Guide to employment, payroll and benefits in

Japan

Rivermate offers complete payroll, benefits and compliance services for

Japan

01. Overview

Last updated: 

August 19, 2021

Currency
Japanese Yen
Capital
Tokyo
Ease of doing business
78
Language
Japanese
Population
126476461
GDP growth
1.71%

02. Grow your team in

Japan

with Rivermate

Payroll, benefits, taxes, and compliance can be difficult to manage in

Japan

, particularly if you don't have established local relationships. You can hire employees in

Japan

effectively, conveniently, and in full compliance with all relevant labor laws using Rivermate's global employment solution. We handle the responsibilities and legal risks associated with foreign employment so you can concentrate on growing your company.

03. Summary

Japan is an East Asian island nation in the northwest Pacific Ocean. It stretches from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south, and is bordered on the west by the Sea of Japan. Hokkaido, Honshu, Shikoku, Kyushu, and Okinawa are the five largest islands of Japan, which span an archipelago of 6852 islands covering 377,975 square kilometers and are part of the Ring of Fire. Tokyo is Japan's capital and largest city, with Yokohama, Osaka, Nagoya, Sapporo, Fukuoka, Kobe, and Kyoto rounding out the top ten. Japan is the world's eleventh most populous nation and one of the world's most heavily populated and urbanized. The country's landscape is mountainous for about three-quarters of the way, concentrating the country's 125.41 million people on small coastal plains. There are 47 administrative prefectures and eight traditional regions in Japan. With over 37.4 million inhabitants, the Greater Tokyo Area is the world's most populated metropolitan area. The archipelago of Japan has been inhabited since the Upper Paleolithic era, though the first records of the archipelago date from the 1st century AD in Chinese chronicles. The kingdoms of Japan were united under an emperor and his imperial court centered in Heian-ky between the 4th and 9th centuries. Political authority was exercised by a series of military rulers and feudal lords beginning in the 12th century, and enforced by a class of warrior aristocracy. The nation was reunified in 1603 under the Tokugawa shogunate, which pursued an isolationist foreign policy after a century of civil war. A US fleet compelled Japan to free trade with the West in 1854, resulting in the shogunate's demise and the restoration of imperial rule in 1868. During the Meiji period, Japan's Empire adopted a Western-style constitution and embarked on an industrialization and modernization program. Japan invaded China in 1937, and as an Axis power, it entered World War II in 1941. Japan surrendered in 1945 after suffering defeat in the Pacific War and two atomic bombings, and was occupied by the Allies for seven years, during which time it adopted a new constitution. Japan has been a unitary parliamentary constitutional monarchy with a bipartisan legislature, the National Diet, since 1947. Japan is a major force that belongs to a number of international organisations, including the United Nations, the Organization for Economic Cooperation and Development, and the Group of Seven. Despite having given up the right to wage war, the nation retains the world's fourth-most strong military, the Self-Defense Forces. Japan experienced unprecedented economic growth following WWII, rising to become the world's second-largest economy by 1990. The country's economy is the third-largest in nominal GDP and the fourth-largest in terms of purchasing power parity (PPP) as of 2021. Japan has made important contributions to science and technology as a pioneer in the automobile and electronics industries.

04. Public holidays

05. Types of leave

Paid time off

Employees are entitled to a certain amount of paid sick days depending on their period of service:After six months of service, you will be entitled to ten days of paid leave.After 1.5 years of service, you will be entitled to 11 days of paid leave.After 2.5 years of service, you will be entitled to 12 days of paid leave.After 3.5 years of service, you will be entitled to 14 days of paid vacation.After 4.5 years of service, you will be entitled to 16 days of paid leave.After 5.5 years of service, you will be entitled to 18 days of paid leave.After 6.5 years of service, you will be entitled to 20 days of paid leave.Employees are allowed to accumulate up to two years of accrued sick time.

Public holidays

There are 16 public holidays this year. Although there are no formal provisions for public holidays to be charged, it is standard practice to grant such days as paid vacation days.When a national holiday occurs on a Sunday, the next working day is designated as a public holiday.

Sick days

There is no such thing as forced sick leave in Japan. When an employee becomes ill, they take advantage of their accrued holiday time.

