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Hiring Employees in Japan
  • By Milly Barker, PhD
  • Updated August 21, 2024
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Milly Barker, PhD
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Milly is an international lawyer and tech entrepreneur who has advised companies on expanding globally for over 5 years. She is an advocate of remote hiring and regularly consults on future of work matters. Milly founded RemotePad to help employers learn more about building and growing international teams.
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Hiring Employees in Japan in 2024

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Key Takeaways

  • Understand employment laws: Familiarize yourself with Japanese labor laws.
  • Advertise the job: Post the job on Japanese job websites, newspapers, or through local recruitment agencies.
  • Interview and select: Conduct interviews and select the best candidate.
  • Prepare an employment contract: Prepare a contract that complies with Japanese labor laws, and onboard the employee.

What are the key Things to Know Before Hiring employees in Japan

When hiring employees in Japan, there are several key things to know to ensure compliance with labor laws and cultural norms. Here are some important considerations:

  1. Employment Contract: In Japan, it is common to have written employment contracts with detailed terms and conditions. The contract should include information such as job description, salary, working hours, duration of employment, and termination conditions.
  2. Labor Laws: Familiarize yourself with Japanese labor laws, including regulations on working hours, overtime, holidays, and leave entitlements. The Labor Standards Act (LSA) is the primary legislation governing employment conditions.
  3. Working Hours: The standard working hours in Japan are 40 hours per week. Overtime work is limited to 45 hours per month or 360 hours per year. Overtime pay rates are typically 25% to 50% higher than regular pay.
  4. Social Insurance: Employers in Japan are required to enroll their employees in social insurance programs, including health insurance, pension insurance, and employment insurance. Contributions are shared between the employer and employee.
  5. Visas and Work Permits: Ensure that your employees have the necessary visas and work permits to legally work in Japan. The appropriate visa category will depend on the nature of their work and duration of stay.
  6. Language and Communication: Language can be a significant barrier when hiring in Japan. Ensure that you have effective communication channels in place to overcome any language differences and facilitate smooth operations.
  7. Employment Practices: Japanese work culture emphasizes teamwork, loyalty, and respect for hierarchy. It is essential to understand and respect these cultural aspects in your management approach.
  8. Hiring Process: The hiring process in Japan often involves multiple rounds of interviews, including written exams and group discussions. It is customary to conduct background checks and verify educational credentials.
  9. Salary and Benefits: Determine competitive salary ranges and benefits for your industry to attract and retain talent. Common benefits include paid vacation, annual bonuses, and transportation allowances.
  10. Termination and Severance: Familiarize yourself with the procedures and requirements for terminating employees. Japan has strict regulations regarding termination, and severance pay may be required in certain circumstances.
  11. Taxation: Understand your tax obligations as an employer, including income tax withholding and social insurance contributions. Consider seeking professional advice to ensure compliance with tax laws.
  12. Non-Discrimination: Ensure that your hiring practices and workplace policies adhere to Japanese laws on non-discrimination based on gender, age, disability, nationality, and other protected characteristics.

It is advisable to consult with local legal and HR professionals who can provide specific guidance based on your business needs and circumstances.

How much does it cost to hire employees in Japan?

The cost of hiring employees in Japan can vary depending on various factors such as the employee’s qualifications, experience, position, and industry. Here are some key cost considerations:

  1. Salary: The salary you offer will be a significant component of the cost. Salaries in Japan are typically paid on a monthly basis. The amount will depend on the position, industry, location, and the individual’s qualifications and experience.
  2. Bonuses: Annual bonuses, known as “bonuses” or “toshikoshi hōken” in Japan, are common and often expected by employees. These bonuses are typically calculated as a percentage of the employee’s annual salary and paid once or twice a year.
  3. Social Insurance: Employers in Japan are required to contribute to various social insurance programs, including health insurance, pension insurance, and employment insurance. The contribution rates are calculated based on the employee’s salary and are shared between the employer and employee.
  4. Additional Benefits: Companies in Japan may provide additional benefits such as transportation allowances, housing allowances, medical benefits, and retirement plans. The cost of these benefits will depend on the specific offerings provided by the employer.
  5. Recruitment Costs: If you engage recruitment agencies or job placement services to find suitable candidates, there may be fees associated with their services. These fees can vary depending on the agency and the level of assistance provided.
  6. Taxes: Employers are responsible for withholding income tax from employee salaries and remitting it to the tax authorities. The tax rate depends on the employee’s income level and is calculated based on the progressive tax system in Japan.
  7. Administrative Costs: There may be administrative costs associated with hiring, such as the preparation of employment contracts, onboarding processes, and payroll management. These costs can vary depending on the size of your organization and the complexity of your operations.

