When it comes to finding employees with a strong work ethic, Japan is a top contender. Japanese workers are known for their dedication, loyalty, and commitment to delivering value.
Japan is also a leader in innovation, at the forefront of technological advancement in Southeast Asia. Its education system, especially in STEM, is noteworthy too. Japanese students consistently outperform the global average in assessments, resulting in a highly skilled and educated workforce.
Ready to tap into the talent pool in Japan? We can help you along the way. It’s not easy, especially when you’re based out of another country. Italy and Japan have very different approaches to work and hiring, so paying attention to the fine print is important.
Keep reading to learn the ins and outs of hiring Japanese employees. We’ll walk you through the process from start to finish.
How to Get Started
Before hiring in Japan, there are three different routes you can take.
Engage Independent Contractors
When considering recruitment in Japan, one option is to engage independent contractors. However, it's important to keep certain factors in mind. Independent contractors have the flexibility to set their work hours, take on multiple clients (even competitors), and even subcontract work.
However, this arrangement doesn't mirror the conventional employer-employee relationship that comes with permanent roles. Misclassifying contractors as full-time employees can lead to higher taxes and legal consequences.
Set Up a Foreign Entity
Another avenue to explore is establishing a local subsidiary in Japan to directly hire talent. This method provides foreign employers with control over crucial aspects of doing business such as hiring, payroll, and establishing a physical presence.
This approach requires a thorough grasp of the legal landscape and strategic planning. Seeking guidance from experts knowledgeable about compliance laws is essential for navigating this complex process effectively.
Partner with an Employer of Record (EOR)
An increasingly popular and practical choice is partnering with an Employer of Record (EOR) service provider like Borderless. This streamlined option is both cost-effective and compliant. EORs act as legal entities, ensuring strict adherence to local regulations.
They handle vital tasks such as payment processing, payroll taxes, deductions, contributions, and tax forms for employees. Embracing an EOR approach reduces concerns related to tax and labor law compliance, freeing up resources to focus on business growth and expansion.
How Do Work Cultures Differ Between Japan and Italy?
In Japan, there's a strong emphasis on hierarchy and formality. Everything follows a structured setup with well-defined roles, and respecting authority is key. In Italy, things are more relaxed and less formal. While respect is still important, interactions between colleagues and superiors are typically informal and easygoing.
When it comes to time, Japanese employees value punctuality. Being on time for meetings and tasks shows commitment and respect. Italy, on the other hand, is more flexible with time. Meetings might start a bit later, and minor delays are usually okay.
These differences come from broader societal values. Japanese culture values order and diligence, while Italian culture leans towards warmth and sociability. These unique work cultures shape how people and businesses operate in these countries, promoting teamwork and success in their own ways.
Where to Look for Talent as a Legal Employer
When deciding where to hire employees in Japan, employers often look to key cities that offer a wealth of talent and opportunities. Here are some important places to consider:
Tokyo
Japan's capital is a global economic hub with a diverse workforce across industries like finance, tech, and entertainment.
Osaka
A major commercial and industrial center known for manufacturing and innovation, especially in electronics and engineering.
Nagoya
Famous for the automotive industry, it's a hotspot for those interested in manufacturing and engineering.
Yokohama
Close to Tokyo, it's a rising business hub with opportunities in finance, tech, and logistics.
Sapporo
Up north, it's a center for education and technology, great for academia, research, and tech.
Fukuoka
An emerging startup and tech hub with a supportive entrepreneurial ecosystem.
Kobe
Offers diverse opportunities across various industries with a vibrant international community.
Sendai
Growing in technology and research, home to research institutions and tech companies.
Kyoto
Blends cultural heritage with technology, appealing to those interested in innovation and tradition.
Hiroshima
Beyond history, it's a dynamic place with a focus on education, research, and industries like healthcare.
These cities provide a range of options for finding skilled professionals to drive business growth.
What Should You Keep in Mind When Hiring in Japan?
When hiring in Japan, it's essential for a legal employer to understand key aspects that affect the job landscape. Gaining insight into the typical work week in Japan, leave entitlements, benefits of partnering with an Employer of Record, and more, will help you as you hire in Japan. Let's get into it.
Language
In Japan, the primary language spoken is Japanese. However, studies show that between 13% and 30% of Japanese people also have some level of English language skills. Despite this, only around 9% feel confident in using English comfortably.
Currency
Employees in Japan are paid in Japanese yen (JPY, ¥).
Japanese Work Week and Working Hours
Per the local labor laws, employees in Japan can work up to eight hours a day, which is equal to a 40-hour work week. In 2023, it has been noted that many employers in Japan are adapting to a four-day work week.
How Much Does It Cost to Hire an Employee in Japan?
When you hire in Japan, remember that costs go beyond just salaries. Make sure to budget for payroll taxes, benefits, workplace expenses, and any additional items to cover all aspects.
Japanese Minimum Wage
The national minimum wage in Japan is ¥961 per hour, or €6.09. However, the minimum wage can vary by region and industry, from ¥761 to ¥1,072 per hour, or € 4.82 to €6.79.
Employer Taxes
In Japan, employers contribute to employees' welfare and handle income tax deductions:
- Pension (9.15%): Employers give 9.15% of wages for retirement funds.
- Health Insurance (4.905%): 4.905% of wages (up to JPY 1,390,000/month) covers health insurance.
- Unemployment (0.6%): 0.6% helps employees facing job loss.
- Work Injury (0.25% - 8.8%): Insurance for job-related injuries varies by job type.
- Family Allowance (~0.36%): About 0.36% of wages supports family needs.
