Country Overview
Japan is a popular destination for relocation, offering a unique mix of deep cultural heritage and cutting-edge modernity. With a strong economy, advanced infrastructure, and safe, clean cities, Japan provides expatriates with a high quality of life. From the bustling tech hubs of Tokyo and Osaka to historic cultural centres like Kyoto, the country blends tradition with innovation in everyday life.
Japan has a population of approximately 123.1 million and is home to around 4.12 million foreign residents. The country offers a highly skilled workforce with strong expertise in Technology, Engineering, Financial Services, and Manufacturing. Japan operates a Status of Residence–based immigration system, meaning all non-Japanese nationals require an appropriate work-related visa to live and work in the country legally.
2026 Key Legislative Updates
National Pension contribution rises to ¥17,920/month from April 2026. New Child Rearing Support Contribution launches in April 2026 (0.23% total, split 50/50). Business Manager visa requirements tightened from October 2025: minimum ¥30 million capital investment and JLPT N2 Japanese proficiency required. Traditional health insurance cards officially phased out on 1 December 2025 — residents now use a My Number Card or Qualification Verification Certificate.
Contracts
In Japan, employment contracts define the terms of engagement — type, duration, working hours, pay, and benefits. Recent “Work Style Reform” laws emphasise equal treatment between regular and non-regular workers.
Contract Types
| Contract Type | Duration | Key Features |
|---|---|---|
| Permanent (Seishain) | Indefinite | Open-ended; the standard for full-time company employees; typically includes bonuses and pay raises |
| Fixed-Term | Specified end date | Set duration (e.g. one year); renewable; equal-treatment rules apply |
| Dispatch (Haken) | Project-based | Worker employed by staffing agency, deployed to client; max 3 years in same role at one client |
| Part-Time | Indefinite or fixed | Hourly workers; pro-rata entitlements; common in retail and food service |
| Self-Employed (Freelance) | Contract-based | Service agreements rather than employment; labour law protections do not apply |
Dispatch Workers — The 3-Year Rule
Under the Worker Dispatch Law, a dispatch employee generally cannot stay in the same role at one client for more than 3 years. After that, the client must either hire them directly or rotate them. Many independent contractors in Japan operate via umbrella companies that act as the legal employer.
What Your Contract Must Include
Mandatory Terms
- Job title and description
- Contract duration (if fixed-term)
- Salary, pay rate and pay frequency
- Working hours and place of work
- Annual leave entitlement
- Termination and notice conditions
- Renewal conditions (for fixed-term)
- Social insurance enrolment
Common Additional Clauses
- Confidentiality / NDA provisions
- Intellectual property assignment
- Non-compete and non-solicit covenants
- Bonus structure (typical 2–4 months/year)
- Commuting allowance reimbursement
- Retirement allowance (taishokukin) terms
- Probation period (shiyoukikan) — typically 3–6 months
Access Financial drafts compliant Japanese employment contracts and manages onboarding for EOR and AOR engagements.
Working Hours & Overtime
The Labour Standards Act sets the statutory maximum working hours and overtime premiums. Overtime caps introduced in 2019 are designed to address karoshi (death from overwork) concerns.
| Parameter | Rule | Notes |
|---|---|---|
| Standard working hours | 8 hrs/day, 40 hrs/week | Typically Monday to Friday |
| Overtime premium (up to 60 hrs/month) | 125% | Of normal hourly rate |
| Overtime premium (over 60 hrs/month) | 150% | For the excess hours |
| Statutory rest-day work | 135% | E.g. Sunday if guaranteed day off |
| Late-night work (10pm–5am) | +25% extra | Stacks with overtime (e.g. up to 150%) |
| Monthly overtime cap | 45 hrs (normal) | Max 100 hrs in any single month; 80 hrs avg over 2–6 months |
| Annual overtime cap | 360 hrs | 720 hrs with exceptional circumstances |
Minimum Wage Update 2025–2026
Japan’s national weighted-average minimum wage rose to ¥1,121/hour in October 2025 — the largest annual increase on record. All 47 prefectures now exceed ¥1,000/hour for the first time. Tokyo leads at ¥1,226/hour. The government targets ¥1,500/hour by the late 2020s.
