Employment Laws In Japan

Contractual Agreements

Labor laws of Japan are sourced from —

• The Constitution 
• Government Ordinances
• The Minimum Wage Act
• The Labor Standards Act, and
• The Industrial Safety and Health Act, among others.

These sources set forth regulations regarding working conditions, wages, hours, holidays, contracts, and other essential employment terms and conditions in Japan. 

Types of employment contracts 

Companies mainly use three types of employment contracts when hiring employees in Japan.

Permanent and fixed-term employment contracts

• Permanent contracts in Japan are based on lifetime employment, where the employee serves the company till their mandatory retirement age (usually 55-60 years)
• Fixed-term contracts refer to those that specify a legal period of validity, typically one to three years. Such contracts are standard in companies requiring skilled employees.

Part-Time employment contracts 

• These employment contracts are used for those employees who work fewer hours than full-time employees. 
• Part-time workers in Japan are not eligible for certain benefits, such as regular pay hikes, retirement allowances, and bonus payments. 

Dispatched worker contract

• These contracts involve a third-party staffing agency hiring workers and dispatching them to work at client companies temporarily. 
• Articles 35.2 and 40.2 of the Worker Dispatching Law (WDL) in Japan set a one-year limitation on dispatched work. 

Obligations and rights for both parties 

Both employers and employees have rights and obligations regulated by the labor laws of Japan. Employers must adhere to all relevant employment laws in Japan, including those related to minimum wage, working hours, overtime and compensation, and leave policies, among others. 

It is also advisable for employees to have a clear understanding of the common global HR compliance mistakes to avoid any serious legal repercussions.

Working Hours and Overtime 

The Labor Standards Act (LSA) governs working hours and overtime regulations in Japan. 

Regular working hours

• According to the labor law in Japan, the standard working hours for employees are 40 hours per week.
• In some businesses, 44 hours per week is also allowed, with a maximum of eight hours per day.

Overtime regulations and compensation

Under the labor laws of Japan, employers are required to compensate employees for overtime work at higher rates than regular hours.

Minimum Wage and Compensation 

The national minimum wage in Japan might differ based on prefectures and industries. This means that no standard minimum wage applies to all the 47 geographical jurisdictions of Japan. 

If an employee is subjected to two different minimums, then they become entitled to the higher of the two minimum wages. Additionally, all employers in Japan are required to pay their employees in the official currency, yen (¥).

The minimum wage rate in 2024

If we take into account the main prefectures of Japan, then the minimum hourly wage rate (in yen) goes as follows:

• Tokyo - ¥1072
• Kanagawa - ¥1071
• Osaka - ¥1023
• Aichi - ¥ 986
• Chiba - ¥ 984
• Hyogo - ¥ 960
• Hiroshima - ¥ 930
• Hokkaido - ¥ 920 
• Fukuoka - ¥ 900
• Miyagi - ¥ 883

(As of October 2022)

Factors affecting wage determination

The minimum wage rate in Japan is determined by the Ministry of Labor or the Directors of the Prefectural Labor Standards Office. These authorities determine the minimum wages based on the national or prefectural Minimum Wage Council report. 

Based on the council’s surveys and discussions, there are two types of minimum wage in Japan — regional and industrial. That said, minimum wages in Japan are established based on the following three factors:

• The cost of living for workers
• The capacity of the employer to pay
• The wage for similar labor

Employee Benefits and Social Security 

Japan labor law mandates certain employee benefits and social security systems for all individuals. Let’s take a look at the key aspects of such employee benefits. 

Statutory benefits

Health insurance scheme

• Patients under the health insurance scheme typically pay 20% of medical costs, while the scheme covers the remaining portion.
• The scheme offers a high-cost medical care benefit to cover the balance when medical expenses exceed a threshold of 63,600 yen in any month.
• The health insurance scheme also provides sickness or injury benefits equivalent to 60% of their standard monthly remuneration from the fourth day of absence up to 18 months. 
• 60% of the standard monthly remuneration is provided as maternity benefits to employees in Japan. It is divided into two installments: one for the 42 days before and one for the 56 days after childbirth. Additionally, there is a lump-sum birth and nursing grant worth 300,000 yen.

National pension scheme

• All residents of Japan falling within the age group of 20-59 years old are covered under the national pension scheme.

Employees’ pension insurance scheme

• Employees working in the private sector are covered under the employees’ pension insurance scheme.

Child allowance scheme

• The eligibility criteria were revised in 1991 to focus on children under three years of age rather than those under 18.
• 5,000 yen per month for the first and second child and 10,000 yen for each additional child are included in this scheme.
• Individuals with three dependents whose annual income exceeds 2,396,000 are not included in the child allowance scheme.
• Those who cannot receive the child allowance scheme due to income restrictions may be eligible for a special allowance, provided their income falls below 4,178,000 yen for three dependents.

