Employer of Record in Japan: A Complete Guide for 2026

Introduction

Hiring in Japan is governed by detailed rules across the Labor Standards Act, the Labor Contract Act, and a social insurance system that activates from day one. Japanese employment law requires:

• A written contract covering wages, working hours, location, and termination terms, signed before the start date
• Enrollment in health insurance, employee pension, employment insurance, and workers' accident compensation insurance at the point of hire
• A valid Certificate of Eligibility is verified for every foreign hire

Many foreign employers underestimate how quickly these obligations stack up, and the gaps usually surface after the first hire.

An employer of record in Japan operates through a local structure already in place, so foreign companies can hire, onboard, and pay employees without entity setup.

This guide covers employment contracts, payroll, statutory leave, work permits, termination, and how to choose the right EOR provider for Japan.

Japan at a glance

Estimated Population: 122.5 million

Currency: JPY Japanese Yen

Capital: Tokyo

Languages frequently used: Japanese

GDP: USD 4.03 Trillion

Hire employees in Japan

Setting up a subsidiary to hire employees in Japan requires careful planning, accurate local documentation, and a clear understanding of the country's corporate and employment requirements. Each registration step must be completed in sequence before a company can begin hiring through its own legal entity.

The subsidiary setup process involves:

• Reserving a trading name
• Preparing incorporation documents
• Translating required documents into Japanese
• Opening a corporate bank account
• Applying for tax, employment, and social security registrations
• Obtaining business-specific licenses or permits, where applicable

The first step is reserving a trading name, which must be unique and available in Japan. The Trade Register approves names based on priority. Companies then prepare the incorporation documents, including the articles of association, company details, and registration certificate, all of which require legal review, notarization, and certified Japanese translation for foreign entities.

Once documentation is in order, companies open a corporate bank account to hold the share capital and complete social security, employment, and taxation registrations. After the subsidiary is officially registered, recruitment can begin through internal hiring teams, job portals, social media, advertisements, and LinkedIn.

Hiring employees via EOR solutions in Japan

Setting up a kabushiki kaisha (KK, joint-stock company) or godo kaisha (GK, limited liability company) entity in Japan typically takes two to three months and requires registered capital, notarized articles of incorporation, certified Japanese translations, and ongoing Labor Standards Act compliance, all before the first employee can be onboarded.

Skuad helps reduce that dependency. Skuad acts as the legal employer in Japan, so your company can hire, onboard, and pay employees without the need for entity setup, local legal counsel, or in-house Japan payroll infrastructure.

Here is what Skuad helps with:

• Acts as the legal employer across 160+ countries, so you can hire without setting up a local entity
• Supports employment contract generation across 160+ countries, aligned with local labor laws and statutory requirements
• Facilitates statutory contribution workflows across supported markets, covering applicable social insurance and pension obligations
• Supports payroll processing in 70+ currencies with tax withholding and statutory deductions applied per local requirements
• Helps administer statutory benefits, paid leave, and parental entitlements in line with local requirements
• Supports termination and offboarding workflows aligned with local notice period and severance requirements across supported markets

Build your team in Japan without setting up an entity. Book a Demo to see how Skuad can support compliant hiring and onboarding.

Onboarding and agreements

Employee onboarding entails all the measures taken to incorporate new employees into an organization, familiarize them with the company’s culture, and turn them into productive and efficient team members.

The process begins with drafting a written formal agreement, known as the employment contract. Under the Japanese employment law, an employment contract must include the following conditions:

• Places of employment and contents of duties
• Start and finish times, breaks, day-offs, and shift arrangements
• Methods of determining, calculating, and paying wages.
• Closing day of the payroll period
• Matters about wage raises
• Terms and conditions related to retirement and dismissal.

Depending on your business's needs, you can use any of the following types of employment agreements in Japan.

• Permanent employees: These individuals are usually hired for the long term and enjoy several benefits, such as job security and a higher average wage in Japan.
• Contract employees: The typical duration of an agreed-upon contract is three to 12 months. Individuals generally enjoy the same rights and benefits as permanent employees, such as paid leave and the right not to be fired without reason.

Once you have completed the necessary paperwork for the new hire, you can proceed with the other crucial steps of the employee onboarding process, which can be categorized into two main stages.

Taxes

Below is a detailed overview of taxation requirements in Japan from both employers' and employees’ perspectives.

Compliance

The primary scope of labor laws in Japan governs the relationship between employees and employers. Employees are identified by their direct employment relationship rather than by nationality, which means independent contractors fall outside the scope of employee protections under Japanese labor law.

