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Employ Candidates Compliantly in Japan

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  1. Overview: Japan
  2. Global PEO and payroll
  3. Global HR Compliance
  4. Work permit for hiring expats via PEO
  5. Expand without a company set up
  6. Contractor vs. employee: which is better?
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Global HR Compliance in Japan

If you hire an international workforce, or plan to hire, then Hiring and Firing Workforce in Japan Guide below will help you understand the nuances of labor legislation in the country.

When the company is planning to enter a new foreign market of Japan and has a need to employ a local national there, the first question to answer is how it is going to make local hires.

We have designed a Global Employer of Record service to help you outsource global employment of your foreign workforce to companies like ours.

This solution helps you employ your global sales force in Japan as well as in other 180+ countries of the world, and provide pay and benefits to your employees, as well as administer any business expenses with our help.

Our solution is different from other hiring modes in that it helps you engage your foreign workforce in full compliance with the local labor legislation. This means you are protected from any non-compliance and employee misclassification risks while we bear all employment risks, not you.

So, it looks very much like hiring your in-house sales force in your home country. However, you focus on only on your global business development while we admin your global HR. In addition, you don’t need to open your own entities in the foreign countries and can leverage our infrastructure in Japan instead. With our service, you can become a global company with reduced costs and minimized time and effort on your end.

Your employed foreign sales force will devote 100% of their time to your company product and may stay with you longer than foreign independent sales reps.

Global Employer of Record solution is 100% compliant solution that guarantees you and your employees fully compliance with local legislation in Japan .

We are experts in global workforce employment in Japan, and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.

Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.

With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Japan.

See Hiring and Firing Workforce in Japan Guide below for a general overview of labor rules and regulations in the country. Or contact us if you need to employ workers in Japan or would like to get more details.

Hiring and Firing Workforce in Japan Guide

The fact that Japan opens a gateway to Asian huge markets, and is ranked among the leading industrial powers in the world makes it a really enticing site for businessmen who want to extend their operations particularly to Asian market. Japan business environment is highly sophisticated, has a well-developed business friendly infrastructure, and provides good conditions for living. Despite these good factors, research shows that many foreign companies still find it difficult to start up their business in Japan mainly due to how complex its business culture is. To help you Overcome this challenge Acumen International has developed an express global EOR solution that will help you actualize your dreams of penetrating the Japan market in a cost-effective, timely, compliant and risk-free fashion.

Below are some facts you need to know about operating business in Japan.

# Employment Agreements

Employment contracts must be either without a definite term or with a term of three years or less, except in the following cases:

  • An employment agreement with a term required for the completion of a specified project.
  • An employment agreement between an employer and the employee who has an advanced level of expertise, knowledge, skills or experience and who is actually employed to perform activities requiring a prescribed advanced level of expert knowledge.
  • An employment agreement between an employer and an employee who is 60 years old or above.

With regard to employment agreements in situations 2 or 3 above, the maximum term is five years. As regards employment agreements in situation 1 above, there is no cap on the term as long as the term is required for completion of the project. Furthermore, it should be noted that fixed-term contract employees whose contract periods reach over five years in total will be granted a statutory option to convert into employees without a definite term. The working terms and conditions for the converted employee shall be the same as those set forth in the preexisting fixed-term employment contract, except for its contract term, unless otherwise provided.

#Employment Termination and Severance Pay (Dismissal)

The Labor Contracts Act (LCA) requires any dismissal to be based on objectively reasonable grounds and appropriate in general societal terms. Based on accepted customs in Japan, established by numerous court precedents, in general, the following grounds for dismissal are permitted:

  • A worker’s lack of ability or appropriateness to work.
  • A worker’s poor performance.
  • A worker’s breach of discipline (in this case, ordinary dismissal or disciplinary dismissal can be taken).
  • Redundancy.
  • A request from a union based on union shop agreement.

#Notice period

The employer must give the employee to be dismissed at least 30 days’ prior notice or make payment of the average wage in lieu of the notice. Exceptions for the requirement of prior notice or payment in lieu of notice are:

  • Workers who are employed on a daily basis and who have not been employed consecutively for more than one month.
  • Workers who are employed for a fixed period of no longer than two months and who have not been employed consecutively for more than the period set forth in the employment contract.
  • Workers who are employed in seasonal work for a fixed period of no longer than four months and who have not been employed consecutively for more than the period set forth in the employment contract.
  • Workers in a probationary period and who have not been employed consecutively for more than 14 days.
  • When the worker is dismissed because the continuance of the business has become impossible due to natural disaster or other unavoidable reasons and the employer obtains the approval of the relevant government agency with respect to the reason in question.
  • When the worker is dismissed for a reason attributable to the worker and the employer obtains the approval of the relevant government agency with respect to the reason in question.

In addition, any dismissal that lacks objectively reasonable grounds and is not considered to be appropriate in general societal terms will be treated as invalid.

