Employer of Record Japan
Hire staff and expand your business in Japan with our fully-managed EOR Service
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Unrivalled Employer of Record Service in Japan designed to expand your business seamlessly
Agility EOR delivers services for business’s looking for an Employer of Record in Japan. We help clients hire new employees or transfer existing employees into a fully-managed EOR service.
Employer of Record in Japan
A Brief Guide to Japan
Japan – an island nation, fascinating blend of traditional and ultra-modern, distinct cultural flair and famed technological prowess. An Asian economic powerhouse, Japan offers immense opportunities for businesses looking to expand their horizons.
East Asia, Pacific Ocean
Approx. 125 million
Japanese Yen (JPY)
Tokyo, Osaka, Yokohama, Nagoya, Sapporo
Approx. $5.4 trillion (2022)
Automotive, Electronics, Chemicals, Shipbuilding, Services
Business Culture in Japan
In Japan, business culture is marked by precision, formality, and an inherent respect for hierarchy. Professional relationships tend to be formal and respectful, with business conversations often held in a polite and indirect manner. It’s not uncommon for decisions to be made collectively, prioritizing consensus and harmony in the group.
A unique aspect of the Japanese business culture is the exchange of business cards (Meishi) which is done with both hands and a bow. These should be read carefully and treated with respect. Punctuality is highly valued, so arriving on time or preferably early is expected.
Payroll and Taxes
Payroll and Taxes in Japan
In Japan it is not mandatory to pay a 13th month salary. There is, however, a long-standing custom of employees receiving summer and winter bonuses. Traditionally, a company will pay their employee 1/16th of their annual salary every month, except for June and December, when an employee will be paid 3/16ths of their annual salary. This is most common in Japanese companies, with many foreign firms opting to pay 1/12th of their employee’s salary per month instead.
In Japan, income tax rates are progressive, with higher income levels subject to higher tax rates.
Taxable Income (JPY)
Up to 1,950,000
1,950,001 – 3,300,000
3,300,001 – 6,950,000
6,950,001 – 9,000,000
9,000,001 – 18,000,000
18,000,001 – 40,000,000
40,000,001 and above
Employers in Japan are also responsible for various employer costs, which may include:
Typically 5% – 7% (varies depending on employee’s age and location)
Pension and Healthcare
The pension system in Japan is administered by the Japan Pension Service under the guidance of the Ministry of Health, Labour and Welfare. There are two types of pensions: the National Pension and the Employee’s Pension Insurance. The National Pension is a flat-rate system where everyone contributes the same amount and receives the same benefits, while the Employee’s Pension Insurance is wage-related and more common for company employees.
Funding for pensions comes from a combination of contributions from individuals, corporations, and the government. Japan is known for its high life expectancy, which puts significant pressure on the pension system. Over recent years, there have been numerous discussions and revisions to try to ensure the system’s sustainability.
Healthcare in Japan
Japan’s healthcare system is a hybrid of public and private entities. It is recognized worldwide for its efficiency and effectiveness. The public health insurance scheme, known as “kaihoken”, covers everyone residing in Japan, including non-Japanese citizens.
The government’s role is to ensure every resident has access to medical services, regulate healthcare providers, and control medical fees. The funding comes from patient contributions, employer contributions, and government subsidies.
In this universal healthcare system, patients can choose any healthcare providers they prefer. They pay 30% of the cost of the treatment, with the government insurance covering the rest. This applies to everything from routine checkups to major surgeries.
There’s also a thriving private sector, offering high-end medical services and shorter waiting times. This caters to those who can afford to pay more for faster or more specialized care.
Overall, Japan’s healthcare system is highly accessible and offers a high quality of care. It combines the universality of public healthcare with the flexibility of private options, contributing to the country’s world-leading life expectancy.