Employers deduct income taxes from salaries. Rates:
- 5% for earnings up to ¥1.95 million ($17,629.67)
- 10% for income of ¥1.95 million to ¥3.3 million ($17,629.67 - $29,834.82)
- 20% for earnings ¥3.3 million to ¥6.95 million ($29,834.82 - $59,579.24)
- 23% for income ¥6.95 million to ¥9 million ($59,579.24 - $81,367.70)
- 33% for earnings ¥9 million to ¥18 million ($81,367.70 – $162,735.41)
- 40% for income ¥18 million to ¥40 million ($162,735.41 - $361,634.24)
- 45% for earnings exceeding ¥40 million (over $361,634.24).
Please note that these contributions and tax rates may change over time due to government policies and regulations. It's essential for both employers and employees to stay informed about the latest updates in labor and tax laws in Japan.
Employment Contracts
In Japan, there are various employment contracts, such as Seishain and Junshain, offering different benefits and job security levels. Keiyaku Shain, part-time employment (Arubaito), and Haken contracts are also common. These contracts vary in terms of employee's salary, job stability, and benefits. Gyomu-Itaku and Ukeoi contracts are options for freelancers. Choosing the right employment contract depends on your career goals and lifestyle preferences. So, it's essential to understand the specifics of employment agreements before making a decision. Fortunately, partnering with an employer of record like Borderless can help.
Leave Entitlements
In Japan, employees have access to various types of leave entitlements that cater to different situations and needs:
Paid Leave: Known as "nenjiyuu kyuka" or annual paid leave, this type of leave is based on an employee's years of service. It starts with 10 days and increases with years worked. After six consecutive months, employees are entitled to 10 days' paid leave if they attend at least 80% of workdays. These days can be taken together or separately, and unused leave can carry over to the next year, though it usually expires after two years.
Sick Leave: While not legally mandated, many companies provide sick leave to employees. This leave is generally unpaid, but there are exceptions, and it's important to check company policies.
Maternity and Childcare Leave: Expectant mothers can take maternity leave before and after childbirth. Childcare leave is available for employees with children under one year old. Additionally, employees with children under three years old can request exemption from non-scheduled work, shorter working hours, or limited overtime.
Family Care Leave: This type of leave allows employees to take time off to care for family members who are ill or in need of support.
Special Leave: Employees can use special leave for various personal events like marriage, bereavement, and other exceptional situations.
National Holidays: Japanese employees are entitled to days off on the following holidays.
- January 1: New Year (shogatsu)
- Second Monday of January: Coming of Age (seijin no hi)
- February 11: National Foundation Day (kenkoku kinenbi)
- February 23: Emperor's Birthday (tenno no tanjobi)
- Around March 20: Spring Equinox Day (shunbun no hi)
- April 29: Showa Day (Showa no hi)
- May 3: Constitution Day (kenpo kinenbi)
- May 4: Greenery Day (midori no hi)
- May 5: Children's Day (kodomo no hi)
- Third Monday of July: Ocean Day (umi no hi)
- August 11: Mountain Day (yama no hi)
- Third Monday of September: Respect for the Aged Day (keiro no hi)
- Around September 23: Autumn Equinox Day (shubun no hi)
- Second Monday of October: Health and Sports Day (taiiku no hi)
- November 3: Culture Day (bunka no hi)
- November 23: Labor Thanksgiving Day (kinro kansha no hi)
Volunteer Leave: Some companies encourage employees to give back to their communities by providing volunteer leave. This allows employees to engage in volunteer activities without using their regular leave days.
Training and Education Leave: To promote skill development and continuous learning, employees can request time off for training, workshops, or educational programs.
It's important to note that specific rules and entitlements might vary based on the company and industry. While these leave types offer flexibility and support for employees in various situations, employers should ensure compliance with labor laws and maintain transparent leave policies.
Overtime
In Japan, a standard workweek is 40 hours, and extra hours worked are compensated. Agreed-upon overtime pays at least 110% of regular wages, while without an agreement, it's 125% for the first 8 hours and 150% thereafter.
Termination
The labor code in Japan emphasizes that termination should be a last resort, especially for personal reasons, whether they're voluntary or involuntary. The code stresses the importance of having proper grounds and following the correct procedures in these situations.
Notice Period
Employers must provide a 30-day notice or provide compensation for the notice period.
Probation Period
The time frame for probation can range from 3 to 6 months.
Severance Pay
In Japan, severance pay is not a legal requirement outlined in labor law. This means that employers are not obligated to provide a standard severance package to employees upon termination.
Borderless Benefits Packages in Japan
At Borderless, we understand the importance of staying competitive in the global market. Our benefits packages are designed to attract and retain top talent in Japan. We offer comprehensive medical, dental, and vision insurance. Our Employer of Record services also provide life insurance and retirement contributions.
How Do I Maintain Compliance in Japan?
Maintaining compliance in Japan can be tricky. If you do it on your own, you need a solid understanding of the notice period in Japan, local laws, employment regulations, and more. This includes understanding leave entitlements, benefits, and taxes. Plus, getting employee classification right is essential to avoid legal troubles.
For more information about the local laws, employment regulations, compliance, hiring employees in Japan, and more, contact Borderless today. With help from an employer of record, you can take an elevated approach to hiring a global team.
Hire Local Talent With an EOR
When you partner with an EOR, Japan is your oyster. An Employer of Record like Borderless, will help you sidestep potential fines and legal penalties by adhering to local employment laws and more.
We’ll work with you to ensure you align with local regulations in Japan every step of the way. Whether you’re based in Germany, Canada or France - we’ve got you covered. Hiring in Japan just got easier.