Probation Period
Probation periods (shiyoukikan) are not mandated by law but are common in Japanese employment contracts.
| Parameter | Standard practice | Legal notes |
|---|---|---|
| Typical duration | 3–6 months | No statutory maximum; contractual |
| Notice during probation | 14 days (after first 14 days of employment) | Reduced notice may apply in the first 14 days |
| Extension | Allowed | Must be agreed in writing with reasonable cause |
| Statutory rights during probation | Full from day one | Including social insurance enrolment and minimum wage |
Immigration & Work Visas
Japan operates a Status of Residence–based immigration system. All non-Japanese nationals (other than permanent residents) require an appropriate work-related visa. Short-stay tourism or business entries under the 90-day visa waiver do not permit employment.
Residence Card & My Number — Mandatory On Arrival
Foreigners staying over 90 days receive a Residence Card at the port of entry. Within 14 days of finding accommodation, you must register your address at the city or ward office. This triggers enrolment in local services and issuance of your My Number (12-digit tax/social security ID).
Main Work Visa Categories
| Visa Category | Typical Roles | Sponsor? | Duration |
|---|---|---|---|
| Engineer/Specialist in Humanities/International Services | IT, finance, marketing, consulting, design, languages | Yes — Japanese employer | 1, 3 or 5 years |
| Highly Skilled Professional (HSP) | Advanced talent (points-based: 70 or 80+ points) | Yes | 5 years; fast-track to PR |
| Intra-Company Transferee | Internal transfer from overseas branch | UK/foreign parent entity | Up to 5 years |
| Business Manager | Entrepreneurs and company owners | Self-sponsoring | 1, 3 or 5 years |
| Specified Skilled Worker (SSW) | Caregiving, construction, food service, agriculture | Yes | Up to 5 years (varies by tier) |
| Dependent / Spouse | Family members | Yes | Matches sponsor |
Business Manager Visa — Tightened Requirements (October 2025)
Applicants must now invest at least ¥30 million in capital (up from ¥5 million), hire at least one full-time employee resident in Japan, and demonstrate Japanese language proficiency at JLPT N2 (B2) level.
Application Process & Timeline
| Step | Action | Timeline |
|---|---|---|
| 1 | Secure a Japan-based sponsor (employer or umbrella company) | Varies |
| 2 | Certificate of Eligibility (COE) application by sponsor | 1–3 months |
| 3 | Visa application at Japanese embassy/consulate | ~5 business days |
| 4 | Arrival in Japan — Residence Card issued at major airport | On entry |
| 5 | Register address at local city/ward office | Within 14 days |
AF’s immigration team handles Certificates of Eligibility, sponsorship, and ongoing visa renewals for professionals and contractors relocating to Japan.
Leave Entitlements
Japanese leave entitlements scale with length of service. Statutory paid sick leave does not exist separately from annual leave, though many companies offer it as a benefit.
Annual Leave
| Length of Service | Minimum Paid Leave |
|---|---|
| After 6 months | 10 days |
| After 1.5 years | 11 days |
| After 2.5 years | 12 days |
| After 3.5 years | 14 days |
| After 4.5 years | 16 days |
| After 5.5 years | 18 days |
| After 6.5 years and above | 20 days |
Parental Leave
| Leave type | Duration | Pay |
|---|---|---|
| Maternity (Prenatal) | 6 weeks before birth | ~2/3 of wage via health insurance |
| Maternity (Postnatal) | 8 weeks (mandatory) | ~2/3 of wage via health insurance |
| Lump-sum Birth Allowance | One-time | ¥500,000 per child |
| Childcare Leave | Up to 1 year (extendable to 2 yrs) | 67% for first 6 months; 50% thereafter |
| Paternity Leave at Birth | Up to 4 weeks (within 8 weeks of birth) | 67% (or 80% if both parents take ≥14 days, from April 2025) |
Sick & Personal Leave
| Parameter | Rule |
|---|---|
| Statutory paid sick leave | None — employees typically use annual leave |
| Injury & Sickness Allowance (long-term sick) | ~2/3 of wage via health insurance, up to 1.5 years |
| Bereavement leave | Discretionary — typically a few days, company policy |
| Marriage leave | Discretionary — typically 3–5 days |
Public Holidays 2026
Japan has 16 national public holidays, with 17 in 2026 due to a bonus “Silver Week” bridge holiday on 22 September. If a holiday falls on a Sunday, the following Monday is observed.