It is important to note that labor costs in Japan can be relatively high compared to some other countries. It is advisable to consider all these factors when budgeting for employee costs and consult with professionals who can provide specific advice tailored to your business requirements.

What are the legal requirements for hiring employees in Japan?

When hiring employees in Japan, there are several legal requirements that employers must comply with. Here are the key legal requirements:

  1. Employment Contract: It is legally required to have a written employment contract with employees in Japan. The contract should include important details such as job description, working hours, salary, duration of employment, and termination conditions.
  2. Work Permits and Visas: Ensure that your employees have the necessary work permits and visas to legally work in Japan. The appropriate visa category will depend on the nature of their work and the duration of their stay. Non-Japanese nationals must obtain the appropriate work visa before commencing employment.
  3. Labor Standards Act (LSA): The Labor Standards Act is the primary legislation governing employment conditions in Japan. It covers various aspects such as working hours, overtime, holidays, leave entitlements, wages, and termination procedures. Employers must adhere to the provisions of the LSA when employing workers.
  4. Social Insurance: Employers in Japan are required to enroll their employees in various social insurance programs, including health insurance, pension insurance, and employment insurance. Employers and employees share the contribution costs for these insurances.
  5. Taxation: Employers have tax-related obligations, such as withholding income tax from employee salaries and remitting it to the tax authorities. Employers are also responsible for making social insurance contributions and paying other employment-related taxes.
  6. Non-Discrimination: Employers must comply with laws prohibiting discrimination based on factors such as gender, age, disability, nationality, and other protected characteristics. Fair and equal treatment should be provided to all employees throughout the employment relationship.
  7. Termination and Severance: The Labor Standards Act specifies rules and procedures for terminating employees in Japan. Depending on the circumstances, employers may be required to provide advance notice or pay severance compensation. It is essential to follow the legal requirements when terminating employees.
  8. Occupational Safety and Health: Employers must provide a safe and healthy working environment for their employees. Compliance with occupational safety and health regulations is crucial, including conducting risk assessments, implementing safety measures, and providing necessary training.
  9. Employee Benefits: Employers must comply with regulations regarding employee benefits, such as paid leave, including annual leave, sick leave, and maternity/paternity leave. The specific entitlements vary based on factors such as the length of service and company policies.
  10. Employee Representation: In certain cases, employers may be required to establish employee representative bodies, such as labor unions or labor-management councils, depending on the size of the workforce and industry-specific regulations.

It is important to consult with legal professionals or labor experts who can provide specific guidance based on your business situation and ensure compliance with all relevant laws and regulations.

What are the key ways to hire employees in Japan, such as PEO and EOR solutions?

When hiring employees in Japan, there are various ways to manage the employment process. Two common solutions are PEO (Professional Employer Organization) and EOR (Employer of Record). Here’s an overview of these options and other key ways to hire employees in Japan:

  1. PEO (Professional Employer Organization): A PEO is a third-party organization that becomes the employer of record for the hired employees. The PEO handles payroll, benefits administration, tax withholding, and other HR-related tasks. It allows companies to outsource the administrative aspects of employment while maintaining operational control over the employees’ work.
  2. EOR (Employer of Record): An EOR is similar to a PEO but typically focuses more on handling compliance and administrative matters. The EOR becomes the legal employer, taking responsibility for HR, payroll, taxes, and legal compliance on behalf of the hiring company. This arrangement allows businesses to engage workers quickly in a foreign country while minimizing the legal and administrative burdens.
  3. Direct Employment: Companies can establish their legal presence in Japan and directly employ workers. This involves setting up a legal entity, such as a branch office, subsidiary, or representative office, and complying with local labor laws, tax regulations, and other legal requirements. Direct employment offers greater control and flexibility but comes with higher administrative and legal responsibilities.
  4. Temporary Staffing Agencies: Hiring through temporary staffing agencies is a common practice in Japan. Companies can partner with staffing agencies that provide workers for short-term or project-based assignments. The agency serves as the employer and handles HR-related tasks, including payroll, benefits, and compliance.
  5. Recruitment Agencies: Engaging recruitment agencies is a popular way to find and hire qualified candidates. Recruitment agencies in Japan help companies source, screen, and recommend candidates for various positions. They may also assist with interviews, background checks, and other selection processes.
  6. Online Job Portals: Job portals and online platforms are widely used for advertising job openings in Japan. Websites like Indeed Japan, LinkedIn, and Japanese-specific job portals provide access to a broad pool of candidates. Companies can post job listings and manage the hiring process independently.
  7. Referrals and Networking: Referrals and networking are effective ways to find talent in Japan. Encourage your existing employees, business partners, and industry contacts to refer potential candidates. Building relationships with local professionals and attending industry events can also help expand your network.
  8. Universities and Job Fairs: Establishing connections with universities and participating in job fairs can be beneficial for recruiting fresh graduates or entry-level employees. Many universities and institutions host career events where companies can showcase their opportunities and connect with potential candidates.