#Severance payments

The employer must give the employee to be dismissed at least 30 days’ prior notice and, if the 30 days’ prior notice is not given, the employer must pay the average wage in lieu of notice corresponding to the number of days short of the required 30-day notice period. Except for payment in lieu of notice, there is no rule regarding severance pay under the Japanese law, and workers do not have any rights to severance pay.  There is no concept under Japanese labor law that allows an employer to dismiss an employee by paying a specified amount of money in order to validate the dismissal. Dismissal of the employee is only allowed based on objectively reasonable grounds and must be appropriate in general societal terms. As the validity of dismissal is strictly examined by the courts if disputed, employees generally provide severance payment to employees in order to give them incentives to agree to voluntarily resign. The calculation method of the severance pay varies in each company; however, in general, the amount of severance pay is calculated based on the employee’s length of service.

#Employee Benefits and Contributions

Paid Vacation – The Labor Law stipulates the minimum amount of paid vacation for  employees. The number of days of paid vacation is based on the seniority in the company. Employees may accumulate up to two years’ unused paid vacation.

Health Care – In Japan, there is a National Universal Health care system. All Japanese employees enrolled in Social Insurance, benefit from the national coverage. Employees receive a Social Insurance card.

Pension – When employee register to Social Insurance, they also register with Employee Pension system. This system provides a pension to employees who have worked in Japan at least 25 years from the age of 60 years old. Pension benefits depend form individual career so there is no standard payments. However since pension payments are relatively low, some companies who wish to keep their employees till retirement age give employees either lump sum payment when they reach retirement age or a fixed term pension.

Maternity/Paternity Leave – Employees have rights to Maternity leave and Child care leave.

Annual Physical Check up Benefit – Employees registered under the social insurance general system “Kyokai Kempo” are entitled to receive as a benefit an annual physical check up, at any hospitals designated by “Kyokai-kempo”.

#Probationary period

Many Japanese employers set probationary periods for their new employees, and this is acceptable under Japanese law. Probation is understood to be an employment agreement where a right to terminate the employment agreement during the probationary period is specifically reserved by an employer. The provisions of the LSA and other labor laws generally apply during the probationary period. There is no explicit restriction on the length of a probationary period. However, it is generally understood that a probationary period is effective only for a period reasonably necessary. If a probationary period is unreasonably long, then formal employment may be deemed to have commenced after a reasonable probationary period.


In principle, Statutory Overtime Work must not exceed 45 hours per month and 360 hours per year. However, if there is a temporary and special reason necessitating Statutory Overtime Work, Statutory Overtime Work exceeding those limits is allowed on the condition that all of the following requirements are satisfied:

  • The monthly upper limits of 45 hours can be exceeded only six times per year.
  • Total hours of Statutory Overtime Work in any year must not exceed 720 hours.
  • Total hours of Statutory Overtime Work and Statutory Holiday Work in any month must be less than 100 hours.
  • A monthly average of total hours of Statutory Overtime Work and Statutory Holiday Work must not exceed 80 hours in any period of two months, three months, four months, five months, or six months.

However, these rules do not apply to “supervisors and managers” (“kanri-kantokusha”) who, regardless of their titles, are affiliated with management with respect to decisions about working conditions and other issues of management of work (“Supervisor(s) and Manager(s)”)

#Work hours

The statutory working week is 40 hours per week or eight hours per day, excluding breaks. There are a number of business-related exceptions, under which 44-hour working weeks are acceptable. Employers must file a labour management agreement with the Labour Standards Inspection Office if they wish employees to work over the statutory working hours or on statutory days off.

#Annual leave

Employees who have been employed continuously for six months and worked at least 80% of all working days are entitled to ten days of annual leave. Holiday entitlements increase over time in proportion to the length of service

#Sick leave

In Japan, there are Social Security Services providing certain benefits to employees who take leaves due to injury or disease.

Work-related Injuries 

The Workers’ Accident Insurance scheme, managed by the Japanese government provides certain benefits concerning injuries and diseases caused in relation to employees’ work or on the way to and from their workplace. If a Labor Standard Inspection Office concludes that the employee’s injury or disease is a “work-related injury or disease” or “caused on the way to and from his or her workplace” for purposes of the IACIA, the government will pay suspension compensation to such employee from the fourth day such employee is unable to work and thereafter.

Non-work-related Injuries

Another example of a Social Security Services benefit is a health insurance scheme managed by the Japanese government or a health insurance association under the Health Insurance Act (HIA), which provides certain benefits concerning non-work-related injuries and diseases. Employers and employees must enroll in this health insurance scheme. Health insurance premiums are borne equally by employers and employees, although it is employers who are obliged to pay the entire premium to the government or the health insurance association that they enroll in. Usually the premium to be borne by employees is withheld from their wages.

#Parental leave

Maternity leave

Under the LSA, if a female employee who is to give birth within six weeks (14 weeks if expecting more than one child) makes a request not to work, her employer may not require her to work. Similarly, an employer is prohibited from allowing a female employee to return to work within eight weeks after giving birth, even if she wants to do so; except that she may return to work after six weeks from childbirth at her request if it is allowed by a doctor. There is no legal requirement to pay for this absence from work.

Paternity leave

A male or female employee raising a child under elementary school age is entitled to take unpaid nursing care leave of up to five days per year in order to take care of their sick or injured child or accompany their child for a medical checkup or vaccination. If they are raising two or more children under elementary school age, they are entitled to take such nursing care leave for up to 10 days per year.

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