the flexibility to determine how to allocate the time off, which totals 8 weeks following paternity and maternity leave. Either parent is eligible to take this parental leave. During the first 180 days, social security covers 67% of the salary, and this decreases to 50% for the remaining period. Additionally, the parental leave can be extended for up to 2 years, with compensation set at 50% of the salary throughout the extension.
Maternity leave
Female employees are entitled to take maternity leave for up to six weeks preceding the expected date of birth, up to 14 weeks if expected to give birth to more than one child. After childbirth, the mother is required to take eight weeks’ leave. The employee will receive 2/3 of the salary during this period, and the labor insurance office will be responsible for this pay.
New mothers are entitled to two 30-minute nursing breaks daily for up to 12 months following childbirth.
Paternity leave
There is no statutory requirement for paternity leave in Japan.
Other types of leave
Bereavement leave
Employees are eligible for five days of paid bereavement leave in the event of the death of a first-degree relative, three days for a second-degree relative, and two days for a third-degree relative.
Unpaid leave
Employees are entitled to unpaid leave for child and family care, marriage, and menstruation.
Family & domestic violence leave
There is no statutory requirement for family and domestic violence leave in Japan.
Termination
In Japan, employers cannot terminate employees at will after the probation period has ended; termination must be based on just cause. Termination of an employee is invalid if not done on objectively reasonable grounds.
Termination process
In Japan, the termination of employment is strictly regulated and requires objectively reasonable grounds. Employers must justify dismissals. For indefinite-term contracts, termination due to redundancy is considered a last resort, requiring employers to demonstrate efforts to avoid dismissal through measures like reducing compensation or soliciting voluntary retirement. Fixed-term contracts can only be terminated before expiration for “unavoidable reasons,” which are interpreted narrowly. If downsizing will result in termination of at least 30 employees from a single workplace within a month, the employer must prepare a termination plan listing the employees to be laid off and detailing any efforts the employer will make to help them find reemployment.
Termination reasons
In Japan, valid reasons include inability to work due to injury, illness, or poor performance; breach of responsibilities such as misconduct or failure to fulfill duties; and economic reasons like redundancy.
Notice period
Generally, an employer must give an employee at least 30 days’ notice of termination or pay the employee 30 days’ wages in lieu of notice. No notice is required if the employee is being terminated for cause or the employee is still on probation.
Severance Pay
In Japan, there are no legal obligations for employers to provide severance payments. However, employees are entitled to their regular salary during the notice period.
Probation period
Probation periods in Japan may last from one to twelve months.
Probation Period days
- 30 days Minimum probation period
- 360 days Maximum probation period
