Professional Employer Organization (PEO) in Japan

What is a PEO? 

A professional employer organization (PEO) is a service provider that delivers administrative and human resources (HR) functions, among others. PEOs generally help small businesses, startups, and SMEs as an outsourced agency. Some examples of tasks a PEO handles are: 

• Payroll
• Compliance
• Hiring 
• Onboarding
• Benefits
• Compensation 

A PEO takes the often time-consuming and expensive burden of HR functions to allow businesses to focus on more revenue-generating activities. When you don’t have to worry about compliance or payroll constantly, you can work on building core operational activities to scale your business. 

PEOs even enable global growth for companies. 

Take Skuad for example, they can hire in 160+ countries, including Japan, while maintaining 100% compliance with local laws. Think of how much your business could grow by partnering with them! Contact a representative today for a demo. 

What are the benefits of using PEO services in Japan? 

A PEO is a valuable partnership that any ambitious startup or SME should consider. 

If your organization is ready to expand its team to include Japanese workers, you should contact Skuad today to discuss how we can help your organization scale and expand. 

A PEO opens several doors for companies, such as access to better benefits packages or a much larger talent pool. We’ll discuss the top benefits of using a PEO to do international business in Japan below. 

Hire the best talent 

You want the best of the best for your company, right? When you work with a PEO, the talent pool you can choose from expands significantly. Japan has a booming economy and many ambitious professionals eager to advance their careers. By working with a PEO, you gain access to those eager professionals to improve your operations. 

Be more competitive 

Your employer brand will become much stronger if you have global talent vying for your open positions. Working with a PEO in Japan allows you to attract top talent and position yourself as a global competitor. You’ll have access to competitive benefits packages and experts with the knowledge needed to meet worker demands. 

Save on unnecessary costs 

As you’ll read more about later, incorporating a business in Japan is a costly and timely endeavor. Unless you have the time and resources to establish and manage an entity in Japan, working with a PEO is the best decision. 

It will also save you costs associated with hiring and managing an HR department. PEOs bring many benefits to organizations. 

Develop insight into new global markets 

Do you want to someday expand your organization to global markets? 

Starting with a PEO is a great way to develop the insight needed to do this successfully. You’ll gain key insights from Japanese employees to help you expand all over Asia. 

Are you interested in working with Skuad? Contact us today to schedule a free demo. 

Avoid setting up a new entity in Japan 

If you decide to not use a PEO in Japan, the only other option for your company to hire there is to establish an entity in the country. This requires many resources, such as legal teams, many costs, and long hours. Using a PEO eliminates the need to establish an entity in Japan while legally meeting all requirements. 

Increase cultural awareness 

Working with a PEO will increase your cultural knowledge of working in Japan. You’ll understand what’s acceptable and what isn’t to make your global activities run more smoothly. For example, did you know you must bow to those considered superior to you in all interactions in Japan? Or that they’ll return the bow with their own? 

Remain compliant with Japanese labor and employment laws 

Labor and employment laws in Japan are a bit different than those in America. Employment laws in Japan are governed by four acts: 

• Labor Standards Act
• Labor Contract Act
• Labor Union Act 
• Employment Security Act 

Each of these acts enforces strict laws around hiring and employing workers in Japan. You must understand them and follow the laws to avoid penalties and fines. 

Payroll 

The currency in Japan is the Japanese Yen and payroll is processed monthly.

The typical workweek is 40 hours and overtime is an extremely complex process with several governing laws. The minimum wage is between 714 JPY and 932 JPY. 

Employer taxes are between 14.35% and 15.69%. Employee taxes are between 14.685% and 16.63%. 

Japan income tax for employees: 

• 5% for income under 1,950,000 JPY 
• 10% for income over 1,950,000 JPY but under 3,300,000 JPY 
• 20% for income over 3,300,000 JPY but under 6,950,000 JPY 
• 23% for income over 6,950,000 JPY but under 9,000,000 JPY 
• 33% for income over 9,000,000 JPY but under 18,000,000 JPY 
• 40% for income over 18,000,000 JPY but under 40,000,000 JPY 
• 45% for income over 40,000,000 JPY

Paid Leave 

Japan has 16 public holidays. Employees who have been with a company for more than 6 months are entitled to 10 days of paid time off. The amount increases gradually to 20 days of paid time for 6.5 years of employment. 

Maternity leave is 14 weeks of paid time off. 6 weeks are taken before the birth and 8 weeks after. Paternity leave is up to a year of time off and is taken in two installments. The first can start within 8 weeks of the birth of the child. 

There is not a set law around sick leave in Japan. Employees get 5 paid days off for condolence or bereavement leave. 

Do you have more questions about how to expand your operations to Japan? Contact Skuad today and one of our helpful and knowledgeable representatives can assist you. 

How much does it cost to build a team in Japan? 

The cost to build a team in Japan will depend on which option you choose. If you work with a PEO, you can expect to start hiring within weeks. On the other hand, if you want to establish an entity and incorporate a business in Japan, you’re looking at a much longer and more costly timeline. 

Incorporating in Japan 

Setting up a business in Japan is not an easy feat. If you have already incorporated in a global location, you have three options to choose from to expand to Japan. You can establish a representative office, a branch office, or a subsidiary company. 

Most SMEs and startups will not have the above option, so we’ll go into more detail about what would be required as a foreigner starting a new business in Japan. First, you have to establish a company and obtain a special Visa that enables you to act as a business manager. 

Next, you must complete the Japan company registration steps. You must have a physical address to register that is not your home address. You also much meet one of the following conditions for your company to be recognized: 

1. Have capital or investment capital of at least 5,000,000 Japanese Yen
2. Have two full-time employees
3. Have one full-time employee and capital of 2,500,000 Japanese Yen

Then you obtain a special Visa that allows you to operate in Japan. With it, you have 4 months to open a business banking account, obtain a residence card, and register your business. There is also an option to obtain a 6 month Visa. 

Once all of this is completed, you need to start paying taxes at the Japanese corporate tax rate and file all necessary documentation. 

Using a PEO in Japan 

If the above seems overwhelming, you do have the option of working with a PEO. Not only do you have the ability to hire Japanese nationals for a fraction of the cost, but you also have a partner to guide and assist you. 

The pricing structure depends on your company set up and how many employees you want to hire. With Skuad, you can get started for free and cancel at any time. So…what are you waiting for? 

Our PEO services start at $19 per month, per employee. You can also choose to look at our enterprise packages, which have custom pricing, or our employer of record services that start at $199 per month, per employee. 

Are you ready to get started? 

Schedule a free demo today 

Are you ready to start hiring workers in Japan? Skuad makes global hiring a seamless process and makes sure your organization stays compliant with local labor laws in over 160 countries! Schedule a free demo today to see how it works.