Employer of Record in Japón

Why do foreign companies use an EOR in Japan?

Reasons for using an Employer of Record (EOR) in Japan vary. International hiring without establishing a local entity is the most common reason, followed by labor market testing and relocating key employees. An EOR company, such as Rivermate, becomes the legal employer, hiring your employee through its own legal entity. We are responsible for:

• Providing a locally compliant employment contract.
• Global payroll, tax withholding and employee benefits management.
• Ongoing HR administration.
• Compliance with Japanese labor law, such as the Labor Standards Act and Labor Contract Act.

This leaves you free to manage day-to-day operations with the employee, knowing our HR experts are taking care of them locally.

Japanese labor market: A snapshot

The hiring market
Greatest hiring activity:	Tokyo leads in the number of job opportunities, headquarters, international companies and the number of specialized roles in finance, IT and banking.
Onboarding timelines:	Locals: <1 week Foreign national: 8 weeks+
In-demand sectors:	IT and software engineering, healthcare, finance, fintech, construction, hospitality, manufacturing and industrial automation.
Sectors with skills shortages:	Construction, transportation, logistics, healthcare, nursing

The salary market
Statutory costs:	Employer-employee combined contributions: Health insurance (Kenko Hoken): matches the employee contribution and rates vary by prefecture and health insurance society. Bonuses are included in the calculations. Additional nursing care insurance (Kaigo Hoken): applicable only to employees aged 40 to 64 inclusive. Uniform nationwide contribution of 1.62%. Bonuses are included in the calculation. Pension (Kosei Nenkin): matches the employee contribution. Nationwide rate of 18.3%. Bonuses are included in the calculation. Employment insurance (Koyo Hoken): Contribution is industry-dependent. Bonuses are included in the calculation. Child and childcare support levy: New combined contribution of 0.23% effective from April 2026). Bonuses are included in the calculation. Employer-only contributions: Worker’s accident compensation insurance (Rousai Hoken): industry-rated Child and childcare contribution: Nationwide contribution of 0.36%. Bonuses are included in the calculation. Asbestos health damage relief act levy: 0.002%
Hourly minimum wage:	The minimum hourly wage varies by prefecture. National weighted average: ¥1,177 Tokyo: ¥1,280 (highest rate, effective Oct 1, 2026) Miyazaki: ¥1,085 (lowest rate, effective Oct 24, 2026)
National personal income tax rates:	Progressive tax rates of 5% to 45%. Under ¥1,950,000: 5% ¥40,000,000+: 45%

Employment costs in Japan: what employers should consider

The total employment costs for Japan depend on several elements that should be taken into account before you finalize your hiring budget. A simple way to put this would be as follows:

Fixed salary (base salary) + variable compensation + statutory costs + optional benefits + future financial obligations = total employment costs

Financial cost	Explanation
Fixed salary	Monthly predetermined salary that is not affected by the number of hours worked or individual performance.
Variable compensation	Ad-hoc payments that fluctuate based on hours worked, individual performance, company performance, sales figures and industry-related requirements.
Statutory costs	Government mandated employer and employee contributions.
Optional benefits	Non-statutory payments an employer chooses to offer
Future financial obligations	Costs an employer may need to pay when employment ends or entitlements accumulate.

Want to see what hiring in Japan really costs? Use our employment cost calculator for a clearer picture of the numbers.

Employment cost calculator

Statutory rights and benefits

Finalizing a compensation structure is a big step in the hiring process, but before you can conclude the employment contract, you also need to understand employee statutory rights. These statutory rights essentially shape the employment relationship, affecting everything from working hours to termination procedures.