| Date | Day | Holiday |
|---|---|---|
| 1 January | Thursday | New Year’s Day |
| 12 January | Monday | Coming of Age Day |
| 11 February | Wednesday | National Foundation Day |
| 23 February | Monday | Emperor’s Birthday |
| 20 March | Friday | Vernal Equinox Day |
| 29 April | Wednesday | Shōwa Day |
| 3 May | Sunday | Constitution Memorial Day |
| 4 May | Monday | Greenery Day |
| 5 May | Tuesday | Children’s Day |
| 6 May | Wednesday | Substitute Holiday (for 3 May) |
| 20 July | Monday | Marine Day |
| 11 August | Tuesday | Mountain Day |
| 21 September | Monday | Respect for the Aged Day |
| 22 September | Tuesday | Silver Week Bridge Holiday |
| 23 September | Wednesday | Autumnal Equinox Day |
| 12 October | Monday | Sports Day |
| 3 November | Tuesday | Culture Day |
| 23 November | Monday | Labour Thanksgiving Day |
Notice Periods
Japanese law sets minimum notice for resignation and dismissal. Termination by the employer is heavily protected by labour law and case precedent.
| Scenario | Statutory Minimum | Common Practice |
|---|---|---|
| Resignation (employee) | 2 weeks | Often 1 month under contract |
| Dismissal (employer) | 30 days’ notice OR 30 days’ pay in lieu | Requires objectively reasonable cause |
| Dismissal for serious misconduct | No notice required | Subject to Labour Standards Office approval |
Termination & Severance
Japan does not mandate severance pay by law. However, many traditional companies operate a retirement allowance (taishokukin) system, and unemployment insurance provides post-employment income support.
| Item | Detail |
|---|---|
| Statutory severance | None — discretionary |
| Retirement allowance (taishokukin) | Common in large firms; based on tenure |
| Unemployment benefit eligibility | 6+ months of insurance contributions |
| Wait period (involuntary loss/end of contract) | 7 days |
| Wait period (voluntary resignation) | 3 months |
| Benefit rate | ~50–80% of previous salary |
| Benefit duration | 3–6 months (longer for older or long-tenured workers) |
Strong Dismissal Protections
Japanese courts strongly protect workers from unfair dismissal. Employers must demonstrate objectively reasonable cause and that termination aligns with social norms — performance issues alone, without documented warnings and improvement plans, are rarely sufficient.
Income Tax
Japan’s income tax has two layers: progressive National Income Tax and a flat 10% Local Inhabitant Tax (based on the previous year’s income). The tax year matches the calendar year.
National Income Tax Brackets 2025–2026
| Taxable Income (JPY) | Tax Rate | Deduction |
|---|---|---|
| Up to ¥1,950,000 | 5% | — |
| ¥1,950,001 – ¥3,300,000 | 10% | ¥97,500 |
| ¥3,300,001 – ¥6,950,000 | 20% | ¥427,500 |
| ¥6,950,001 – ¥9,000,000 | 23% | ¥636,000 |
| ¥9,000,001 – ¥18,000,000 | 33% | ¥1,536,000 |
| ¥18,000,001 – ¥40,000,000 | 40% | ¥2,796,000 |
| Over ¥40,000,000 | 45% | ¥4,796,000 |
FY2025/2026 Tax Reform — Raised Deductions
The basic deduction has been raised from ¥480,000 to ¥620,000 (with a special top-up of ¥420,000 for employment income up to ¥6.65 million). The minimum guaranteed employment income deduction has been raised from ¥550,000 to ¥690,000. As a result, the income-tax-free threshold for salaried employees is now around ¥1.78 million per year.
