How do you terminate an employee in Japan in 2026?
Japan's Labor Contract Act voids any dismissal that lacks objectively reasonable grounds from the very first day of employment. There is no statutory severance formula, 30 days notice is the flat statutory minimum regardless of tenure, and final pay must be settled within 7 days of a request.
· Japan guide
Illustration · Tokyo, Japan
Japan protects employees from unlawful dismissal from their first day at work. A dismissal is illegal unless you can show objectively reasonable grounds and social reasonableness. The flat notice period is 30 days, with no scaling for tenure. You can pay it out instead of serving notice (Labor Standards Act, Article 20).
Japan has no legal severance formula. You are not required to pay a lump sum when you make someone redundant. Retirement allowances (taishokukin) are common and are often set out in employment rules. Where those rules exist, they are binding and you must pay them.
An illegal dismissal means the employee is entitled to reinstatement plus back pay from the day they were dismissed. Japanese courts prefer reinstatement over a cash award. There is no cap on the back pay that builds up while the case runs. Final pay must be settled within 7 days of an employee request after termination.
How much notice must you give an employee in Japan?
The minimum notice period is 30 days, flat. Japan does not scale notice with how long the employee has worked. The same 30 days applies whether someone started last month or ten years ago (Labor Standards Act, Article 20).
You can pay it out instead of serving notice. Pay 30 days of average wages as a lump sum and the employment ends immediately.
| Situation | Statutory minimum notice |
|---|---|
| First 14 days of employment | None (Article 21 exemption) |
| Any employment beyond 14 days | 30 days (or average wages in lieu) |
The Article 21 exemption removes the notice requirement entirely, but only for dismissals in the first 14 calendar days of employment. After that, the flat 30 days applies even within a probationary period.
Employee resignation notice
An employee resigning under an indefinite contract is governed by Civil Code, Article 627: 14 days minimum notice. The employment contract cannot reduce this below the statutory minimum, though it can extend it. Contracts that impose excessively long employee notice periods risk being void as contrary to public policy.
Contractual and practical notice periods
Most Japanese employment rules (shuugyou kisoku) specify longer notice periods in practice, commonly one to three months for regular employees. Senior roles often carry three to six months. Whatever the employment rules provide is binding on both parties, but the statutory 30 days remains the absolute floor for the employer.
What makes a dismissal lawful in Japan?
Japan has one of the world's tightest dismissal standards. A dismissal is illegal if it lacks objectively reasonable grounds and is not socially acceptable. This applies from day 0 of employment. There is no qualifying period (Labor Contract Act, Article 16).
An illegal dismissal means reinstatement plus back pay, not just a cash payment. Japanese courts consistently choose reinstatement over monetary remedies.
Grounds for dismissal
There is no single statutory list of valid grounds. Courts assess each case individually against the objectively reasonable grounds and social reasonableness standard. In practice, accepted grounds fall into four categories:
- Conduct: serious or repeated misconduct, documented, with prior warnings and an opportunity to improve
- Capability: sustained performance below required standard, with documented support and a realistic improvement period
- Business reorganisation (seirigaiko): genuine economic necessity, with the four criteria courts apply (see below)
- Disability or illness: where the employee cannot perform the contracted duties and no reasonable accommodation is possible
The four seirigaiko criteria for redundancy dismissals
Where the reason for termination is business restructuring or headcount reduction, Japanese courts apply four established criteria. Failure on any one of them risks the dismissal being declared void:
- Business necessity: headcount reduction is genuinely required, not just commercially convenient
- Efforts to avoid dismissal: the employer must show it exhausted alternatives (recruitment freeze, redeployment, voluntary departures, reduced hours) before dismissing
- Fair selection: selection criteria are rational and applied consistently, not targeting specific individuals
- Consultation: the employer consulted employees and, where one exists, the labour union, explaining the business reasons and the selection process
Protected categories
Dismissal is absolutely prohibited in specific circumstances regardless of grounds: during maternity leave and for 30 days after return, during workers' compensation leave for a work injury or occupational disease and for 30 days after recovery, on grounds of union membership or legitimate union activity, and in retaliation for whistleblowing. These prohibitions sit in the Labor Standards Act, the Labor Contract Act, and the Equal Employment Opportunity Act.
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Build the grounds file
Document the specific factual basis for the dismissal before serving notice. Under Article 16, a dismissal without objectively reasonable grounds is void in law, so the evidence must exist before the decision, not after it is challenged.
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Exhaust alternatives first
For business restructuring cases, record every alternative considered: redeployment, reassignment, voluntary departure incentives, reduced hours. This is the second seirigaiko criterion, and courts scrutinise it closely.