Statutory benefit	Statutory provision
Minimum wages	Employees are entitled to at least the hourly minimum wage set by the prefecture they work in.
Public holidays	Public holidays are mostly national. Some employers add company holidays. Local observances may exist but are not generally statutory public holidays.
Working hours	Labor Standards Act, Article 32: No more than 40 hours per week, excluding break periods.
No more than 8 hours per day for each day of the week, excluding break periods Only certain categories of workers are excluded from the standard working hours regulations, as per Article 41 of the LSA.
Overtime	Overtime requires the proper legal framework (Labor Standards Act, Article 36) and tracking. Employers must be able to evidence working time, including overtime and late-night work, to ensure correct premiums and compliance. The general limits are 45 hours a month and 360 hours a year.
Overtime premiums are mandatory and cannot be waived. The premium level depends on the overtime category. Overtime must be documented with a ‘36 agreement’ and filed at the Labor Standards Inspection Office before an employee works beyond the statutory working-hour limits.
Annual paid leave	Paid annual leave starts at 10 days after 6 months of continuous service with ≥80% attendance.
It increases with service up to 20 days per year at 6.5 years+ Employers must ensure that employees who are granted at least 10 days of paid annual leave, take at least 5 days within a relevant year.
Sick leave	No general statutory employer-paid sick leave.
In many cases, employees may claim sickness allowance through health insurance (commonly around two-thirds of standard remuneration after a waiting period, subject to conditions).
Employers often manage short absences through policy, not statute.
Maternity leave	Labor Standards Act, Article 65: 14 weeks, divided into:
6 weeks before the expected birth (or 14 weeks in the case of multiple fetuses) 8 weeks postpartum An employer is not legally required to pay the employee during maternity leave. The employee is compensated by the government social insurance. Article 19 of the Labor Standards Act prohibits the dismissal of a woman during the maternity leave period, nor within 30 days thereafter.
Post-birth paternity leave	Up to a maximum of 4 weeks (28 days), within 8 weeks of the birth of the child. Eligible employees must meet certain conditions, as prescribed by the Ministry of Health, Labor and Welfare. The benefit is paid through Employment Insurance.
Additional Childcare leave	Available to both parents. Lasts until the child turns one, but may be extended for 18 months or two years, in qualifying circumstances. Eligible employees may receive compensation through Employment Insurance.
Severance pay	Under Japanese labor laws there is no statutory requirement for the employer to provide a severance payment upon termination of contract.

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Hiring in Japan: what it’s really like

For a first-time foreign employer, the labor environment may be unfamiliar and cultural differences challenging. This is when the first-hand knowledge and experience of local experts can make a huge difference. The insights help you to understand the market better and hire successfully in it.

Infrastructure stability

There are many attractive foreign investment jurisdictions in APAC but Japan stands out because it offers highly developed infrastructure, such as mature transportation, telecoms and public services. This makes Japan a practical choice for companies that need operational continuity and consistent service delivery.

Major hiring centers

In other countries, there may be several cities that hold particular skill sets or have established industry hubs, but Japan is highly concentrated geographically. This means hiring takes place mainly in Tokyo and the surrounding areas like Chiba and Kanagawa, with Osaka a close second. Inevitably, Tokyo tends to be more expensive than other areas, but it’s where most foreign companies are located. It’s also the easiest place to find bilingual workers with work experience in international companies.

Cost-efficient labor market

There is a general idea that Japan is an expensive hiring market, but in reality it is extremely cost-efficient. The latest hourly minimum wage of ¥1,280 for Tokyo is equivalent to $8. Although that's not what most white-collar workers earn, the hourly wage is much lower than most international employers expect for Japan.

Recruitment practices

Japanese candidates don’t tend to use LinkedIn, so a recruitment agency or local advertising will be necessary. Recruiters typically charge 30 to 35%, which can be very expensive depending on the position you’re hiring for.

When interviewing, it’s important for the company to be viewed as financially stable and committed to the market. Foreign companies also need to understand local management and career expectations, or the candidate will not leave a stable employer to take up a new opportunity. Also, fixed-term jobs are considered less stable in Japan and will likely not attract the same kind of interest as a permanent contract.

Workplace culture

The Japanese workforce is well-educated and very capable. The workplace culture places high value on professional responsibility and reliability, so when you ask for something to be done, it is taken seriously by employees. This approach is beneficial for maintaining quality assurance and delivering excellent customer service.

Japanese workplaces have a conservative approach to proactively introducing new ideas and change. They tend to emphasize hierarchies and consensus-based decision-making. So where a foreign company wants to encourage innovation and rapid technological development, it will need to educate employees into that culture.

Japanese view of employment

In Japanese culture, commitments are taken very seriously and the offering or accepting of employment offers is no exception. For this reason, especially if the employer is new to the Japanese market and has not yet built an established reputation it can take some time to attract the best talent, and they must be prepared to meet expectations.

