JapanFind an employer’s guide to employment laws, regulations, and Employer of Record (EOR) services in Japan.
Looking to hire in Japan? An EOR can support you
Using an Employer of Record (EOR) can be crucial for companies aiming to establish a presence in Japan. By avoiding the need to set up a local office or handle HR functions directly, you gain time back to focus on what really matters.
An Employer of Record serves as the formal employer for your Japanese team, allowing you to retain full control over daily operations and employee management.
Services provided by EORs, include managing payroll, addressing employment-related tax responsibilities, administering benefits, and more.
How to hire in Japan
Step 1: Decide between establishing a local entity or using an EOR
When expanding your workforce in Japan, your initial choice is whether to set up a local entity or engage an Employer of Record (EOR).
Creating a local entity provides full control over your operations and a greater presence in the Japanese market. This route is ideal if you plan to employ a very large number of people. However, it requires significant investment in time and resources. You’ll need to understand and comply with local regulations, establish a business entity, and adhere to various legal requirements.
On the other hand, using an EOR streamlines the employment process by managing all legal and administrative tasks. This method allows you to enter and exit the Japanese market more flexibly and with reduced risk. While the EOR assumes legal responsibilities, you maintain operational control over your employees.
Step 2: Finding an EOR
Choosing the right EOR for your team in Japan is essential. An unsuitable provider can lead to compliance issues, unforeseen costs, and a negative experience for your employees. Here are key factors to consider when selecting an EOR:
- Legal compliance. Ensure the EOR is knowledgeable about Japanese labor laws, employee rights, tax obligations, and local benefits. Opt for a provider with a proven track record and experience in your industry.
- Customer service. Verify that the EOR offers robust support (from humans!) Multiplier, for example, provides dedicated account managers and 24/5 support.
- Transparent pricing. Be wary of EORs that advertise low initial costs but have hidden fees or ambiguous pricing. Make sure you understand all potential costs to prevent unexpected expenses.
- Total cost of ownership. Consider the overall value rather than just the price. Ensure you’re investing in a reliable solution that fits your budget and delivers all essential services.
Step 3: Employing and onboarding in Japan
Send over the contract
After selecting a candidate, the next step is to prepare an employment contract that complies with Japanese labor laws. An EOR can draft this for you in minutes and you can then customize key details.
Once the contract is ready, your EOR will securely send it to the candidate for their signature.
Enhance compensation with competitive benefits
Instead of finding local vendors yourself, take advantage of the benefits packages offered by your EOR. They can also manage the distribution of any necessary IT equipment to your new hires.
Get all your documentation in order
Onboarding involves collecting the new hire’s tax and banking information. An EOR can streamline this process, setting up payroll efficiently and reducing paperwork.
Step 4: Run payroll for employees based in Japan
Managing payroll for employees in Japan requires a good grasp of local tax laws and mandatory contributions. Japan’s income tax system is progressive, with rates reaching up to 45% depending on income levels.
Employers in Japan must also contribute to several statutory programs, including the Employees’ Pension Insurance (EPI) and Health Insurance (HI).
The EPI is a retirement savings program where employers contribute a percentage of each employee’s salary to their pension fund, helping employees save for their retirement. Meanwhile, the Health Insurance scheme offers medical benefits and social security to employees.
Using an EOR can simplify all payments, making sure they are made on time and in line with local laws, taxes, contributions, and deductions. Multiplier manages global payroll from a single solution so you can oversee key figures without navigating between different places.
Employ top talent in Japan through an EOR
Onboard, pay, and manage all your international employees
Employment laws and regulations in Japan
Employers in Japan must adhere to various regulations concerning their workforce. This includes managing working hours, overtime, mandatory benefits, and proper termination procedures.
For example, the standard work week in Japan is limited to 40 hours, with a maximum of 8 hours per day. Overtime must be paid at a rate set by the government, generally 1.25 to 2.5 times the regular hourly wage, depending on the hours worked. There are specific rules regarding overtime for employees working more than 60 hours a month, as well as restrictions on working hours for young workers.
For a comprehensive overview of how these laws affect hiring and managing employees in Japan, refer to Multiplier’s guide on employment law in Japan.
Employee benefits and compensation
The minimum wage in Japan varies by region but generally starts around JPY 1,000 per hour. Employers are also required to provide benefits such as contributions to the Employees’ Pension Insurance (EPI) and Health Insurance (HI).
Employees are entitled to a minimum of 10 days of paid annual leave per year, which increases with years of service. They also receive up to 7 days of paid sick leave annually, though the specifics can vary based on company policies. Female employees are entitled to 14 weeks of paid maternity leave.
For companies looking to provide additional benefits to attract and retain top talent Multiplier’s Global Benefits platform offers a variety of customized, local solutions.
Termination and offboarding procedures
Termination and offboarding procedures must comply with Japanese regulations concerning notice periods and severance pay. The standard notice period is typically 30 days, though it can vary based on the employment contract and company policies.
Severance pay is required under Japanese law, generally amounting to one month’s salary for each year of service, though this can be specified differently in the employment contract or company guidelines.
These procedures can be complex, especially for companies unfamiliar with Japanese labor laws. An EOR like Multiplier can simplify this process by managing termination and offboarding tasks.
Visa and work permit assistance
Hiring foreign employees in Japan involves securing the appropriate visas and work permits. The type of visa required depends on the job role, employment duration, and the employee’s nationality. Here are the main categories:
- Working Visa: For foreign nationals employed by Japanese companies in roles that require specialized skills or knowledge. This visa is typically issued for one to three years and can be renewed.
- Business Visa: For individuals visiting Japan for business-related purposes, such as meetings or negotiations. It does not allow direct employment but can be used for business activities.
- Highly Skilled Professional Visa: For individuals with advanced skills and expertise. This visa offers benefits like a longer duration of stay and fast-tracked permanent residency options.
- Spouse or Dependent Visa: For spouses or dependents of foreign nationals who hold a valid work visa. This visa allows them to stay in Japan but does not permit employment.
- Student Visa: For individuals who have completed their studies in Japan and wish to remain temporarily while seeking employment related to their field of study.
Navigating visa applications and renewals can be challenging and time-consuming. Expert assistance is often needed to ensure compliance with Japanese immigration regulations.
Multiplier provides comprehensive support for work permits and visa management as part of its Employer of Record (EOR) services. For more information, visit our Global Immigration page.
Get started with Multiplier’s EOR services
Multiplier’s Employer of Record (EOR) services simplify expanding your team in Japan.
With our EOR, you can hire employees without setting up a local entity, while we handle all HR responsibilities, including compliant contracts, payroll, tax requirements, and local benefits.
Focus on growing your business while we manage the compliance and administrative details. Book a demo to learn more.