Employment Law in Japan
Relevant Legislation: Key employment laws in Japan include the Labor Standards Act, Trade Union Act, Industrial Safety and Health Act, Minimum Wage Act, and the Employment Security Act. They cover a variety of areas including working conditions, employment contracts, termination, and health and safety at work.
Employment Contracts: In Japan, employment contracts can be either for a fixed term or indefinite. Both oral and written contracts are legal, but written contracts are more common to ensure clarity on job description, working hours, salary, and other terms.
Working Hours: Standard working hours in Japan are eight hours per day and 40 hours per week. These can be extended under special agreements, but typically not exceeding 44 hours per week.
Leave: The Labor Standards Act requires companies to provide at least 10 days of paid leave per year once an employee has worked for six continuous months. This increases with length of service. In addition, there are public holidays and annual New Year holidays.
Overtime: Overtime is any work beyond eight hours a day or 40 hours a week. Overtime work requires mutual agreement but is limited to 45 hours per month and 360 hours per year, beyond which it is considered harmful.
Termination: Termination can be a complex process in Japan due to strong job security laws. It requires a ‘justifiable’ reason such as serious misconduct. Redundancy is possible but requires a genuine need and fair process.
Notice: Employers must give at least 30 days’ notice before terminating an employment contract. If unable to give such notice, employers must pay ‘average wages’ for the notice period.
Severance Pay: Severance pay, often called “retirement allowance” in Japan, is not legally mandatory but is a common practice. The amount varies depending on the company’s internal rules, often based on length of service and reason for leaving.
Work Permits in Japan
Navigating Japan’s immigration procedures can be complex, and understanding the country’s immigration system is crucial for any business planning to deploy talent in this dynamic Asian market. The Immigration Services Agency of Japan, an arm of the Ministry of Justice, is responsible for administering and managing all immigration-related procedures.
The first step in the immigration process typically involves securing a Certificate of Eligibility (CoE). This certificate provides validation that the potential immigrant’s planned activities in Japan correspond with the visa status they’re seeking. The CoE application process is typically handled by the employing entity in Japan and is submitted to the local immigration office within the country. Once issued, the CoE is sent to the prospective immigrant, who can then apply for the appropriate visa at a Japanese embassy or consulate in their home country.
There’s a variety of work visa categories available, each designed to suit specific professional capabilities and job classifications:
- Highly Skilled Professional Visa: Aimed at individuals with superior, specialized skills. Categories include advanced academic research, advanced technical/specialized activities, and advanced business management.
- Intra-Company Transferee Visa: Designed for employees transitioning to the Japanese branch of their current organization.
- Business Manager Visa: Targeted at individuals commencing their own business in Japan or operating a business as a director or manager.
- Engineer/Specialist in Humanities/International Services Visa: Covers a broad range of professions such as engineers, language teachers, designers, and interpreters.
- Skilled Labor Visa: For those with relevant skills or experience in industries where Japan experiences a domestic worker shortage.
Each visa category has its specific set of requirements and stipulations, including relevant professional experience, academic qualifications, and job particulars in Japan. The permitted duration of stay ranges from a few months to 5 years and is extendable.
Adherence to Japan’s strict immigration rules and regulations is of utmost importance. Any breach of visa conditions can lead to severe penalties, including possible deportation. Therefore, compliance with visa requirements is paramount.
At AgilityEOR, we provide extensive support and guidance to businesses aiming to navigate Japan’s immigration landscape. Our comprehensive services ensure that the immigration process is managed effectively and compliantly, minimizing risks and enabling a smoother transition for your global workforce.
Japan Public Holidays
New Year’s Day
Coming of Age Day
Second Monday of January
Vernal Equinox Day
Constitution Memorial Day
Third Monday of July
Respect for the Aged Day
Third Monday of September
Autumnal Equinox Day
Health and Sports Day
Second Monday of October
Labour Thanksgiving Day
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Japan Employer of Record Benefits
When you choose Agility EOR to expand in Japan, we guarantee an Employer of Record Service tailored to the needs of your business