It is vital that the employer understands the expectations of its employees, and also their own responsibilities and obligations. It’s also important to note that labor law strongly favors employees, so in matters of disciplinary action or termination, in-depth knowledge and culturally sensitive handling is vital. Chris Alderson, founder of the Eos group in APAC, which is now part of Rivermate, has provided guidance on this subject to many government organizations and global multinationals.

“Before entering the Japanese market, it's important to properly understand the employment structure, the expectations of local staff, and how to manage the team. Failure to properly strategize and prepare the necessary support structure for new staff members can be very damaging to a new organisation’s opportunities in the market. There is great dedication to perfection in Japanese culture and people take pride in carrying out their work to the best of their ability and in a very organized fashion .

When you drive to a gas station, employees will run to the car with a warm greeting and enthusiasm, despite working on minimum wage. If a task is undertaken, it is always given 100%. Employees expect the company to mirror this by offering a well-organized employment structure and a responsible attitude towards their long-term employment security and well-being. Failure to properly prepare can be very destructive to company culture and the success of your business.”

Expand internationally with confidence. Rivermate's global consultants provide practical, hands-on guidance to help you enter new markets, build compliant operations, and manage international teams effectively.

Where ending an employment contract can be challenging in Japan

Since an employment relationship is considered a serious commitment in Japan, ending one can present some challenges. Here we discuss common termination risks and practices employers should know about upfront, as they may change how you view hiring decisions and performance management.

Compliance obligation	Challenge
Terminations	Japan’s local labor law is highly protective of employees. They cannot be dismissed ‘at will’. Dismissals require objectively reasonable grounds. For employer dismissals, at least 30 days' advance notice must be provided or payment in lieu of notice (at least 30 days' average wages). Final settlements must account for outstanding wages and accrued entitlements.
Severance is not automatically required by law.
Dismissal for poor performance	Poor performance is not considered a unilateral reason to terminate a contract. In practice, if an employer implements a Performance Improvement Plan (PIP), it must be fair and last long enough to see a result (experientially this is between 2-3 months). The PIP must be supported by examples of prior performance failures, KPI specifics, regular feedback and opportunities to improve. Even if the PIP fails, it does not necessarily mean dismissal is immediately lawful. In this case, the employee may still request to be moved to another position (if available).
Probationary periods	Probationary periods in Japan are seen as an assessment period, not an automatic right to dismiss an employee. Probation periods of 3 to 6 months are common practice, but an employer still needs to follow a termination process if they want to dismiss the employee during the probation period.
Mutual termination agreements (MTAs)	A mutual termination agreement must be used with care. It should be a discussion about terms of separation and concluded without pressuring the employee to accept the terms. The agreed settlement should be fair if employers want to avoid a labor dispute.

How Rivermate can help you hire compliantly in Japan

EOR services, like Rivermate, have gained popularity in Japan in the last decade because they can facilitate rapid entry into the market. They also help employers to manage the complexities of foreign payroll, taxes, statutory costs and benefits administration. With global HR experts in Japan who understand the local laws, we are ideally positioned to take care of employment compliance on your behalf.

Ready to hire in Japan?

Rivermate handles the complexities so you can hire with confidence and ease in Japan.

Talk to a Japanese Hiring Expert

Sources:

Labor Standards Act - English - Japanese Law Translation
Labor Contracts Act - Japanese/English
Health Insurance Act - Japanese/English
Industrial Safety and Health Act - English - Japanese Law Translation
Act on Comprehensively Advancing Labor Measures, and Stabilizing the Employment of Workers, and Enriching Workers' Vocational Lives - English - Japanese Law Translation
Labor Union Act - English - Japanese Law Translation
Act on Equal Opportunity and Treatment between Men and Women in Employment - Japanese/English
Act on Improvement of Personnel Management and Conversion of Employment Status for Part-Time Workers and Fixed-Term Workers - English - Japanese Law Translation
Labor ministry ends blanket 45-hour overtime guidance | The Asahi Shimbun: Breaking News, Japan News and Analysis
Japan - Individual - Taxes on personal income
Paternity Leave