Local Inhabitant Tax & Consumption Tax
| Tax | Rate | Notes |
|---|---|---|
| Local Inhabitant Tax | ~10% flat | Based on previous year’s income; new arrivals usually pay none in year one |
| Consumption Tax (Standard) | 10% | Most goods and services |
| Consumption Tax (Reduced) | 8% | Food and non-alcoholic beverages (groceries/take-out); newspapers |
| Consumption Tax registration threshold | ¥10 million | Annual taxable sales (small business exemption applies first 2 years) |
Let Access Financial handle your Japanese payroll, withholding, and Shakai Hoken filings — seamlessly and compliantly.
Benefits
Japan’s universal healthcare and statutory benefits are comprehensive. Competitive employers add supplemental benefits to attract professional talent.
Mandatory Statutory Benefits
| Benefit | Provision | Notes |
|---|---|---|
| Universal Health Insurance | 70% coverage of medical costs | Employees’ Health Insurance or National Health Insurance |
| High-Cost Medical Expense Benefit | Reimbursement above ~¥90,000/month | Caps out-of-pocket for average earners |
| Maternity Allowance | ~2/3 of wage | For 6 weeks prenatal + 8 weeks postnatal |
| Lump-sum Birth Allowance | ¥500,000 per child | One-off, from health insurance |
| Childcare Leave Benefit | 67% (first 6 months); 50% thereafter | Via employment insurance |
| Annual Paid Leave | 10–20 days/year | Scales with length of service |
| Workers’ Compensation | Full coverage of work-related injury | Employer-funded |
Market-Standard Supplemental Benefits
| Benefit | Prevalence | Typical provision |
|---|---|---|
| Commuting Allowance | Very common | Full reimbursement of train pass (up to tax-free cap) |
| Bonus (semi-annual) | Standard at large firms | 2–4 months’ salary per year, split summer/winter |
| Retirement Allowance (taishokukin) | Common in traditional firms | Based on years of service |
| Housing Allowance | Common | Especially for relocated/expat staff |
| Private Health/Life Insurance | Sometimes provided | Top-up to public scheme |
| Remote / Flexible Working | Increasing | Hybrid 2–3 days common at large firms |
Pension System
Japan’s public pension has two tiers: National Pension (basic, flat-rate) and Employees’ Pension (earnings-related). Foreign workers leaving Japan after a short stay can claim a partial lump-sum withdrawal.
| Parameter | FY2025 | FY2026 (from April 2026) |
|---|---|---|
| National Pension monthly contribution | ¥17,510 | ¥17,920 |
| Employees’ Pension total rate | 18.3% | 18.3% |
| Employee share | 9.15% | 9.15% |
| Qualifying period for pension | 10 years | 10 years |
| State Pension age | 65 | 65 |
| Full basic pension payout (approx.) | ~¥68,000/month | ~¥68,000/month |
| Lump-sum Withdrawal (for departing foreigners) | Up to 5 years’ contributions | Up to 5 years’ contributions |
Insurances
Public health insurance enrolment is mandatory for all residents. Private insurance is optional and typically used as a top-up rather than a replacement.
| Insurance | Coverage / Status | Notes |
|---|---|---|
| Employees’ Health Insurance (Kenkō Hoken) | Mandatory for company employees | Covers 70% of medical costs; dependents included |
| National Health Insurance (Kokumin Kenkō Hoken) | Mandatory for self-employed/freelancers | Income-based premium via city office |
| Long-term Care Insurance (Kaigo Hoken) | Mandatory from age 40 | ~1.8% of salary, split with employer |
| Workers’ Compensation | Mandatory; employer-paid | Covers occupational injury/illness |
| Motor Insurance (CALI) | Mandatory for all vehicles | Plus optional voluntary policies |
Professional Indemnity Insurance — Contractors
Although not legally required for most professions in Japan, Professional Indemnity Insurance (PII) is often contractually required by end-clients — especially in IT, engineering, and financial consulting. AF can advise on appropriate cover for your sector.
