How to hire and pay employees in Japan
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Before hiring
Before hiring employees in Japan, there are a few important things you’ll need to know. Firstly, in Japan, employees are entitled to unpaid maternity leave of 14 weeks, divided into six weeks before the birth and eight weeks after. They can claim up to two thirds of their base salary through social insurance.
Employers in Japan are not required to make severance payments, but they can be negotiated into contracts beforehand.
We know this might sound overwhelming—but it doesn’t have to be. A solution like Oyster eliminates the barriers for you. With Oyster, you can automate compliance across 180+ countries, easily managing HR and payroll—all in one, easy-to-use platform.
Get an overview of what you need to know when hiring in Japan below.
At a Glance
CURRENCY
JPY
OFFICIAL LANGUAGE
JAPANESE
PAYROLL FREQUENCY
MONTHLY
EMPLOYER TAXES
UP TO 24.66%
13th / 14th SALARY
N/A
Good to know
- In Japan, employees in managerial positions are expected to work overtime and the company is not obligated to pay extra for this work.
- Termination of employment can be difficult in Japan and employers will generally seek to obtain the employee's resignation before handing out a termination notice. In some cases, financial incentives can be offered to encourage employees to resign.
- There is no payment for sick leave in Japan. For short-term cases, employees use their paid vacation to take leaves of absence.
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Labor Laws in
Japan
Working hours and overtime
Employees in Japan work eight hours daily and 40 hours weekly.
Any work exceeding 40 hours a week is considered overtime, and is paid at an additional rate on top of the employee’s hourly base salary. The breakdown is as follows:
- Overtime (typically over eight hours a day): Additional 25%
- Weekends and holidays: Additional 35%
- Nighttime (continuing from overtime): Additional 50%
- Holidays (continuing from nighttime): Additional 60%
Overtime work cannot exceed:
- Five hours per day
- 45 hours per month
- 360 hours per year
Employees in managerial positions can be expected to work overtime without extra pay.
Employment contracts
Probationary periods in Japan typically last three to six months.
IP protection and non-compete agreements
In Japan, non-compete agreements must be negotiated beforehand and be reasonable in scope. Employers are not required to compensate employees to enforce the agreement.
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Benefits & leave in
Japan
Vacation time
The minimum number of paid vacation days depends on the length of service:
- Six months seniority: 10 days paid vacation earned
- One and a half years of seniority: 11 days paid vacation earned
- Two and a half years of seniority: 12 days paid vacation earned
- Three and a half years of seniority: 14 days paid vacation earned
- Four and a half years of seniority: 16 days paid vacation earned
- Five and a half years of seniority: 18 days paid vacation earned
- Six and a half years of seniority: 20 days paid vacation earned
Employees may accumulate up to two years of unused paid vacation.
Sick leave
In Japan, there is no mandatory sick leave. When an employee gets sick, they are required to use their paid vacation time to take a leave of absence.
After three days of absence, employees can claim benefits that equal two-thirds of the applicable standard wage (calculated according to a specific formula) under national health insurance coverage. This benefit can be claimed up to a period of 18 months.
Parental leave
Employees are entitled to unpaid maternity leave of 14 weeks, divided into six weeks before the birth and eight weeks after. They can claim up to two thirds of their base salary through social insurance.
Either parent can take child-care leave, which starts at the end of the maternity leave and lasts till the day the child turns one. As with maternity leave, parents can claim up to two thirds of their base salary through social insurance.
Holidays
View a list of recognized public holidays in Japan here.
Employer tax
In Japan, an employer’s social contributions can be up to 24.66%. This includes pension, health insurance, unemployment insurance, work injury, and family allowance.
Individual tax
Employees in Japan pay between 5% and 45% in taxes depending on their income bracket. Employees also pay 14.39% in social security contributions.
Termination in
Japan
Employers in Japan are not required to make severance payments, but they can be negotiated into contracts beforehand.
The notice period for resigning employees can range from two weeks to a month.
In the case of dismissals, the employer must provide 30 days’ notice or payment in lieu of the notice period.
However, employers will generally seek to obtain the employee's resignation before handing out a termination notice. In some cases, financial incentives can be offered to encourage employees to resign.
Start hiring employees in
Japan
Setting up a business entity everywhere you want to hire a new employee isn’t scalable—it takes too long and the legal fees are high. At the same time, understanding and adhering to the local labor laws and employee expectations can be complex and time consuming. And it’s hard to find reliable information on up-to-date employment information for all the countries where you’re considering hiring. Not to mention tracking down invoices and managing employee contracts over email and spreadsheets—that gets messy fast.
We can’t afford to take risks when it comes to compliance—we need to make sure we follow the local guidelines, especially when it comes to taxes and legalities.
With Oyster, you can manage HR and payroll, and automate compliance across 180+ countries—all in one, easy-to-use platform.
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