Maternity leave

Maternity leave in Japan is 14 weeks. This is split into six weeks prior to the birth and eight weeks after the birth. The woman will return to work before her maternity leave ends if she has been cleared by a doctor.The woman is paid two-thirds of her base wage and is compensated by social security.

Paternity leave

Employees who have worked at the same company for at least a year are eligible for a year of paid leave.

Parental leave

Childcare leave can be taken by either the mother or the father in Japan, and it begins the day after the maternity leave ends. Childcare leave is protected by workers' compensation and can be used up until the day before the child turns one year old. If all parents take child care leave, the leave is extended until the child reaches the age of one year and two months.

Other leave

Unpaid leave for up to three months to care for a partner, infant, relative, or grandparent.Employees on work-related disability leave enjoy 60% of their regular coverage plus a 20% extra supplement following a 3-day waiting period. The boss pays for the first three days.Employee – 0 percent; Employer –.25 percent to 8.8%, depending on the type of company;Government – Subsidies are based on the wishes of the people;Leave of Absence for Bereavement:Up to five days after the death of a father, mother, partner, or infantUp to three (3) days after the death of a grandparent, grandchild, sibling, child's spouse, or spouse's parentUp to two (2) days of extra leave are added while the individual is in charge of planning the funeral service.One day of leave is provided for the first year of a Buddhist memorial service for a deceased parent, partner, or child.

06. Employment termination

Termination process

Terminating full-time employees is difficult under Japanese labor legislation. Employees who do not wish to leave may argue and pursue negotiations, which normally result in compensation of at least one month's income for each year worked. 30 days notice is necessary prior to dismissal.

Notice period

The company must give 30 days' notice or pay the employee in lieu of notice.

Severance pay

Although there is no statutory severance payment, employers should follow socially acceptable terms due to the difficulties associated with terminating an employee.

Probation period

Probationary periods in Japan typically last 3 to 6 months.

07. Working hours

General

In Japan, the standard workweek runs from Monday to Friday and includes 40 hours of work per week, unless otherwise agreed upon with a union or a representative of local employees. The agreement must specify the maximum number of hours of overtime work permitted.

Overtime

Employers are required to compensate employees who work more than 40 hours per week. If the employee is a manager, he or she is expected to work overtime without compensation from the company.


If an employee is regularly expected to work overtime, a written agreement must be in place and filed with the Labor Inspection Office.


Overtime pay at the basic rate is 125 percent of the base hourly wage. Work on a rest day is compensated at 135% of the base hourly wage. Overtime paid late at night (between 10:00pm and 5:00am) is 150 percent of the base hourly wage. On a rest day, late night overtime pays 160 percent of the base hourly wage. Overtime work exceeding 60 hours per month is compensated at 150 percent of the base hourly wage. Overtime in excess of 60 hours per month is compensated at 175 percent of the base hourly wage.


Currently, small to medium-sized businesses are exempt from the last two rates. Additionally, “persons in supervisory or management positions or those who handle confidential matters” are generally exempt from overtime.

08. Minimum wage

General

Japan’s hourly minimum wage depends on the region. Currently, the region with the highest minimum wage is Tokyo whose employees are paid 985 Yen per hour while the lowest is Kagoshima whose employees are paid 761 Yen in an hour.

09. Employee benefits

General

The state provides universal healthcare, but employees may be required to pay for some medical treatments and procedures out of pocket. Japan's statutory health insurance contribution program covers 98.3 percent of the population, with the remaining 1.7 percent covered by the Public Social Assistance Program. Enrollment is required for both citizens and resident non-citizens. Approximately 59 percent of the population is covered by employment-based plans.

Every employed person is covered by social health insurance, to which employers and employees each contribute 5% of their salary.

In Japan, it is critical to provide a safe and harmonious workplace. Employers are required by law to provide all employees with annual physicals and checkups. Employers may also be required to provide stress assessments depending on the type of work.

10. Why Rivermate as your Employer of Record / PEO?

Establishing an entity in

Japan

to hire a team takes time, money, and effort. The labor law in

Japan

has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into

Japan

simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record solutions in

Japan

give you peace of mind so you can focus on running your business.

Please contact us if you'd like to learn more about how Rivermate can help you hire employees in

Japan

via our Employer of Record / PEO solution.

Ready to get started? Our friendly staff is ready to assist you with all your questions, let's connect.