Employer of Record Guide in 

Japan

Annual Leave (Paid Vacation)

Minimum Entitlements:

Key Rules:

• Accrual: Granted after 6 months of continuous employment
• Usage Rate: Employers must ensure employees take at least 5 days annually
• Carryover: Unused days expire after 2 years
• Payout: Must be paid out upon termination

Sick Leave

Legal Framework:

• No Statutory Requirement: Japan has no mandatory paid sick leave
• Company Policies: Most employers provide 5-10 days annually
• Medical Certificates: Required for absences exceeding 3 consecutive days
• Long-term Illness: May qualify for health insurance benefits (60% of salary)

Maternity Leave

Maternity Leave (Sango Kyuka):

• Duration: 14 weeks total
  • 6 weeks before due date
  • 8 weeks after childbirth (mandatory)
• Compensation: 67% of salary through health insurance
• Job Protection: Position guaranteed upon return

Parental Leave

Child Care Leave (Ikuji Kyugyo):

• Duration: Until child reaches 1 year (extendable to 2 years)
• Eligibility: Available to both parents
• Sharing: Parents can take leave simultaneously or sequentially
• Compensation: 67% of salary for first 180 days, then 50%
• Job Protection: Same or equivalent position guaranteed

Special Leave Types

Nursing Care Leave:

• Duration: Up to 93 days per family member requiring care
• Compensation: 67% of salary through employment insurance
• Flexibility: Can be taken intermittently

Bereavement Leave:

• Duration: Varies by company policy (typically 1-7 days)
• Relationship: Different durations based on family relationship
• Compensation: Usually paid by employer

Leave Summary

Termination Categories

Dismissal for Cause (Kaiko):

• Requires "objectively reasonable grounds"
• Must be "socially acceptable"
• Examples: serious misconduct, criminal activity, persistent poor performance
• Burden of Proof: High standard required from employer

Ordinary Dismissal:

• Business restructuring or economic reasons
• Requires demonstration of necessity and fair process
• Must follow "four requirements" for validity

Voluntary Resignation:

• Employee-initiated termination
• Requires written notice
• May still qualify for unemployment benefits

Notice Period Requirements

Minimum Legal Requirements:

Payment in Lieu:

• Employers may pay 30 days' salary instead of providing notice
• Common practice for immediate termination
• Must include average daily wage calculation

Severance Pay

Legal Requirements:

• Minimum: 30 days' average wage per year of service
• Calculation: Based on average daily wage over preceding 3 months
• Maximum: No legal maximum, but typically 1-2 years' salary

Company Practices:

• Many companies provide more generous severance
• Long-service employees may receive substantial packages
• Negotiation often occurs in termination discussions

Retirement System

Mandatory Retirement:

• Legal Age: 65 years (increasing to 70 by 2025)
• Continued Employment: Employers must offer re-employment until age 65
• Retirement Benefits: Separate from severance, based on years of service

Final Pay Requirements

Timeline: Final payment must be made within 7 days of termination or on the next regular payday, whichever is later.

Components:

• Outstanding salary
• Unused annual leave
• Severance pay
• Retirement benefits (if applicable)

Legal Protections

Prohibited Grounds for Termination:

• Pregnancy or maternity leave
• Trade union activities
• Filing labour complaints
• Discrimination based on nationality, gender, or religion

Dispute Resolution:

• Labour Standards Inspection Office
• Labour Relations Commission
• Court proceedings for wrongful dismissal

National Holidays (2025)

Japan observes 16 national holidays annually:

Golden Week

Period: Late April to early May Impact: Extended holiday period combining multiple national holidays Business Considerations: Many companies close for the entire week

Holiday Pay Rules

Eligibility: All employees are entitled to holiday pay for national holidays Rate: Regular daily wage Substitute Holidays: If a national holiday falls on a regular day off, the following workday becomes a substitute holiday

Regional Variations

While national holidays apply nationwide, some regions may observe additional local festivals or events that affect business operations. Employers should be aware of local customs in their specific prefectures.