Japan has a well-defined legal framework that protects workers from discrimination, unfair termination, and workplace violations. Skuad supports compliant hiring across these areas, drawing on local employment knowledge to help companies meet statutory requirements.

Book a demo and see how Skuad supports compliant hiring, payroll, and onboarding in Japan.

Some of the provisions of Japan's employment laws are as follows:

Independent contractors vs. full-time employees

Independent contractors in Japan work under service-based agreements, while full-time employees work under employment contracts. Employers must understand this difference clearly to manage work terms, responsibilities, and legal obligations correctly.

The right engagement model depends on the scope of work, budget, and long-term hiring plans. See pricing for both models to choose the option that fits your hiring needs.

Penalties for worker misclassification

If an employer fails to classify workers correctly, whether intentionally or not, they may face penalties under Japan's labor laws. This makes worker misclassification an important compliance concern for businesses hiring in Japan.

Legal consequences include fines of up to JPY 300,000, imprisonment of up to six months, and a penalty tax at a 10% rate. Social security-related penalties may also include fines of up to JPY 500,000 and/or imprisonment of up to six months.

To reduce the risk of worker misclassification, businesses can work with an EOR service. Skuad supports compliant hiring in Japan and assists with the broader employment process, including onboarding, payroll, tax workflows, contract management, contract amendments, and e-signing.

IP protection

Japan has a well-established legal framework for safeguarding intellectual property created during the course of employment or business operations. Employers should clearly define IP ownership in employment contracts, contractor agreements, and internal policies to avoid ambiguity and future disputes.

The key IP statutes in Japan include:

• Patent Act: Governs the registration and protection of inventions. Ownership of employee-generated inventions should be expressly addressed in the employment contract.
• Utility Model Act: Protects practical inventions, product improvements, tools, and devices. Ownership of such work created by employees or contractors should be formally documented.
• Designs Act: Protects product designs and visual features. Employment and contractor agreements should specify ownership of designs developed as part of the engagement.
• Trademark Act: Protects company names, logos, and brand identifiers. Businesses should register and actively manage trademarks used in commercial operations.
• Copyright Act: Protects original works created for business use. Contracts should clearly state whether outputs produced by employees or contractors are owned by the company.
• Unfair Competition Prevention Act: Protects businesses from unfair trade practices, misappropriation of trade secrets, and misleading commercial conduct. Employers should maintain confidentiality and data protection policies.

Japan is also a signatory to several international IP treaties, including the Paris Convention and the Berne Convention, which extend protection for intellectual property across member jurisdictions.

Types of visas in Japan

Work permits

If you are a foreign national who wishes to work in Japan, you cannot do so without a work permit. The work permit needs to be applied for by you and the employer, who will also need to sponsor it.

Payroll

To set up payroll in Japan, you must be aware of the local rules and the acts governing those rules.

Knowing your employee profile is important since it will help you understand which act you need to refer to.

Payroll details

Benefits and compensation

The National Health Insurance (Kokuho) is the primary health insurance policy offered to both residents and foreign nationals who have stayed for more than three months in Japan. It covers medical treatment for sickness and injuries. Insurance premiums are calculated based on income from the previous fiscal year.

Employees are also entitled to retirement benefits under Japan’s multi-tiered pension system. This includes a mandatory basic pension for all residents, an income-related pension for most employees, and an optional third tier for larger pensions.

Worker rights

Employers must understand the key terms and conditions of employment when hiring in Japan.

Standard work hours in Japan

The statutory work hours in Japan are forty hours a week or eight hours a day. Some businesses may allow up to 44 hours a week, with a maximum of eight hours a day.

Rest period

Employees must get at least 45 minutes of rest when work exceeds six hours and at least one hour when work exceeds eight hours.

Minimum wage

The minimum wage in Japan differs by prefecture, with each prefecture setting its own hourly rate. The national average hourly minimum wage is set to rise to JPY 1,118. Tokyo is expected to have the highest rate at JPY 1,226, while several lower-rate prefectures are expected to fall around JPY 1,000 to JPY 1,050.

Probation period

In Japan, most companies set a probationary period of three to six months for new hires.

Anti-discrimination laws/acts

Japan has laws that prohibit workplace discrimination based on gender, nationality, social status, age, and other factors. These include:

• The Labor Standards Act
• The Equal Opportunity Act
• The Child Care and Nursing Care Act
• The Employment Measures Act (1966)
• The Labor Union Act
• The Act on Promotion of Employment of Persons with Disabilities (1960)

Health and safety acts/laws

The Japanese Industrial Safety and Health Act, enacted in 1972, is the main law governing workplace safety, health, and comfortable working conditions.

