Demand Quality Supply Growth

Japan offers a stable economy, world-class infrastructure, and a highly educated workforce making it an attractive market for global business expansion. However, its employment landscape is shaped by strict labour laws, strong worker protections, and a culture that values long-term employment and trust-based relationships. From social insurance enrolment to labour contracts and termination procedures, navigating Japan’s regulatory environment requires precision.

Work Rules & Compliance

Employers with 10 or more employees per workplace are legally required to prepare and submit Work Rules to the local Labour Standards Inspection Office. These rules must cover key aspects such as working hours, wages, termination, safety, training, and disciplinary procedures.

Employers must consult with a labor union or an elected employee representative when drafting or revising these rules. Once established, the rules must be made clearly accessible to all employees, either by posting them in a visible location or by distributing them through internal systems or physical copies.

If any employment contract contains terms that conflict with the Work Rules, the conflicting terms are considered invalid.

Work Week & Overtime

The statutory working hours in Japan are 8 hours per day and 40 hours per week, typically Monday through Friday.

If an employer requires employees to work beyond these limits, they must conclude a formal Article 36 Agreement with a labor union or employee representative and submit it to the Labour Standards Office.

Statutory Holidays

Japan recognizes 16 national holidays annually. When a holiday falls on a Sunday, it is usually observed on the next working day. While not legally required, many employers provide these holidays as paid days off.

Annual Paid Leave

Employees are eligible for paid annual leave after six months of continuous service, provided they have worked at least 80% of scheduled working days during that period.

Employees receive:

• 10 days of leave initially
• One additional day for each subsequent year of service
• Up to a maximum of 20 days after 6.5 years of service

Unused paid leave expires after two years.

Sick Leave

There is no legal obligation for employers to provide separate sick leave. In practice, employees use annual paid leave or may claim benefits through the Social Insurance system if applicable.

Fixed-Term & Indefinite Contracts

Fixed-term contracts generally may not exceed three years, except in cases involving highly specialized roles. If an employee works on a fixed-term contract for over five continuous years, they may request conversion to an indefinite (permanent) employment contract.

To terminate employment, employers must:

• Provide at least 30 days’ notice, or
• Pay 30 days’ wages in lieu of notice

Dismissals must be based on reasonable and socially acceptable grounds. Unfair termination may result in reinstatement or financial compensation.

Payroll & Minimum Wages

Salaries are typically paid on the 25th of each month, although exact dates may vary by employer.

Minimum wages are determined by region and industry. For example, the Tokyo minimum wage is approximately JPY 1,163 per hour as of early 2025. These rates are reviewed and updated annually.

Overtime & Additional Compensation

Employers must compensate employees for work exceeding statutory limits with the following premium pay rates:

• Overtime (beyond 8 hrs/day): +25%
• Late Night (10:00 PM – 5:00 AM): +25%
• Holidays/Weekends: +35%
• Overtime during Night or Holidays: Up to +60% or more depending on the situation

These premiums must be supported by a valid Article 36 Agreement.

Mandatory Social Insurance & Health Checks

All employers must enroll their employees in the following social insurance programs:

• Workers’ Accident Compensation Insurance
• Employment Insurance
• Health and Long-Term Care Insurance
• Employees’ Pension Insurance

Employers contribute between 15.4% and 16.2% of total compensation, depending on employee age and income thresholds.

In addition, employers must provide annual health checkups and mental health stress checks (mandatory for workplaces with 50 or more employees).

Employment Contracts

All employees must receive a written employment contract outlining:

– Wages
– Working hours
– Leave entitlements
– Termination conditions

Contracts must align with Work Rules and cannot contain terms that contradict statutory protections. Fixed-term employees exceeding five years of service may request conversion to permanent status.

Eligible female employees are entitled to maternity leave:

• 6 weeks before childbirth, and
• 8 weeks after childbirth

Employees may return to work after 6 weeks postpartum only if they consent and a doctor confirms it is safe.

Maternity leave payments are typically made through the Social Insurance system, not directly by the employer.

Childcare Leave

Employees may take childcare leave until the day before their child turns one year old. Under certain conditions, this may be extended up to 1.5 or 2 years.

Benefits include:

• Approximately two-thirds of salary paid via social insurance
• Lump-sum childbirth benefit of JPY 420,000
• Exemption from social insurance premiums during the leave period

Recent reforms removed the one-year minimum service requirement for fixed-term employees to qualify for this leave.

Paternity Leave (“Papa Kyūka”)

As of October 1, 2022, male employees may take up to four weeks of paid paternity leave within the first eight weeks after childbirth.

This is in addition to standard childcare leave.

• The leave can be taken in two separate periods
• A minimum of two weeks’ notice is required
• Employees may work up to half of their normal hours during this period if agreed upon in a labor-management agreement

Paternity leave benefits are paid through employment insurance, covering approximately 67% of the employee’s salary. With social insurance exemptions, net take-home pay may reach up to 80%.

Employers are legally obligated to inform employees proactively about parental leave options and must encourage and facilitate their use through internal policies and training.

Taxation Overview

• Residents (Japanese nationals and long-term foreign residents) are taxed on their worldwide income.
• Non-residents are subject to a flat 20.42% tax on Japan-sourced income (includes a 0.42% special reconstruction income tax).
• Non-permanent residents (foreign nationals living in Japan for less than five of the past ten years) are taxed on:
  1. Japan-sourced income, and
  2. Foreign income only if remitted to Japan.

Japan’s income tax is progressive, ranging from 5% to 45%. As of 2025, these brackets remain largely unchanged, though threshold adjustments are under review.

Individuals pay resident tax (comprising municipal and prefectural components), typically around 10% of the previous year’s income, plus a per capita levy (about JPY 5,000, depending on location).

Immigration and Employment Requirements

Foreign workers must secure a valid work visa before starting employment in Japan. This process generally includes:

• Obtaining a Certificate of Eligibility (CoE) from the Immigration Services Agency, which typically takes 4 to 8 weeks.
• Once granted a visa and entering Japan, long-term visa holders receive a Residence Card at the
• Within 14 days of arrival (or any address change), they must register at the local municipal office.

Employers are required to notify the Labour Department when hiring or terminating foreign employees, in accordance with Japan’s employment and immigration compliance regulations.

Please find our Japan office address below:

201 Kanda Ekimae Plaza,
3-7-33 Kanda Kajicho, Chiyoda-Ku,
Tokyo 101-0045, Japan

Email: kl@linkcompliance.com