Known for its efficiency and advancements, Japan is one of the global front-runners in innovation and progress. The country also has a highly stable, secure, and advanced financial infrastructure, with the 4th largest purchasing power parity globally.
The employment laws in Japan have been made keeping business upliftment, employee safety, equality, and much more in mind. Employers have to mandatorily draft an employment contract that talks about all the employment criteria. Businesses need to know these laws before they hire in Japan.
Labor Laws in Japan
The following labor laws are relevant when you hire employees in Japan:
Conditions of Service
- The employment laws in Japan are designed to cover all aspects of employer-employee relationships.
- The sources of Japanese labor laws are the Constitution, government ordinances, and pieces of legislation such as the Labor Standards Act, the Minimum Wage Act, the Industrial Safety and Health Act, and so on.
- In addition to the above-mentioned sources, employment contracts, work rules, and collective bargaining also govern aspects of employment rules in the country.
- Working hours in Japan span eight hours per day or 40 hours per week.
- Employers are required to pay overtime wages if their employees are required to work more than the statutory working hours.
- The Reform Act, which came into effect in Japan in 2019, promotes equal work, and equal pay. This means employees are entitled to equal and fair wages, irrespective of their job statuses.
- This Act also prohibits disparities between non-regular and regular employees.
- The Equal Opportunity Act and the Comprehensive Promotion of Labor Policies outline steps for employers to follow to minimize cases of harassment in the workplace. It also prohibits employers from dismissing employees who participate in any harassment-related investigation in the company.
- The Minimum Wage Act oversees the minimum wage rates in Japan. This Act is periodically updated.
- Statutory benefits in Japan include social security, annual leave, insurance, healthcare, and so on.
Health and Safety
- The Labor Contract Act, Industrial Safety and Health Act, and the Labor Standards Act have provisions to ensure employees’ mental and physical well-being.
- These acts provide guidelines and protocols to prevent accidents and prevent hazards.
Data Privacy and Security
- Only work emails and computers can be monitored by employers if the need arises.
- Employers are not allowed to use any employee’s personal information other than for the reason for which it was provided.
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Payroll and Taxes in Japan
The payroll frequency in Japan is usually once a month on a specific date. Other essential information related to payroll in Japan is discussed here:
- Overtime work up to 60 hours a month is compensated at 125% of the set salary.
- Overtime work that exceeds the 60-hour mark is compensated at 150% of the set salary.
- Late-night work, done between 10 p.m. and 5 a.m. is compensated at 125% of the normal salary.
Employer and Employee Contributions
- The employee income taxes in Japan range from 5% to 45%.
- Additionally, employees are required to pay a local income tax of 10%.
- Non-resident employees pay a national income tax of 20.42%.
- The corporate income tax is collected at a rate of 30.62%.
Dates of Taxation
- The tax year in Japan starts from January 1 and extends till December 31, encompassing the entire year.
- Essentially, there are two types of taxation forms in Japan; Form A and Form B.
- Form A is specifically for employment income, whereas the latter is for filing any kind of income.
Employee Benefits in Japan
Employee benefits in Japan are put in place to ensure employees can receive all the help and support they need to lead a healthy and protected life.
Leave Policy in Japan
Paid Time Off:
- Paid time off in the country relies on the duration of continuous employment.
- Female employees get 14 weeks of maternity leave in Japan.
- This leave should be taken six weeks before and eight weeks after the birth of the baby.
- Starting from October 1, 2022, paternity leave has been introduced in the country.
- The paternity leave in Japan is known as Childcare at Birth Leave and lasts for 4 weeks.
- There is no government-mandated sick leave in Japan.
- However, a company’s leave policy can cover the conditions of sick leaves.
- Individuals aged between 20 and 59 are covered by the National Pension System, which receives contributions from employees and employers.
- The system starts distributing pensions once individuals reach 65.
- There are also disability pensions and survivors' pensions in Japan. The former covers individuals with a disability, whereas the latter is paid to the family members of a deceased individual.
- Employers and employees contribute nearly 50-50 to health insurance.
- Health insurance covers primary care, hospital visits, prescription drugs, mental health care, etc.
