Japan is a global economic powerhouse with a highly respected workforce. Japan also has strengths in various areas, providing your company with ample opportunity to grow.
Since the pandemic, remote work has become more common, enabling employers to recruit top talent from around the globe. Expanding your operations into the booming Asian market can bring your business several benefits.
However, it isn’t always easy to hire international talent as a French company. There are many things you’ll need to keep in mind to remain compliant throughout the entire hiring process. Here’s everything you need to know as a French company hiring in Japan.
Reasons to Hire in Japan
Japan Skilled Workers
Companies looking to hire in Japan can benefit from the country’s large and skilled workforce. Japan has one of the best education systems in the world, ranking 7th globally in 2023. This produces highly skilled graduates with specialized knowledge that can help grow your company.
Japanese skilled workers have expertise in various industries such as technology, pharmaceuticals, biotechnology, and manufacturing.
Additionally, Japan is home to the 9th largest labor force in the world with 68.93 million people as of 2022. This can give your company access to a well-educated and diverse talent pool.
Innovation
Japan has a strong focus on research and development and ranked 13th in the world for innovation. The country’s interest in technological advancements make it an attractive destination for tech firms, especially those who want to expand into sectors like robotics, automotive, or electronics.
Access to Asian Markets
The country’s strategic location is another benefit for French employers looking to hire in Japan. Its close proximity and cultural ties to other important Asian markets gives your company a chance to build a presence in a major global powerhouse.
Japan’s geographic location also places it in the middle of major global trade routes, allowing you to build connections in Asia’s rapidly developing economies. It’s also a member of numerous free international trade agreements.
Strong Economy
Japan has a large and diverse economy that gives international businesses an accommodating location for growth. As of 2023, the Japanese economy ranked third in the world, ahead of European powers like France and Germany.
The country has a reputation for precision and a strong manufacturing sector, ensuring your workforce will produce high-quality goods. Japan’s stable economy also makes it a good choice for companies with long-term expansion or investment plans.
Potential Challenges for French Companies in Japan
Recruiting Japanese workers to your company offers several key benefits, but there are also several challenges that may arise when hiring in Japan. Before you begin hiring, it’s important to understand the market you’re trying to build a presence in. Partnering with an Employer of Record (EOR) can help you understand potential difficulties and remain compliant with local labor laws.
Cultural Differences
French employers may run into various challenges with their Japanese employees because of the major cultural differences. The language barrier may make it more difficult to recruit or manage your employees in Japan, and not all Japanese workers are proficient in French.
Additionally, Japan has a different business culture than many Western markets. It’s important for French companies to learn about some of the customs and standards that workers expect. For example, many Japanese businesses have a more formal structure and workers expect social norms to be met.
Difficult Business Environment
Japan has a strong economy and a culture with a strong focus on innovation, but the infrastructure can be somewhat complicated for international companies to navigate. Japan ranks 29th in the world in terms of ease of doing business, which measures factors like how easy it is to start a business, resolving insolvency, and more. This means your company may be subject to unfamiliar regulatory requirements.
Additionally, the tax-paying process can be complicated for international employers. It’s important to understand the different types of taxes or deductions to avoid potential penalties.
Japanese Labor Law
In addition to some of the cultural and regulatory challenges your company may face, Japan also has a range of employment laws that your business needs to obey. Here are some of the most important things you need to know when attracting skilled Japanese workers.
Employment Contracts
All working relationships must have a valid employment contract that’s agreed upon before starting. It isn’t a legal requirement to provide written contracts, but employers must specify in writing essential factors of the labor contracts, including:
- Compensation and payment schedule
- Hours of work
- Vacation entitlement
- Grounds for dismissal and resignation policies
- Term of employment
- Job description
There are a few different types of employment contracts foreign companies can use to hire in Japan.
Permanent Contracts (Seishain)
This is the standard employer-employee working agreement for full-time or permanent employees. There is no specified end date and workers are given employment protections against termination. These employees are also entitled to statutory benefits such as pension, health insurance, paid leave entitlements, and statutory holidays.
Fixed-Term Contract (Keiyaku)
These contracts are meant for specific projects or shorter-term working arrangements and have a specified end date. Generally speaking, employees have the same rights and some of the same benefits as full-time employees. These agreements typically have a maximum duration of 3 years except in certain cases.
Temporary employees who have been extended on fixed-term contracts for more than 5 years with the same employer can qualify for the conversion rule, which allows them to transition to a permanent position.
Temporary Staff Contracts (Haken-shain)
This agreement applies to employees who are hired to companies by a dedicated staffing agency. In this case, the staffing agency acts as the worker’s legal employer in the country. Dispatch employees can work for the same company for up to 3 years, then the company must decide whether or not to hire the employee on a full-time basis.
Part-Time Contracts (Arubaito)
These contracts limit the amount of hours an employee can work per week. Workers get more flexibility when choosing their schedule. However, they also receive less benefits than permanent employees.
Costs of Hiring in Japan
When recruiting Japanese talent, there are several additional costs you’ll need to consider. These include taxes, payroll, and employee benefits. If you’re wondering what some of the requirements are, here’s an idea of how much it might cost to hire a Japanese worker.
Wages
Japan has a federally-mandated minimum wage for employees that must be paid to remain compliant with local laws. As of 2023, the minimum wage in Japan is set at JP¥961, which is roughly equivalent to €6.09. Of course, the amount you’ll pay Japanese workers also depends on their area of expertise and level of experience.