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Consult the employee and any union
Explain the specific grounds to the employee in a documented meeting. Where a labour union covers the employee, good-faith negotiation with the union is required before the dismissal is confirmed.
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Serve notice or pay in lieu
Provide 30 days written notice, or pay the equivalent average wages in lieu under Labor Standards Act Article 20. Deliver in writing, confirm receipt, and keep a signed copy.
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Settle final pay on time
All unpaid wages, accrued annual leave, and any agreed departure allowance must be available within 7 days of an employee request after termination under Labor Standards Act Article 23.
Is there statutory redundancy pay in Japan?
No. Japan has no legal redundancy or severance formula. There is no minimum lump sum on termination, regardless of how long the employee has worked.
Retirement allowances (taishokukin) are common. Where they appear in employment rules or contracts, they become binding. The amount is set by the employer's rules, not the law.
The absence of a statutory severance formula is one of Japan's most significant departures from global EOR norms. Many employers have established retirement allowance rules that pay a multiple of monthly salary per year of service, but the rates vary widely by company and industry. There is no government-mandated rate.
Voluntary retirement allowances
Where a retirement allowance plan exists in the company's shuugyou kisoku (employment rules), it has the same legal force as the employment contract. Courts have held that an employer cannot unilaterally reduce or abolish these provisions without employee consent. Typical industry practice ranges from roughly half a month's salary to one month's salary per year of service, but these are norms, not legal obligations.
What happens on a forced departure?
When a dismissal is not agreed, the financial exposure shifts to back pay and reinstatement rather than a formula payment. A void dismissal means the employment relationship is treated as never having been interrupted, and the employee is entitled to all wages from the date of dismissal until the court order. This exposure is open-ended in time and there is no statutory cap on the amount. Settlement sums are often calculated as several months to over a year of gross salary depending on the specific circumstances of the case.
Japan imposes no statutory redundancy formula. The lawfulness of any dismissal turns on whether objectively reasonable grounds exist under Labor Contract Act Article 16. A void dismissal triggers reinstatement plus all unpaid wages from the dismissal date, with no monetary cap on the total exposure.
Source: Ministry of Health, Labour and Welfare; Labor Contract Act, Article 16
Are there special rules for collective workforce reductions?
Japan has no collective redundancy law like the EU Directive or UK TULRCA. There is no government notification requirement. There is no minimum consultation period set by law. There is no protective award system for mass dismissals.
The seirigaiko four-criteria test applies to each person individually. You must meet all four criteria for every affected employee.
In practice, companies undertaking significant workforce reductions in Japan follow an extended voluntary departure process rather than a notified mass redundancy. The typical sequence involves an announcement period, a voluntary retirement incentive with enhanced allowances, a window for applications, and only then any remaining compulsory dismissals. Skipping the voluntary phase and going straight to compulsory dismissal for large numbers significantly increases the risk of each dismissal being found void.
Labour unions and consultation
Where a recognised labour union covers affected employees, consultation with the union is an essential element of the fourth seirigaiko criterion. The union must receive the business rationale, the selection methodology, the number of proposed departures, and adequate time to respond. Failing to consult a union undermines the social reasonableness test. Under the Labor Relations Adjustment Act, refusing to negotiate in good faith is an unfair labour practice.
No protective award regime
Unlike the UK or France, Japan has no per-employee protective award for failure to follow collective consultation procedures. Liability flows from void individual dismissals, not from a collective penalty. This means the financial exposure scales directly with the number of dismissed employees and the duration of litigation, not from a multiplier applied to a headcount threshold.
How do mutual departure agreements work in Japan?
The cleanest exit in Japan is a mutual termination (gogo no goi ni yoru taishoku). Both employer and employee agree in writing to end the relationship on specific terms. Because no dismissal has occurred, the Article 16 test does not apply.
Settlement amounts reflect the strength of each side's position. They are not formula-driven.
A mutual departure agreement must be genuinely voluntary. Japanese courts will scrutinise whether the employee was pressured into signing, and an agreement obtained through improper pressure can be invalidated on grounds of coercion or fraud. Best practice is to provide the employee time to consider the terms, obtain independent advice, and confirm the agreement in a signed document that records both parties' intent clearly.
Key elements of a mutual departure agreement
- Departure date: the agreed final date of employment
- Departure allowance: any agreed payment above contractual entitlements, documented clearly as consideration
- Unpaid wages and accrued leave: all amounts settled within 7 days of the agreed departure date or by the next payroll run, whichever is sooner in practice
- Reference wording: agreed language for future reference requests, especially relevant for senior roles
- Mutual non-disparagement
- Confidentiality: of both the circumstances and the departure terms
Labour tribunal and court settlement
Where a dismissal is already disputed, Japan's labour tribunal system (rodo shinpansei) provides a specialist three-person panel that aims to resolve disputes within three hearings, typically within three months. Around 70% of cases settle at the tribunal stage. Where settlement is not reached, the matter proceeds to the district court. Companies represented by qualified employment law advisers see materially better settlement terms and resolution timelines.