Required Documentation

Employment Contract (Rodo Keiyakusho):

• Must be provided in writing
• Include: job duties, work location, hours, salary, benefits, termination conditions
• Available in Japanese (English translation acceptable with Japanese version)

Government Forms:

• Tax Withholding Certificate: For income tax calculations
• Social Insurance Registration: Health insurance, pension, employment insurance
• Residence Card: For foreign employees
• My Number: Japanese social security number

Banking Information:

• Japanese bank account required for salary payments
• Account opening may require residence registration

Work Authorization

Japanese Citizens: No restrictions

Foreign Employees:

• Work Visa Required: Appropriate visa category for job type
• Residence Card: Must be valid throughout employment
• Status of Residence: Must match job responsibilities
• Renewal Requirements: Employer may need to support visa renewals

Background Checks

Legal Framework:

• Limited background checking compared to other countries
• Must be job-relevant and proportionate
• Employee consent required

Common Checks:

• Employment history verification
• Educational credential verification
• Criminal background (limited circumstances)
• Credit checks (financial positions only)

Data Protection Compliance

Personal Information Protection Act (PIPA):

• Strict consent requirements for data collection
• Purpose limitation for data use
• Employee rights to access and correction
• Secure data storage and transfer requirements

Cross-border Data Transfers:

• Restrictions on transferring employee data outside Japan
• Adequate protection measures required
• Employee consent may be necessary

Probationary Periods

Standard Duration: 3-6 months typical Legal Framework:

• Easier termination during probation
• Must still follow fair procedures
• Cannot exceed reasonable duration
• Performance evaluation required

Onboarding Timeline

Cultural Integration

Workplace Orientation:

• Company hierarchy and reporting structure
• Business card exchange etiquette (meishi koukan)
• Meeting protocols and decision-making processes
• Dress code and professional appearance standards

Worker Classification

Employee vs Independent Contractor: Japan has strict criteria for worker classification, with most working relationships presumed to be employment.

Employee Indicators:

• Work under company direction and control
• Use company equipment and facilities
• Integrated into company operations
• Receive regular salary payments

Contractor Indicators:

• Independent business operations
• Own equipment and bear business risks
• Invoice for services provided
• Multiple clients typical

Misclassification Risks:

• Retroactive social insurance contributions
• Back payment of benefits and overtime
• Tax penalties and interest
• Labour standards violations

Note: Japanese authorities heavily scrutinise contractor arrangements, particularly for foreign workers.

Collective Bargaining

Union Landscape:

• Approximately 17% of workforce unionised
• Enterprise unions (company-specific) most common
• Industry-wide unions in some sectors
• Collective agreements override individual contracts

Employer Obligations:

• Good faith bargaining required
• Cannot discriminate against union members
• Must provide information for negotiations
• Strike actions legally protected

Cultural Workplace Norms

Hierarchy and Respect:

• Clear seniority systems (senpai-kohai relationships)
• Formal communication protocols
• Group consensus decision-making (ringi system)
• Respect for authority and experience

Work-Life Integration:

• Long working hours traditionally expected
• After-work socialising (nomikai) common
• Gradual shift toward work-life balance
• Paid leave usage historically low but increasing

Communication Style:

• Indirect communication preferred
• Avoiding direct confrontation
• Reading between the lines important
• Silence as communication tool

Remote Work Considerations

Legal Framework:

• No specific remote work legislation
• Standard labour laws apply to remote workers
• Working time management challenges
• Health and safety obligations continue

Practical Considerations:

• Equipment provision requirements
• Communication and supervision methods
• Overtime tracking difficulties
• Cultural resistance in traditional companies

Tax Implications:

• Home office expense deductions limited
• Commuting allowances may be affected
• Cross-prefectural work may have tax implications

Diversity and Inclusion

Legal Requirements:

• Equal Employment Opportunity Law prohibits gender discrimination
• Act on Promotion of Women's Participation and Advancement
• Revised Immigration Control Act supports foreign workers

Cultural Challenges:

• Traditional gender role expectations
• Age-based discrimination concerns
• Foreign worker integration issues
• LGBTQ+ rights gradually expanding

Best Practices:

• Inclusive hiring practices
• Cultural sensitivity training
• Language support for foreign employees
• Flexible work arrangements for diverse needs