A standard work day is eight hours and a work week lasts for 40 hours Monday through Friday. Employees who work more than 40 hours in a week are entitled to overtime pay, except if they’re in a managerial position. Skilled Japanese workers can work up to 45 overtime hours per month and 360 hours per year in most cases.
Employees who work overtime must receive:
- 125% of their regular wage
- 135% of their regular wage when working on a weekend or holiday
- 125% of the normal rate for late-night work (10:00 p.m. to 5:00 a.m.)
Employee Benefits
There are certain mandatory benefits you need to provide to your employees when hiring in Japan. The statutory benefits your company will need to provide include:
- Pension contributions
- Unemployment insurance contributions
- Paid time off
- Health insurance
Many employers also offer supplemental benefits packages such as housing or transportation allowances. This can help you attract top Japanese talent and boost employee retention.
Payroll
Your company is responsible for setting up proper payroll and handling tax deductions and social security contributions when hiring in Japan. Japan follows a monthly payroll cycle with payments coming on the 25th of each month.
Employee income tax is calculated based on the workers wage. Japan’s tax brackets are:
- 5%: up to ¥1.95 million
- 10%: up to ¥3.3 million
- 20%: up to ¥6.95 million
- 23%: up to ¥9 million
- 33%: up to ¥18 million
- 40%: up to ¥40 million
- 45%: over ¥40 million
Employers also must cover certain costs under Japan's social security system. Under Japanese employment laws, employer taxes are generally around 18% of the employee’s salary. The hiring company will need to cover the following.
- 9.15%: Welfare pension insurance
- 4.9%: Health Insurance contribution (rates may vary depending on the worker’s age)
- 0.6%: Unemployment insurance
- 0.25% to 8.8%: Work injury
- 0.36%: Family and Childcare allowance
Additionally, it’s customary in Japan to pay a 13th or 14th month bonus. The amounts can vary and depend on management and labor negotiations and company performance.
Severance and Termination
The termination process in Japan can be complicated. The country doesn’t have at-will termination, and employment agreements can only be ended for a justifiable reason. Some reasonable grounds for termination may be:
- Disciplinary dismissal for misconduct such as theft or fraud
- Poor performance
- Not following mandatory work policies
- Inability to work because of health-related reasons
- Economic circumstances
Because of the strict rules and regulations regarding termination when hiring in Japan, many employers opt to negotiate voluntary resignations with workers to avoid potential legal action.
In the event of a formal termination, you’re required to give 30 days notice before ending the employment agreement. You can also give compensation for the notice period. Both employers and employees can end the agreement during the probation period, which is generally around three to six months. However, probation periods are not mandatory.
Japan has no federally-mandated requirement for severance pay after termination. If an employer chooses to offer severance pay, it is up to them.
Leave Entitlement
Japanese workers are entitled to a certain amount of time off for various reasons. Employers hiring in Japan must give workers at least ten days of paid leave per year after six months of work. Additionally, the amount of paid time off given increases the longer the employer works for your company, which will be listed in compliant employment contracts.
- 1.5 years of consecutive work: 11 days paid leave
- 2.5 years: 12 days
- 3.5 years: 14 days
- 4.5 years: 16 days
- 5.5 years: 18 days
- 6.5 years: 20 days
Japan has 16 national holidays. Generally speaking, these holidays are rest days for Japanese employees, and individuals who work may be entitled to additional payment.
New mothers are entitled to take 14 weeks of paid maternal leave, and they can take six weeks before the child's expected birth date. . New parents can also take parental leave and are entitled to up to 1 year off.
It’s also important to know that local labor laws in Japan do not mandate sick leave provisions. Sick leave entitlement is at the sole discretion of the employer.
How to Hire in Japan as a French Company
Japan is home to skilled workers that can help you grow your business and generate new ideas. However, Japan’s local labor laws and business culture can be somewhat difficult to understand. You may be wondering how you can recruit top talent but remain compliant throughout the hiring process. There are 2 ways you can do this, either by opening a local entity yourself or partnering with an employer of record.
Set Up a Local Entity
Companies who want to hire in Japan need to set up a local entity in the country. If you set up a local entity yourself, you are responsible for all aspects of the hiring process, including payroll and taxes. Failure to do so may result in noncompliance penalties.
There are 2 main types of entity you should consider when registering your business:
- Kabushiki Kaisha (KK): This is the most common type of entity in Japan. These companies can be traded on the stock exchange, allowing for greater scalability. It also has clear distinctions between shareholders and directors.
- Godo Kaisha (GC): This is a limited liability company that cannot be publicly traded. Additionally, it does not require a minimum capital investment to register your business.
To set up a subsidiary in Japan, there are certain requirements you must meet:
- You need to reserve a unique trading name
- You need to open a Japanese bank account to transfer capital
- You need to register with Japanese tax authorities
- You’ll need to get your articles of incorporation notarized
Partner with an EOR in Japan
Engaging an employer of record can help you quickly and efficiently hire top talent from around the world. An EOR acts as the legal entity in the country you want to hire from and handles all aspects of the hiring process. This includes complex logistics, such as payroll, taxation, termination, and more.
EORs in Japan have in-depth expertise about the local labor laws, ensuring that you remain compliant in all areas. Your EOR can also quickly and efficiently onboard your new hires, though it’s still your responsibility to manage and train your staff.
Consider Borderless
Borderless is an EOR that can provide you with everything needed to recruit skilled Japanese workers and grow your company. Book a demo today to see all the services we offer.
Disclaimer: Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
