Global PEO Services (GPS) helps companies hire employees in Japan without establishing a legal entity. All human resources, benefits, payroll, and tax needs for the employees are managed by the Global PEO, while the new hires and headquarter teams focus on your business goals.
When hiring employees in Japan, establishing a subsidiary or branch office is not always the best route, as it’s often a lengthy and expensive process. Hiring via a Professional Employer Organization (PEO), or Employer of Record (EOR), is a faster and often more effective option – especially when starting up in a new country.
Global PEO Services hires the employees on your behalf, legally contracting them through our subsidiary in accordance with Japanese labor laws. As a result, the burden of compliance is on us and the employees can begin work for your company in a matter of days. PEOs/EORs provide you with a streamlined option for hiring employees, testing markets, and responding to growing business needs in Japan. With Global PEO Services, you get control without taking on legal entity liabilities, contractor risks, or sacrificing on talent or speed to market.
Japan, a sovereign island nation in East Asia consists of four islands: Honshu, Hokkaido, Shikoku, and Kyushu, constituting nearly 98% of land area. It has the world’s 3rd largest economy by nominal GDP and the 4th largest economy by purchasing power parity (PPP).
Ranked as one of most innovative countries in the world, Japan is the world’s largest electronic goods producer and the 3rd largest automobile manufacturer. The country generally has a surplus in annual trade and international investment. The workforce in the country is highly qualified and skilled that prove to be instrumental in organizational growth.
Currency: Japanese Yen
Principal language: Japanese
Government: Based on a constitution that stipulates the division of powers among the legislative, executive, and judicial branches
Capital City: Tokyo
Major Cities: Yokohama, Osaka, Nagoya, Sapporo, Kobe
Both employers and employees, under the Labor Contract Act, are required to enter an employment agreement in writing. Though employers can establish a probationary period of up to 1 year, periods varying from 3 to 6 months are common.
The duration of fixed-term contracts is usually not more than 3 years, and 5 years for highly skilled professionals and employees aged over 60. Employers with 10 or more employees must establish a set of work rules, submit them to a Labor Standards Inspection Office, and publicize them in the workplace by distributing copies to employees, posting them in the workplace, or in any other way.
Under the Labor Standards Act, a regular work schedule should not be more than 8 hours per day or 40 per week. However, flexible work schedules are also prevalent. Work hours above these ceilings are considered overtime. Employers should provide at least 1 rest day per week or 4 days in a 4 week period to employees. Employers should also provide rest periods of minimum 45 minutes if the work schedule exceeds six hours or 1 hour if the work schedule goes beyond 8 hours per day.
Rest periods don’t apply:
- for workers in agriculture, animal husbandry, or fishing
- for supervisors, managers, and persons handling confidential matters
- for individuals engaged in intermittent labor or keeping watch if employers obtain approval from a Labor Standards Inspection Office.
The declaration of a national holiday doesn’t bind private businesses, and it is not mandatory for employers to provide paid or unpaid leave for such holidays.
The national holidays that are listed by the government every year are:
- Jan. 1: New Year's Day
- Second Monday in January: Coming of Age Day
- Feb. 11: National Foundation Day
- Vernal Equinox (date in March varies)
- April 29: Showa Day
- May 3: Constitution Memorial Day
- May 4: Greenery Day
- May 5: Children's Day
- 3rd Monday in July: Marine Day
- August 11: Mountain Day
- 3rd Monday in September: Respect for the Aged Day
- Autumnal Equinox (date in September varies)
- 2nd Monday in October: Health and Sports Day
- Nov. 3: Culture Day
- Nov. 23: Labor Thanksgiving Day
- Dec. 23: Emperor's Birthday
A national holiday falling on a Sunday is observed the next day. Government offices, non-retail businesses, and banks remain closed on national holidays, but several stores and restaurants remain open.