Remote & hybrid work

Remote work readiness is a key component of hiring in Japan. It means how well your organization, including all employees and team members, can maintain productivity while engaging in work outside of a traditional office setting.

Several factors determine a company's remote and hybrid work readiness. They include:

Flexible work policies

Make sure that your company's existing work policies highlight clarity, relevance, and effectiveness. They must target some of the key areas of remote and hybrid work, including performance evaluation, communication expectations, and time management.

Technology and infrastructure

Invest in proper technology and infrastructure to amplify remote work readiness at your organization. These include a stable internet connection, proper communication platforms and software, and hardware, such as laptops and mobile devices.

Data privacy and security

Implementing robust cybersecurity policies to safeguard your business’s sensitive data is important, especially in a remote and hybrid work environment. This will also allow you to comply with all the data protection laws and regulations in Japan, thereby reducing the risk of potential legal challenges.

Salary

Salaries in Japan vary based on job location, company size, role type, industry, and candidate experience. For private-sector employees who worked throughout the year, the average annual salary is around JPY 4,780,000.

When hiring in Japan, reviewing the latest salary benchmarks for your specific industry can be helpful. This gives businesses a clear reference point for pay structures that align with current market standards and role expectations.

To support this process, Skuad offers a salary insights tool that helps businesses access compensation data and benchmark roles across markets.

It is also important to understand Japan’s tax regulations and follow the country’s minimum wage requirements when structuring employee compensation.

Scope of negotiating terms

In Japan, the scope of negotiating employment terms has always been limited. The compensation packages and benefits offered to candidates are standard.

The exact positions will have little to distinguish them. However, for higher positions, the scope for negotiation can be significantly higher, and candidates can often dictate terms.

Leave policy

Employees in Japan have different leave entitlements based on their service period and employment conditions. These may include paid leave, maternity leave, paternity leave, sick leave, and public holidays. Employers should follow Japan’s leave rules when managing employee time off.

Annual paid leave

• Annual paid leave depends on the employee’s length of service.
• Employees get 10 days after six months of service.
• This can increase up to 20 days after 6.5 years or more of continuous service.

Maternity leave

• Maternity leave in Japan lasts 14 weeks.
• Employees can take six weeks before childbirth.
• They can take eight weeks after childbirth.

Sick leave

• Japan does not have a specific statutory sick leave policy.
• Bereavement or condolence leave is five days.
• Employers may offer additional sick leave based on company policy.

Public holidays

Japan has many national holidays, all of which are generally available to employees. The national holidays are the following:

• New Year's Day
• Coming of Age Day
• National Foundation Day
• The Emperor’s Birthday
• Vernal Equinox Day
• Showa Day
• Constitutional Memorial Day
• Greenery Day
• Children’s Day
• Marine Day
• Sports Day
• Mountain Day
• Respect for the Aged Day
• Autumnal Equinox Day
• Culture Day
• Labor Thanksgiving Day

Dates of these holidays and observances may change based on religious calendars.

Background Checks

Background checks are common in Japan to verify a candidate’s claims before hiring. Employers must get written consent from the individual and follow privacy rules, including the Act on the Protection of Personal Information.

Education verification

Education verification confirms a candidate’s academic claims. Employers may contact educational institutions to check degrees, certificates, and other academic details.

Employment verification

Employment verification confirms a candidate’s previous work details. This may include job title, responsibilities, employment dates, reasons for leaving, and compensation details.

Termination and offboarding

Terminating employees in Japan can often be exceedingly difficult because several reasons and types of elimination permitted in other countries are not applicable in Japan.

It is strictly prohibited to terminate employment contracts due to redundancies. All terminations are considerable individual decisions, and a robust reason must be given to back up the resignation.

If an employee wishes to terminate the labor agreement by notifying the employer of their intent to do so, they must provide a notice period of two weeks. However, in cases where the employer offboards or dismisses an employee, they need to provide the employee with a 30-day notice of termination.

Working with an EOR like Skuad helps organizations carry out such actions in compliance with local laws to avoid disputes in the future. Book a demo to see how Skuad supports compliant offboarding.

Simplified hiring in Japan

The most important part of setting up a remote team in Japan is knowing the local laws and how they affect all employment processes.

Managing different employee types, payroll setup, taxation, and local employment rules can make expansion in Japan time-consuming. Businesses also need to understand workplace practices and legal requirements before hiring.

Instead of setting up a local entity, companies can work with a trusted partner to manage HR, payroll, benefits, compliance, and employee support. This makes it easier to build a team in Japan without handling every process internally.