It’s important to consider factors such as cost, legal compliance, administrative workload, and the specific needs of your business when choosing the best hiring method in Japan. Consulting with local HR experts or legal professionals can provide further guidance tailored to your unique circumstances.

What are the steps businesses need to take to hire employees in Japan?

To hire employees in Japan, businesses need to follow several steps to ensure legal compliance and a smooth hiring process. Here are the key steps involved:

  1. Determine Employment Needs: Clearly define the positions and roles you need to fill in your organization. Identify the required skills, qualifications, and experience for each position.
  2. Develop Job Descriptions: Prepare detailed job descriptions that outline the responsibilities, qualifications, and any specific requirements for each position. This will help attract suitable candidates and set expectations.
  3. Recruitment: Implement a recruitment strategy to attract potential candidates. This can include posting job openings on online job portals, leveraging recruitment agencies, networking, or participating in job fairs. Advertise the job positions widely to reach a diverse pool of applicants.
  4. Application and Screening: Collect and review applications from interested candidates. Screen resumes and other application materials to shortlist candidates who meet the initial requirements. Conduct interviews, either in person or remotely, to further assess the candidates’ suitability.
  5. Background Checks: Perform background checks, including verifying educational credentials, employment history, and any other relevant information. This step ensures the accuracy and integrity of the candidates’ qualifications and helps in making informed hiring decisions.
  6. Employment Offer and Negotiation: Once you have identified the preferred candidate, extend a formal employment offer. Outline the terms and conditions of employment, including salary, benefits, working hours, and start date. Negotiate and finalize the terms to reach a mutually acceptable agreement.
  7. Employment Contract: Prepare a written employment contract that clearly outlines the agreed-upon terms and conditions of employment. Include details such as job responsibilities, salary, working hours, leave entitlements, termination conditions, and any other relevant information.
  8. Work Permits and Visas: For non-Japanese employees, assist them in obtaining the necessary work permits and visas. Ensure they meet the requirements of the appropriate visa category for their intended work and duration of stay in Japan.
  9. Onboarding and Orientation: Plan and conduct a comprehensive onboarding and orientation process for the new employees. Provide them with the necessary information about the company, its policies, procedures, and introduce them to their colleagues and work environment.
  10. Compliance with Labor Laws: Ensure compliance with Japanese labor laws throughout the hiring process and employment relationship. Familiarize yourself with regulations related to working hours, overtime, leave entitlements, social insurance, and other relevant employment laws.
  11. Payroll and Benefits Administration: Establish payroll systems to ensure accurate and timely payment of salaries, deductions, and social insurance contributions. Arrange employee benefits, such as health insurance, pension contributions, and any other applicable benefits.
  12. Employee Training and Development: Provide ongoing training and development opportunities to support employee growth and improve their skills. Develop a plan for continuous learning and professional development within the organization.
  13. Performance Management: Implement performance management systems to set clear goals, provide regular feedback, and assess employee performance. Conduct performance evaluations to identify areas for improvement and recognize exceptional performance.
  14. Ongoing HR and Administrative Responsibilities: Stay compliant with all relevant employment laws and regulations, maintain accurate employee records, handle employee inquiries and grievances, and address any employment-related issues that may arise.

Remember, it’s essential to consult with legal professionals and local experts who can provide specific guidance based on your business needs and ensure compliance with all legal requirements when hiring employees in Japan.

FAQs

  • Yes, there are certain restrictions and requirements for hiring foreign nationals in Japan. Employers need to ensure that foreign employees have the appropriate work visas and permits. The specific visa category depends on the nature of the work and the duration of stay. Companies should comply with immigration laws and work closely with their foreign employees to ensure legal compliance.
  • The standard working hours in Japan are generally set at 40 hours per week. Overtime work is limited to 45 hours per month or 360 hours per year. Overtime pay rates are typically 25% to 50% higher than regular pay. Employers should closely monitor and manage working hours to ensure compliance with labor laws and avoid excessive overtime.
  • Yes, employers in Japan are required to provide paid leave to their employees. The specific entitlements depend on the length of service and other factors. The annual paid leave typically ranges from 10 to 20 days, and employees can start using their paid leave after six months of continuous employment. Additionally, employees are entitled to sick leave, maternity/paternity leave, and other types of leave as specified by labor laws and company policies.

Please note that these answers provide general information, and it is important to consult with legal and HR professionals for specific guidance based on your unique circumstances and the most up-to-date laws and regulations in Japan.

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