How Teamed runs Japan terminations
Teamed is your employer of record in Japan for from $599 per employee per month, with zero FX mark-up in any currency. Japan's Article 16 rule means procedure must be right from day one. Teamed keeps the grounds documentation, consultation records, and seirigaiko four-criteria evidence trail in order.
We handle notice calculations and final-pay settlement within the 7 days window. We coordinate with qualified local employment law partners. Decisions on who to let go, why, and on what terms are yours.
Real HR and legal experts handle your Japan hires, from the first offer letter through every social insurance filing and year-end settlement. An actual person, not a pooled queue, knows your employment rules and the specific circumstances of each employee. There is no setup fee and no exit fee, and employer cost passes through at cost, itemised on every invoice.
The split of responsibilities under EOR for Japan terminations:
| What Teamed handles | What the client decides |
|---|---|
| Statutory notice calculation and pay-in-lieu documentation | Whether to terminate, the grounds, and the timeline |
| Article 16 grounds file: documentation of the lawful basis | Performance standards and what constitutes a breach |
| Seirigaiko four-criteria evidence trail for business restructuring cases | Which roles are genuinely at risk and why |
| Mutual departure agreement drafting with qualified local employment law partners we engage | The commercial terms of any departure allowance |
| Final-pay settlement within the statutory 7 days window including accrued leave | Whether to enhance the departure terms above the contractual minimum |
| Social insurance deregistration, resident tax notification, source documents | Communication with the wider team |
| Labour tribunal support coordination if a dispute arises | Settlement versus defence strategy |
Japan's void-dismissal framework means the cost of getting a termination wrong is not a fixed penalty. It's open-ended back pay plus reinstatement until the case resolves. Teamed carries the procedural discipline at scale so each dismissal rests on documented grounds from the outset.
EOR payroll, contractor onboarding, and entity setup all live on one platform. A Japan contractor who converts to payroll keeps their record, and that same employee can graduate to your own Japan entity without switching systems. Run the Crossover Calculator to see the month the model flips. EOR is the right model for a first Japan hire, until it isn't. Start from the Japan hiring overview; each guide here takes one layer of Japan employment law.
Frequently asked questions
How much notice must you give an employee in Japan in 2026?
The Labor Standards Act, Article 20 requires 30 days minimum notice, regardless of the employee's length of service. There is no tenure-based scaling. You can also terminate immediately by paying 30 days average wages in lieu of notice. The notice requirement does not apply in the first 14 days of employment under the Article 21 exemption.
Is there statutory redundancy pay in Japan?
No. Japan has no statutory severance or redundancy formula. There is no legally mandated lump sum on termination. Some employers operate voluntary retirement allowance schemes under their employment rules; where those rules exist, they are contractually binding on the employer. Otherwise, there is no baseline payment obligation.
What happens if a dismissal is found void in Japan?
Under Labor Contract Act, Article 16, a dismissal without objectively reasonable grounds and social reasonableness is void. The employment relationship is treated as having continued uninterrupted, and the employee is entitled to all unpaid wages from the dismissal date until the matter resolves. Reinstatement is the default remedy. There is no statutory monetary cap on the total award. Settlement amounts often reflect several months to over a year of gross salary depending on the circumstances.
Does Japan have any qualifying period before dismissal protections apply?
No qualifying period applies. Labor Contract Act Article 16 protects employees from day one of employment. The only exception is the Article 21 notice exemption for the first 14 calendar days of employment, but Article 16's substantive void-dismissal standard applies throughout that period too.
When must final pay be settled after termination in Japan?
Under Labor Standards Act, Article 23, if the employee requests it, the employer must pay all outstanding wages, including accrued annual leave and any agreed allowances, within 7 days. In the absence of a request, final pay follows the regular payroll cycle, but best practice is to settle within the 7 days window regardless.
Japan's Article 16 doesn't just make a bad dismissal expensive. It makes it void. The employment relationship is treated as unbroken until a court says otherwise. Every day between dismissal and judgment is accruing back pay. That's why the grounds file has to be built before notice is served, not assembled after the claim lands.
Japan gives employees dismissal protection from their first day at work. 30 days notice, no tenure scaling, and a void-dismissal rule with no cap on the back pay that accrues.
Most countries set a formula for what a termination costs. Japan sets a standard for whether it was lawful at all.
Get the grounds file right before you serve notice, or the meter keeps running.
