What do you need to know to hire in Japan?

Employer social insurance in Japan covers five branches: welfare pension (9.15%), health insurance, nursing care (for employees aged 40 to 64), unemployment insurance, and workers accident insurance. The exact total varies slightly by industry because the accident insurance rate is sector-specific. For a typical Tokyo office employer with workers under 40, total employer contributions run around 15 to 16 percent of gross salary.

There is no statutory 13th month or annual bonus requirement under Japanese law, though lump-sum bonus payments (bonuses paid in June and December) are deeply embedded in Japanese employment culture and expected by candidates.

Teamed's Japan price is a starting rate, with zero FX in any currency pairing. No setup fees. No exit fees. Salaries, taxes, and benefits passed through at cost on every invoice. The full breakdown with worked examples is in the cost guide.

Setting up a Kabushiki Kaisha (KK) requires a minimum JPY 1 in share capital but involves notarisation, court registration, and statutory filings. The process takes four to eight weeks and requires a resident director or a representative. An Employer of Record is faster and cheaper at low headcount. Teamed runs Japanese payroll, contracts, and social insurance enrollment from day one.

The crossover point depends on Japanese salary levels and your local accounting costs. For most roles it lands around 5 to 8 employees. The EOR vs entity guide runs those numbers for Japan specifically.

Most EOR providers will not tell you when you have crossed it. We do, and we help you move. You progress from contractor to EOR to your own Japan entity on one platform under Teamed's Graduation Model, with tenure preserved.

Japan's Labor Standards Act requires all employment conditions to be written in an employment contract or work rules (Shugyo Kisoku) and given to employees on their first day. The standard working week is capped at 40 hours under Article 32. Any overtime beyond that requires a written 36-kyotei agreement with employee representatives and triggers premium pay at a rate set in the agreement.

Since 2019, employers must ensure each employee uses at least 5 of their statutory annual leave days each year. Employers who fail this obligation face criminal penalties. The minimum wage is reviewed annually by the Minimum Wage Council and varies by prefecture; Japan has no single national fixed hourly floor because each prefecture sets its own rate. For the current rates and all day-one obligations the hiring guide covers them in full.

Statutory annual leave starts at 10 days for an employee with six months of service and 80 percent attendance. It rises to 20 days at 6.5 years of service. Japan counts annual leave and public holidays separately. There are 16 national public holidays in 2026. Employers must actively schedule at least 5 days of statutory leave per employee per year.

Sick pay is funded by the health insurance system, not the employer. After a 3 days-day waiting period, employees receive 66.67% of their standard remuneration for up to 18 months from the health insurance fund. The employer pays no direct sick pay beyond the waiting period. Maternity leave is 14 weeks total, with pay at approximately 67% of remuneration through the health insurance system. Fathers may take up to 4 weeks of childcare leave within 8 weeks of birth. The benefits guide covers each entitlement and the enrollment obligations.

Japanese social insurance splits across five branches on the employee side: welfare pension (9.15%), health insurance, nursing care (for ages 40 to 64), unemployment, and child and childcare support. The employee total is 14.69% for workers under 40. The employer mirrors most branches; total employer contributions run around 15 to 16 percent.

Income tax is progressive. The first band runs at 5% and rises through six bands to 45% above JPY 40 million. Japan has no flat personal allowance band; instead a basic deduction is subtracted from gross income before the bracket schedule applies. On top of national income tax, a flat 10 percent inhabitant tax applies to most residents. Withheld income tax must be remitted to the tax office by the 10 daysth of the following month. The tax and payroll guide sets out every band and threshold.

Under Labor Standards Act Article 20, an employer must give 30 days written notice before dismissing an employee, or pay 30 days of average wages as a substitute. But the notice requirement is only part of the test. Under Labor Contract Act Article 16, a dismissal must also have objectively reasonable grounds and be socially appropriate. Dismissals that fail this test are void regardless of notice.

Japan has no statutory severance formula. Most large Japanese employers maintain voluntary retirement allowance (taishokukin) schemes. These are contractual and vary widely; typically around 1 to 2 months of salary per year of service, but there is no legal minimum. If the employer is conducting a large-scale redundancy of 30 or more employees within 30 days days, a prior notification to the public employment security office is required at least 30 days before the first termination. Final wages must be settled within 7 days of the departure date when the employee requests this. The termination guide covers the full process.

Japan's dismissal standard is not a qualifying-service test. Article 16 of the Labor Contract Act requires every dismissal to have objectively reasonable grounds and to be socially appropriate. There is no two-year wait before protection kicks in, as there is in Germany, and no at-will exception, as there is in the United States. A dismissal that fails the test is void and the employee retains employment rights. Most US buyers do not model this into their planning before the first Japan hire.

The June and December bonus cycle is deeply embedded in Japanese employment culture. Candidates expect two seasonal bonuses as part of their total annual compensation, even though they are not required by the Labor Standards Act. An offer that omits a bonus commitment will lose candidates to offers that include one. The hiring guide covers how to structure Japan offer letters and work rules to set clear bonus terms from day one.