Employer of Record in Japan

General Information

• Currency: Yen (JPY)
• Employer Taxes: 16.62% – 26.74%
• Payroll Frequency: Monthly
• Employee Costs: 15.54%
• Capital: Tokyo
• Fiscal Year: 1 April – 31 March

Main Aspects of the Labour Code

Minimum Wage

General: The national minimum wage in Japan varies by prefecture. The hourly minimum wage ranges from 896 JPY to 1,113 JPY. Specifically, in Tokyo, it is set at 1,113 JPY, in Osaka at 1,064 JPY, and in Kyoto at 1,009 JPY.

Payroll

Payroll Cycle: The payroll cycle in Japan is generally monthly.

13th Salary

In Japan, it’s common to receive a “13th month” or even a “14th month” salary as summer and winter bonuses, typically paid in June and December, respectively. However, many international companies are now opting for a simpler 12-month pay structure.

Working Hours

General: The standard working hours in Japan are 8 hours per day, 40 hours per week.

Overtime: All work performed beyond standard weekly hours is classified as overtime and is governed by employment contracts or collective agreements. If an employee is expected to regularly work overtime, a written agreement must be submitted to the Labour Inspection Office.

When employees are asked to work overtime or on holidays, the limits are set at a maximum of 5 hours per day, 45 hours per month, and 365 hours per year. For overtime exceeding 60 hours in a month, compensation must be at least 50% above the normal hourly wage; otherwise, it must be at least 25%.

Employees in managerial and supervisory roles, as defined by the Labour Standards Act, are exempt from these rules, but they are still eligible for late-night work allowances. Overtime pay is calculated as follows:

Holidays following night shifts: additional 60%

Overtime (generally over 8 hours per day): additional 25%

Night shifts (22:00 – 05:00): additional 25%

Weekends and holidays: additional 35%

Night shifts following overtime: additional 50%

Leave

Annual Leave (Vacation):

In Japan, paid leave is specified in the employment contract and is based on the length of service. This paid leave is in addition to public holidays.

• Employees with up to six months of service are entitled to 10 days of paid leave.
• Those with up to one and a half years of service receive 11 days.
• Employees with up to two and a half years of service get 12 days.
• After three and a half years, employees are entitled to 14 days.
• Those with up to four and a half years receive 16 days.
• Employees with up to five and a half years are entitled to 18 days.
• Finally, employees with up to six and a half years get 20 days of paid leave.

Unused leave expires after two years.

Public Holidays

They are 16 public holidays in Japan. While there are no legal requirements to pay for public holidays, it is common to grant those days as paid days off.
If a national holiday falls on a Sunday, the next working day will become a public holiday. In addition, companies are usually closed from December 29th to January 3rd.

Sick Days

Sick leave is not mandatory in Japan. Some companies may implement their own sick leave policies, but employees often use their vacation days to cover absences due to illness or rely on social insurance benefits.

Maternity Leave

All female employees in Japan are entitled to maternity benefits, which include 14 weeks of paid leave: six weeks prior to the due date and eight weeks afterward. The maternity payment is provided by Social Insurance, based on National Health Insurance rates, currently set at 420,000 JPY per child.

If the employee is enrolled in the employee health insurance plan, they may receive a maternity allowance equivalent to two-thirds of their regular salary from 42 days before the birth until 56 days after delivery.

Paternity Leave

Fathers are entitled to paid paternity leave, known as “childcare leave” in Japan, for up to one year after the birth of their child. While on leave, employees typically do not receive a salary unless specified in their employment contract, but they are eligible for a partial allowance from social security.

Male employees can take four weeks of leave within eight weeks after the birth, either in one or two installments, referred to as “Childcare at Birth Leave.” Benefits during this period are provided by social security at the same rate as maternity leave (67% of covered pay). This new Childcare at Birth Leave is in addition to existing government-paid childcare leave entitlements for both parents, which can now also be taken in one or two separate installments, rather than just one.

Childcare Leave

Childcare leave can be taken by either the mother or father and begins the day after maternity leave concludes. Labor insurance covers this leave, which can be taken until the child turns one year old. If both parents utilize childcare leave, it is extended to when the child is one year and two months old.

Companies with 1,000 or more employees are required to publicly disclose the annual rate of childcare leave taken by their staff.

Other Leave

In Japan, employees are entitled to bereavement leave in the event of the death of an immediate family member. For the death of a parent, spouse, or child, employees can take five days of leave, while three days are allowed for the death of a grandparent, grandchild, sibling, child’s spouse, or spouse’s parent.

Additionally, if the employee is responsible for funeral arrangements, they may request an extra two days of leave. Employees can also take family care leave, which is unpaid and allows them to care for a spouse, child, parent, or grandparent for up to 93 days per family member.

Employees with a child under three years old have specific rights. If they request to be excused from unscheduled work, they cannot be required to work beyond their regular hours. Requests for a reduced working hour system should be granted. Moreover, if an employee has a preschool-aged child and requests to be excused from unscheduled work, they should not be expected to work more than 24 hours of overtime in a month or 150 hours in a year.

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