PEO & Employer of Record (EOR) in Japan
Expand Your Business With Our Japan PEO
GlobalPEO delivers a top tier employer of record service for clients that are looking to recruit, hire, and operate payroll services without first setting up their own subsidiary in Japan.
How it Works: Our Japan PEO & Employer of Record (EOR) hires your candidate while abiding by local labor laws and cultural customs. The newly hired employee will communicate directly with your company and perform all job functions as if they were your own employee. We act as your in-country HR department and handle the entire onboarding, payroll, and benefits process in strict accordance to Japan’s regulations.
Why Choose our Japan PEO?
Japan PEO & Employer of Record
Hire, onboard, and manage employees in Japan quickly and easily with GlobalPEO. Working with our Japan PEO and Employer of Record solution eliminates the headaches that come with establishing a foreign legal entity and guarantees full compliance with local regulations.
#1 - Fast Facts For Hiring in Japan
#2 - Working Hours in Japan
The traditional working week in most Japan cities begins on Monday and ends on Friday. This culture typically works 40 hours per week, unless there have been arrangements made with working unions in advance. There must also be an agreed upon maximum number of overtime hours designated per week.
The minimum overtime rates are as follows:
Standard (basic) overtime rate – 125% of base hourly wage
Required work on a “Rest Day” – 135% of base hourly wage
Late night overtime (anytime from 10:00pm & 5:00am) – 150% of base hourly wage
Late night overtime on a Rest Day – 160% of base hourly wage
Overtime work after the threshold of 60 hours in a single month – 150% of base hourly wage
Late night overtime after the threshold of 60 hours in a single month – 175% of base hourly wage
Keep in mind that small to mid-size companies are exempt from the 60+ hour thresholds shown above. Supervisors, managers, and personnel in charge of “handling confidential matters” are usually exempt from receiving overtime pay.
#3 - Japan Employment Contracts
Although Japan’s Labour Standards Law does not require a specific format for creating employment contracts, all employers must share specific terms and conditions for employment in writing with their employees. This can easily be done by providing the employee with a copy of the company’s “work rules.” All employees hired with GlobalPEO’s Japan employer of record service are covered under a locally compliant contract for employment.
Make sure to always clearly state the employee’s benefits, vacation time, termination requirements, and compensation in Yen currency.
#4 - Japanese Holidays
While it is not a legal requirement, it is incredibly unusual to not grant salaried employees in Japan the day off on national holidays. This is also the case for Japanese workers employed by foreign companies. If a holiday falls on a Sunday, the traditional practice in Japan is to observe the holiday on the following Monday.
Japan celebrates 16 national holidays that grant most employees the day off of work. These holidays are listed below:
– New Year’s Day
– Coming of Age Day
– Foundation Day
– Vernal Equinox Day
– Showa Day
– Constitution Memorial Day
– Greenery Day
– Children’s Day
– Marine Day
– Mountain Day
– Respect for the Aged Day
– Autumnal Equinox Day
– Health and Sports Day
– Culture Day
– Labour Thanksgiving Day
– The Emperor’s Birthday
#5 - Bonus Payments in Japan
Similar to US business practices, there is no legal requirement to provide bonuses to employees working in Japan.
#6 - Employment Benefits in Japan
Japanese culture dictates that their employees’ are given a fair, safe, and peaceful workplace. It is the responsibility of the employer to provide annual doctors appoints to all employees to ensure they stay in good health. If the work has the potential of being hazardous to an employee’s mental health, the employer may be required to also provide regular stress checkups.
Employers operating within or employing workers in Japan are required to provide 10+ days of annual paid leave to all employees after completing their first 6 months of employment.
We suggest allocating around 10% of your Japan expansion budget to cover the potential cost of benefits in addition to the base salary of employees working in Japan.
#7 - Sick Leave in Japan
Traditionally, employers are not required to approve paid leave to employees who are absent from work due to sickness or injury. The only exception to this rule is if your company’s employment contract specifically states otherwise.
#8 - Maternity Leave in Japan
When an employee working in Japan becomes pregnant, she is granted maternity leave from within 6 weeks of the anticipated birth date and then up to 8 weeks following the birth. It is illegal for an employer to require a female employee to return to work within 8 weeks after giving birth unless both parties agree for the worker’s return and a doctor approves that it is safe for the female employee to return to work.
Note that in Japan, employers are not required to pay for maternity leave unless they stipulate that benefit in the employment contract.
#9 - Laws on Termination & Severance in Japan
Japan’s laws surrounding termination provide a high degree of legal protection for employees. It is extremely difficult to terminate an employee working in Japan and there are strict restrictions surrounding what is considered as a “justified termination.” In fact, a dismissal will be deemed invalid as an abuse of employee rights under the country’s local laws if it is not considered to be appropriate in general societal terms.
Historically, it has been very challenging for employers to successfully prove a valid cause for termination in the eyes of Japan’s legal courts. The exceptions to this rule include: employees committing crimes or violations such as theft, violence, excessive insubordination, dishonesty regarding their professional credentials, or long-term poor performance in the position.
The tradition in Japanese business culture is to place poor performing employees on a 3 to 6 month probationary period. If the employee continues to underperform or not meet the expectations of the company, they can be terminated without being deemed unacceptable under Japan law.
All employees must be given at least 30 days notice of termination. This stipulation is commonly included in the “work rules” as provided by the company to the employee at the time of initial hire.
#10 - Japan's Tax Laws
All employment income in Japan is subject to federal income tax as well as the “local inhabitants tax.” The national tax rates is typically applied at comparatively progressive rates depending on the amount of income. The local inhabitants tax is applied at a flat rate that is set locally.
Because of the country’s higher tax rates, Japan has a very strong and well-regarded social security system. Japan operates within their National Universal HealthCare system. This provides all employees with health insurance, welfare pension insurance, workers’ compensation, and unemployment insurance. These benefits are granted by the Japanese government, so it is uncommon for employers in Japan to offer additional insurance benefits.
Why Choose GlobalPEO?
Global expansion is a great step for your business – and now it’s easier than ever. Setting up your own entity in each country where you wish to operate can be expensive, complicated, and requires deep knowledge of the specific rules and regulations. Let GlobalPEO take care of everything. From International PEO & EOR, Global Payroll and International Recruiting we deliver our exceptional services at an affordable price.