Employment injury benefits

• It provides essential benefits to workers who sustain injuries, fall ill, become disabled, or die due to a work-related accident.

Unemployment benefits

• The employment insurance scheme covers individuals working in companies comprising one or more workers. 
• However, those covered under the Seamen’s insurance scheme or individuals employed after 65 years of age are not eligible for the employment insurance scheme.
• This scheme primarily has three main benefits: job applicant benefit, employment promotion benefit, and continuous employment benefit.
• Both employers and employees must bear a specific amount equivalent to 0.8% of the worker’s wages for the financial resources of this unemployment benefit.
• The National Treasury provides funding for the scheme’s operations and benefits. 

Additional perks and benefits

Family allowance

• Although not legally mandated by the Japan labor law, many companies provide allowance benefits to employees with dependents.

Social security contributions and requirements 

Long-term care insurance system

• The long-term care insurance system was passed in 1997, creating a comprehensive nursing care insurance system for the elderly in 2000. 
• Individuals aged 65 and above contribute to the benefits under this system through pension deductions.
• Those aged 40-64 contribute through health insurance premiums.
• In addition to the regular insurance contributions, beneficiaries must pay 10% of the cost of services received.
• The nursing care insurance system financing is sourced from various entities, including 25% from the national government, 12.5% from each prefecture and local government, and 50% from insurance contributions.

Vacations and Paid Time Off in Japan

Paid vacations and unpaid leaves play an important role in the labor laws of Japan. Here’s a detailed overview of the same. 

Annual leave entitlement 

The number of paid annual leaves granted to an employee is directly influenced by their duration of work.

Public holidays and special leaves

There are currently 16 public holidays in Japan. 

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

Sick leave

• The labor law in Japan currently does not mandate sick leave for employees.
• Japanese companies can provide leave policies to cover sick leave conditions. 

Maternity leave

• A total of 14 weeks is provided as maternity leave to female employees in Japan.
• It is divided into six weeks before childbirth and eight weeks after delivery.

Paternity leave

• As of October 1, 2022, employers must provide concerned employees four weeks of paternity (childcare at birth) leave. 
• It is usually divided into two installments and can start within eight weeks of birth.

Bereavement leave

• Labor laws of Japan mandate five days of bereavement or condolence leave to every employee. 

Termination and Severance 

Employment laws in Japan permit employers to dismiss employees only on reasonable grounds, and the reason for such termination must be mentioned in the work rules. 

Grounds for termination

Employers may dismiss employees without notice in the following situations:

• Discontinuation of business due to natural disasters or other unavoidable circumstances
• An employee commits a crime in the workplace, like embezzlement, theft, or causing injury.
• An employee breaches workplace rules or negatively influences a co-worker.
• An employee makes false or misleading claims in their resume that affect their hiring decision.
• Absence from work without leave and due cause for two weeks or more.
• An employee is consistently late for work, absent without leave, leaves work before the stipulated time, and fails to be punctual after repeated warnings.

Notice period and severance pay

• Employers in Japan are required to provide at least 30 days of notice (except in situations described above) before terminating an employee. 
• There are no statutory severance pay requirements in Japan. 
• However, the Labor Standard Act dictates that employers must pay the wages due to the employee within seven days of termination.

Discrimination and Equal Opportunity in Japan

Discrimination and equal opportunities in Japan are important issues that various laws and regulations address. The ultimate goal is to promote workplace fairness, equality, and diversity. 

Prohibitions against workplace discrimination

• Japan's labor laws recently included the Reform Act in 2019.
• Under this act, every employee in Japan is entitled to equal wages, irrespective of the status of their jobs.
• Equal Opportunity Act and Comprehensive Promotion of Labor Policies outline the regulations related to cases of harassment in the workplace.

Health and Safety Regulations in Japan

• The primary legislation addressing health and safety in the workplace includes the Labor Contract Act, the Labor Standards Act, and the Industrial Safety and Health Act.

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FAQs

Q1: What are the employment laws in Japan?

Ans: Japan has comprehensive employment laws that govern various aspects of employment, including wages, overtime, holidays, and termination procedures. 

Q2: What is the work policy in Japan?

Ans: The statutory work hours in Japan are currently set at 40 hours per week. Additionally, the labor laws of Japan also allow for instances, wherein, employees might be required to work for 44 hours per week, with a maximum of eight hours per day.

Q3: What is the termination pay in Japan?

Ans: Currently, there is no legal obligation for employers to provide severance pay to employees upon termination of their employment.

Q4: Does Japan have a 4-day work week?

Ans: Yes, Japan has recently introduced the four-day workweek, marking a significant departure from its culture of intense labor practices.