Hire in Japan

Employer of Record(EOR) in Japan

Japan Workforce Unlocked: How Employer of Record Makes Hiring Easy

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At a Glance

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$599.00 / month
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$49.00 / month


Known as the “Land of the Rising Sun”, Japan’s distinction from the rest of the world is not only its strategic geographical location but also due to its rich cultural virtues. Japanese people are known to be polite, organized, and have a good work ethic. In turn, the country has many merits to its name and is considered one of the most developed countries in the world.

Japan’s economy is ranked as the third-largest in the world by nominal GDP and fourth by Purchasing Power Parity (PPP) GDP. The country is also one of the world’s leading investors, having more than $220 billion in FDI (foreign direct investments) outflows each year.

Major economic hubs:

Tokyo, Osaka, And Kyoto

Skills in demand:

IT Engineer, Cloud Computing Engineer, IoT Engineer, Country Manager

Public and Provincial Holidays

Employee Leaves


Resident Tax Information

All residents are taxed on their worldwide income; however, non-residents and foreign nationals are taxed on their income derived in Japan.

Income tax rates in Japan are progressive based on an individual’s income. The Japanese income taxes are as below —

Social Security

Contributions toward social security are mandatory in Japan. The Japanese social security includes the following areas –

  • Pensions
  • Health insurance
  • Unemployment insurance
  • Workplace injury
  • Family allowance

The employer and employee contributions toward each fund include —

Statutory Benefits

An employer must pay certain statutory benefits to their Japanese employees. Statutory benefits in Japan include —

  • Statutory leaves
  • Pension or superannuation
  • Old-age pensions leaves
  • Disability pension
  • Survivors' pension:
  • Social security
  • National Health Insurance
  • Longevity Healthcare System

Statutory leaves

All employees are entitled to a certain set of leaves as laid out by the Japanese labor laws. This has been covered extensively in the previous section.

Pension or superannuation

  • Superannuations are provided to regular employees (also classified into Type 2 Insured) and part-time employees Type 2 employees are covered by the Employees' Pension Insurance plan (Kosei Nenkin). The premiums toward the Employees' Pension Insurance Plans depend on the employee's gross salary.
  • It is mandatory for all employers to ensure that the enrollment procedures are settled Contributions as premiums are borne by both the employer and the employee and are split equally between both.

Old-age pensions

In Japan, all employees are entitled to old-age pensions at the legal retirement age of 65 years. Employees must have contributed toward National Pension for 10 continuous years before they can receive benefits from it in addition with their final salary.

Disability pension

Employees are entitled to a disability pension in cases of injury or sickness There are three categories of disability benefits depending on the seriousness of the disability The three classes of disability include —

  • Class I: Complete disability that requires constant care/attendance
  • Class II: The Degree of disability that restricts the employee's ability to live independently
  • Class III: The degree of disability that restricts an employee's ability to work

The employee must have contributed at least one third of their previous participation period.

Survivors' pension

The survivor's pension is a generous benefit that ensures the dependent can live comfortably with their income. The employee must pay contributions from 1/3rd or more of past participation period, but this payment isn't required if they're dead by themselves.

Social security

All employees are covered under social security for several aspects that include

  • Pensions
  • Health insurance
  • Unemployment insurance
  • Workplace injury
  • Family allowance

However, contributions by both the employer and the employee are mandatory.

National Health Insurance

The Japanese social security system offers a similar package of benefits to health care under National Health Insurance. Employees not covered by any type of insurance must be enrolled in order for them and their family members' medical needs be met, at least 70% on average (with higher percentages available depending upon height). The local government determines the contribution amount, which is based on

  • The total income of the employee and
  • The number of dependents of the employee

Longevity Healthcare System

With the Longevity Healthcare System, employees are provided with benefits when they reach age 75. In addition to this protection from economic shocks at old ages there is also disability coverage that begins between 65 and 74 years of age for individuals who have certain disabilities.

13th-month pay

There is no legal requirement to provide employees with an annual bonus like a 13th salary.

Fringe Benefits

Fringe benefits are provided by the employers in addition to their compensation and benefits. Commonly provided fringe benefits in Japan include —

  • Flexible working hours
  • Housing allowance
  • Commuting allowance
  • Travel vouchers
  • Additional paid days off
  • Meal

Exempt Benefits

There are certain benefits in Japan that are exempt. Exempt benefits in Japan include —

  • Life insurance premiums
  • Tax credits on mortgage interests
  • Business expenses such as travel and entertainment expenses

Long-term Incentives

Long-term incentives are given to employees for a time horizon that extends beyond 12 months. These benefits can be seen as an integral part of your company's strategy, with the goal being retention and strong growth potential in future years.

Commonly provided long-term incentives in Japan include —

  • Group life insurance
  • Group personal accident insurance
  • Group long-term disability insurance
  • Group medical top-up insurance
  • Family allowances
  • Allowances for the spouse — 10,000 to 15,000 yen monthly
  • Allowances for children — 3,000 to 5,000 yen monthly
  • Although uncommon in Japan, many employers also provide employee stock options

Termination/Severance in Japan

Termination Process

Employers terminating their employees must provide a notice of termination informing them of the reasons for the decision. In cases of summary dismissal, an employer may do so without any notice but must pay their employees 30-days worth of wages, known as a “notice allowance.”

Notice Period

A notice period of up to 30 days is generally observed in Japan.

Severance Pay

A severance pay is not mandatory in Japan.

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