- Most Japanese companies provide allowances to employees who have dependents.
- The notice period should be at least 30 days before an employee is dismissed.
Cost of Hiring an Employee in Japan
To hire employees in Japan, employers have to spend varying amounts of money, depending on:
- Online job postings
- Conducting interviews
Establishing a Subsidiary vs. Employer of Record (EOR) in Japan
While hiring in Japan can be tricky and be further complex by the decision to start a subsidiary, partnering with Skuad can help simplify the process, drastically.
Top Job Listing Sites in Japan
The following are the most popular job listing sites in Japan:
- Daijob: This is the ideal job listing site, as it has a huge pool of bilingual applicants. 70% of the candidates on this site have working English proficiency.
- BizReach: BizReach is certainly one of the costlier job posting sites in the country. However, this website has over 1.7 million registered applicants, and hence, offers a diverse pool of skills and talent to companies.
- CareerJet Japan: This is an affordable option for posting job vacancies in the country. Additionally, they offer custom plans based on your posting needs.
- Indeed: Indeed is a global forerunner for employers and employees, alike. It has a huge daily website traffic and allows free job posting.
- Jopus Connector: This website has special features that let you assess applicants based on several factors. Furthermore, you are not required to pay any fee till you hire someone.
Compliance Risks of Hiring Employees in Japan
Failure to comply with Japanese labor laws may lead to heavy penalties and even jail time. For instance, if an employee is misclassified by an employer, they may incur a fine of up to 300,000 JPY or six months of imprisonment. Some other compliance risks include:
- Data Protection Compliance: The General Data Protection Regulation applies to Japan as well. Companies should ensure that businesses protect employee data.
- Antitrust & Competition laws: Employers hiring employees in Japan must adhere to the country’s antitrust and competition laws. Violating these can lead to hefty fines and legal consequences.
- Labor Laws: Japan has strict labor laws governing issues like employment contracts, working hours, wages, and employee benefits. Non-compliance with labor laws may result in legal conflicts, monetary penalties, and harm the company's image.
How to Hire Talent in Japan
Option 1: Establishing a Subsidiary
- Businesses aiming to exert greater control over their company’s hiring procedures can opt for a subsidiary in the country.
- However, establishing a subsidiary in Japan increases expenditure, compliance risks, and much more.
Option 2: Hiring On A Contractual Basis
- Contracts can be a hassle-free option for employers to hire talented individuals on a short-term basis, thus allowing flexibility and cost management.
- That being said, companies should have the proper legal and HR team in place to ensure their contracts follow all the relevant Japanese labor laws and regulations.
Option 3: Hire an Employer of Record (EOR)- Skuad
- If you want to skip the complexities of hiring employees in Japan, and jump straight to onboarding Japanese talent, partner with an EOR, like Skuad.
- This is the ideal option as it minimizes all sorts of risks while solidifying your chances of securing the finest and most eligible candidates.
Hiring Trends in Japan in 2023
Ever since the pandemic, the job market in Japan has witnessed some fluctuations. One of the persistent problems was the lack of skilled employees in the country. This has improved considerably, partly due to increased retention efforts by the companies. Additionally, 40% of enterprises are considering hiring remote employees with flexible work timings to overcome the employee shortage.
Additionally, the country is also open to hiring foreign nationals, with nearly 1.82 million foreigners working in the country as of October 2022. This proves Japan’s willingness to work with a global talent pool and enrich its working environment.
Partner with Skuad for the Perfect Hiring Experience in Japan
Our global presence and robust framework allow us to facilitate hiring and onboarding processes without any hassle or compliance risks. Skuad’s unified platform enables employers to manage their employees’ onboarding, payroll, taxes, and more, compliantly. Book a demo today!
1. How do companies hire in Japan?
First, companies usually post job vacancies on websites. Subsequently, after shortlisting the eligible candidates, they conduct interviews and carry out background checks to hire a candidate.
2. How do you pay an employee in Japan?
Employees are generally paid once a month on a date that is fixed as per the employment contract.
3. What is the minimum wage in Japan in US dollars?
The minimum wage in Japan is ¥1,113 per hour.