Skuad supports businesses in hiring and managing talent in Japan through its Unified Employment Platform. From payroll and benefits to compliance and taxation, Skuad supports companies as they expand into Japan with local employment infrastructure.

Book a demo to understand how Skuad supports compliant hiring, payroll, and onboarding in Japan.

FAQs

1. What is an employer of record in Japan?

An Employer of Record in Japan legally employs workers on behalf of another company. It manages payroll, tax deductions, social security contributions, benefits, contracts, and labor law compliance, helping businesses hire in Japan without setting up a local entity.

2. What is the Labor Standards Act in Japan?

The Labor Standards Act sets the basic rules for employment in Japan. It covers working hours, wages, overtime, rest periods, holidays, annual paid leave, and workplace safety. Employers must follow it to maintain lawful employment practices.

3. How many hours do Japanese people work per day?

The standard working hours in Japan are 8 hours per day and 40 hours per week. Overtime is common in many workplaces, but it is regulated under the Labour Standards Act. Employers must follow legal limits, overtime pay rules, and work-hour requirements when managing employees.

4. How much does an EOR in Japan cost?

The cost of an EOR in Japan depends on employee count, service scope, provider, location, and support needs. Pricing may include payroll, onboarding, benefits administration, contracts, compliance support, tax coordination, and ongoing HR management services.

5. What are the differences between an EOR and a PEO?

An EOR acts as the legal employer and manages employment responsibilities in Japan. A PEO works as a co-employer and usually requires the company to have its own local entity before using its HR, payroll, compliance, and benefits support.

Conclusion

The most important part of setting up a remote team in Japan is knowing the local laws and how they affect all employment processes. 

Factors like knowing the laws governing different kinds of employee types, differences in state laws, understanding the Japanese negotiation process, setting up payrolls, and navigating the nuances of taxation can slow down the expansion process.

However, instead of setting up a new entity and understanding the impact of every law on the employment process, it is much simpler to work with a trusted partner who can take care of your HR needs. 

It will also ensure that your HR practices are compliant with the local legal system and you are never on the wrong side of the law.

Skuad’s globally distributed teams and experience make it simple to hire exceptional talent in Japan while also managing your payroll and benefits and helping you with compliance and taxation using a Unified Employment Platform. 

Skuad has built trust among some prominent remote employers and continues to look for ways to make your expansion plans smoother.

‍Contact Skuad today to give your business expansion plans the boost they need.

FAQs

What is an employer of record in Japan?

In Japan, an Employer of Record 日本 (EOR) is a service that employs staff on behalf of another company and handles all associated legal and HR responsibilities. This includes managing Japan payroll, tax, social security, and compliance with local labor laws. It benefits foreign companies that wish to operate in Japan without establishing a regional entity. Want to know how much it costs to hire an employee in Japan? Click here.

What is the employment status in Japan?

Employment status in Japan typically falls into two main categories: regular (seisin) and non-regular (hiseishain) employees. Regular employees are hired on indefinite contracts with full benefits and job security. In contrast, file non-regular employees include part-time, temporary, and contract workers, often with less job security and fewer benefits.

What is the Labour Standards Act in Japan?

The Labour Standards Act in Japan sets the fundamental rules for working conditions to ensure the safety and health of Japanese people. It covers various aspects of employment, such as minimum wage, working hours, overtime work, holidays, annual leave, and safety standards. It applies to all businesses and aims to protect Japanese workers' rights and improve their working conditions.

How many hours do Japanese work per day?

The standard working hours in Japan are 8 hours per day and 40 hours per week. However, many employees work additional hours; overtime is common and is regulated under the Labour Standards Act. The government has been actively promoting work-life balance to reduce excessive working hours.

What is the 5-year rule in Japan?

The 5-year rule in Japan refers to the regulation under the Labour Contract Act that if a fixed-term employee has been continuously employed for more than five years, they can request to be converted to an indefinite-term employment contract. This rule was implemented to provide excellent stability and protection for long-term contract workers.

Do Japanese companies do background checks?

Yes, background checks are permissible under the Japanese labor laws. Some of the most common types of employer conductors during the hiring process include criminal record checks, employment verification, and educational verification, among others.

How much does an EOR in Japan cost?

The total cost of hiring an employer of record services in Japan usually depends on multiple factors, such as the number of employees, the type of service required, the EOR provider, or even the location.

What are the differences between an EOR and a PEO?

A Professional Employer Organization (PEO) provides similar expertise in recruitment, payroll management, benefits management, and employee management. However, it differs from an Employer of Record in that a PEO acts as the co-employer of your company’s employees, whereas an EOR acts as a legal employer.