My Number Card Health Insurance Integration
The traditional health insurance card was officially phased out on 1 December 2025. From 2 December 2025, residents must present either a My Number Card registered for health insurance use or a Qualification Verification Certificate to access medical services.
AF Solutions
Access Financial supports end-clients, recruitment agencies, and contractors operating in Japan with a full suite of employment, payroll, immigration, and compliance services.
For End-Clients
Managing a contingent workforce can be complex. Our solutions streamline workforce management, making it simple, compliant, and cost-effective.
For Recruiters
We offer a complete suite of services, allowing you to simply, compliantly, and efficiently place your candidates internationally, with minimum fuss.
For Contractors
Focus on what you do best and let us take care of your payroll, tax compliance, social security, and immigration needs.
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FAQ
Find answers to our most frequently asked questions below.
Can I employ international workers in Japan without setting up a local entity?
Yes. Working with an Employer of Record (EOR) such as Access Financial allows you to engage employees and contractors in Japan without establishing your own legal entity. The EOR acts as the formal employer of record, handles Shakai Hoken enrolment, payroll, tax withholding, and immigration sponsorship, while your team manages day-to-day work and deliverables.
How does global workforce management work in Japan?
Global workforce management in Japan depends on coordinating immigration sponsorship, payroll, contracts, Shakai Hoken enrolment, and local employment rules through one structured system. Companies use internal teams, external providers such as EORs and umbrella companies, or both to standardise operations while staying compliant with Japan’s Labour Standards Act, Worker Dispatch Law, and Immigration Control Act.
What does managing employees remotely from outside Japan involve?
Managing employees remotely in Japan involves coordinating compliant onboarding, payroll, contracts, benefits, and performance processes from abroad. Employers must account for Japanese labour law, tax obligations, the My Number system, and time-zone differences. A structured remote workforce model with a local EOR partner helps employers support staff consistently while reducing administrative gaps and ensuring employees remain properly engaged, documented, and paid.
Why is workforce management important for multinational companies operating in Japan?
Workforce management in Japan is particularly important because of the complexity around immigration sponsorship, prefecture-specific health insurance rates, the layered social insurance system, and strict dismissal protections. A clear workforce structure helps businesses standardise operations while adapting to Japan-specific requirements such as the 36 Agreement overtime caps, equal treatment rules, and the Worker Dispatch Law’s 3-year limit.
What is a global workforce strategy for Japan?
A global workforce strategy for Japan is a business plan for how a company hires, manages, pays, and supports talent in the Japanese market. It typically covers employment models (direct vs EOR vs dispatch), visa sponsorship pathways, payroll arrangements, compliance priorities, and expansion goals. A strong strategy helps international companies decide whether to set up a local entity, use an umbrella employer, or engage contractors — and how to scale efficiently.
What workforce solutions do international companies need in Japan?
Workforce solutions for international companies in Japan typically include Employer of Record support, contractor management, payroll services, Shakai Hoken administration, visa sponsorship (including Certificates of Eligibility), and ongoing compliance. These services help businesses enter the Japanese market and manage talent without setting up a local entity. The right solution depends on whether the company is hiring employees, engaging contractors, or expanding operations.
Social Insurance
Japan’s Shakai Hoken system funds health, pension, unemployment, and workers’ compensation. Most contributions are split roughly 50/50 between employer and employee.
April 2026 Change — Child Rearing Support Contribution
A new Child Rearing Support Contribution launches from April 2026 at 0.23% total (split 50/50 between employer and employee). The rate is expected to rise gradually, reaching approximately 0.4% by 2028. National Pension contribution also rises to ¥17,920/month from April 2026.
Employer Contributions
Employee Contributions