Female employees can take a maternity leave of maximum 6 weeks before the expected date of delivery and maximum 14 weeks if they are expected to give birth to more than 1 child. They must take 8 weeks of leave after the delivery date. Employers are required to pay wages during maternity leave if work rules require it. Employment insurance compensates 60% of employees’ wages.
Child Care Leave
Male or female employees can take up to 1 year of partially paid child care leave until the child is 1 year old and in certain circumstances until the child is 18 months old. This leave begins after maternity leave. Employers can refuse a request for child care leave if the applicable collective bargaining agreement does not have the provision of granting this leave to an employee and if:
- the employee has worked for less than 1 year
- the employment relationship will end before the child turns 1 year old in the case of fixed-term employment
- the employee works for 2 or fewer days in a week
Employers are required to pay wages during child care leave if work rules require it. The employment insurance funded by the government compensates 30% of employees’ wages during a leave.
Family Care Leave
Employees are entitled to take partially paid family care leave if a family member requires constant care for 2 or more weeks due to sickness, injury, physical, or mental disability. Employees can take 2 forms of family care leave:
- 5 days in a year to care for 1 family member or 10 days in a year to care for 2 or more family members
- A maximum of 93 days every time a family member requires care
Instead of taking full leave for 93 days, employees can request flexible or shorter hours during this period.
Sick Child Service
Employees who are raising a child below the elementary school age can take unpaid leave to care for their child in case of an injury or illness. This leave is limited to 5 working days per year for parents who have 1 preschool-age child and 10 days for those with 2 or more.
Leave due to Death in the Family
Though not required by the law, employers usually allow employees to take a maximum of 5 days' paid leave for the demise of a family member, mother, father, child, or spouse. Also, a maximum of 3 days' leave is allowed for the death of a grandchild, grandparent, sibling, spouse’s parent, or child’s spouse.
The official retirement age will increase to 65 by 2025. Employees in Japan must be covered by the National Pension system which provides pension benefits. This system is administered by the Japan Pension Service and includes the compulsory Employees’ Pension Insurance Program. Employers contribute the same amount as employees. Foreign employees who have made contributions to the national pension system for a minimum of 6 months but not more than 25 years can withdraw a lump-sum amount within 2 years of leaving Japan.
Employees are required to contribute to government-operated program insurance program that compensates employees for work-related illnesses and injuries. The program provides compensation for a percentage of lost wages, medical expenses, and disability expenses. If an illness or injury causes an employee’s death, employers compensate employee’s survivors for funeral expenses and also provide a pension or a lump-sum benefit to them.
How GPS can Help
With our Global PEO/Employer of Record services, companies can expand into Japan and hire their employees without having to establish a branch office or subsidiary in Japan.
- Your candidate is hired via our Japan PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services.
- Your new employee begins work quickly as we take care of employment contracts, statutory and non-statutory benefits, and running their payroll - all in full compliance with Japan laws.
- Global PEO Services experts manage all day-to-day operational issues such as employee expenses, and severance/termination if required.
- With no contractor risks, pass on the compliance burden to Global PEO Services.
Spin Off/M&A Support
- Ensure continuity of payroll, benefits and HR support when acquiring or spinning off a business with employees overseas.
24/7 Support in 150+ Countries
- Empower your teams with 24/7 support and a single point-of-contact model in which experienced client services directors are in continuous communication with information and advice.
- We are backed by a mix of 300+ multidisciplinary experts from HR, Payroll, Finance, Tax, and Legal domains who are ready to respond to the expected and unexpected needs of your business on the shortest notice.
Easy Visibility into Your Employee Time &apm; Attendance and Benefits Data
With our Global PEO, you get access to Mihi, our proprietary SaaS solution for time and attendance, vacation, leave management and benefits enrollment and management. Mihi enables clients to have easy access to employee data in real time. It is designed specifically for companies with a global workforce, especially when working in multiple countries with low headcount.
Ready for Growth When You Are
When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance and staffing support. Learn more about our end-to-end international expansion services.