Table of Contents

Japan

Table of Contents

Currency

Japanese Yen (JPY)

Payroll Frequency

Monthly

Employer Taxes

15.045%

About Japan

Japan is an island country in the Pacific with varied geography as well as cultural landmarks such as the many shrines and temples which are a symbol of Japanese religion, Shintoism. Japan is an industrial center with many technological hubs such as the vehicle manufacturing and electronic industries. Japan is also widely known for its technological innovation and advancement, as evidenced by the electric bullet trains that connect the islands. Japanese culture is both respective of ancient tradition as well as continuously evolving. It comprises both traditional Japanese sports like sumo, karate, and martial arts along with modern entertainment and aspects of social culture adapted from the West. Japan has both a functioning if volatile democracy, with a lot of recent turnover in political leadership, as well as a monarchy where the emperor’s power is limited to ceremonial duties only.

Employment Relationship

• Permanent Employment

The Labor Contracts Law states that employment contracts concluded for indefinite duration are considered permanent. Permanent employees are entitled to benefits, including but not limited to paid annual leave, paid sick leave, public holiday allowance, parental leave allowance, and allowance for late-night work.

• Fixed-Term or Specific-Purpose Contracts

In Japan, the duration of fixed-term contracts may not exceed three years, unless the employee is either someone who has the expert knowledge, advanced skills, or experience or someone who is aged 60 years or older. Fixed-term employees cannot be dismissed before the expiry of the term of the contract, except in case of gross misconduct.  Fixed-term employment is converted to permanent if the fixed-term employee has been working for more than five years with the same employer, with two or more renewals of the labor agreement. Employers must disclose renewal restrictions and the application process for converting to indefinite employment in the working conditions of the contract.  The Labor Contracts Law provides that there must be no unreasonable differences in the rights and working conditions of fixed-term employees and permanent employees. 

• Temporary Employment Contratcs

In Japan, temporary employment is allowed in almost all occupations except for port transport services, construction work, security services, lawyers, and healthcare-related work. Temporary contracts can be valid for a maximum of 36 months with the same employer in a particular job and cannot be concluded for less than 30 days. Temporary employees are hired through temporary staffing agencies that determine their wages. Such agencies cannot dispatch more than 80% of their employees to group companies. A dispatch fee is determined while concluding a contract with an agency. Agencies must provide a statement on expected wages and treatment when employed, their business operations  and overview of the worker dispatch system. The law prohibits an unreasonably different treatment (e.g., wages, allowances, benefits, education) of permanent or full-time employees, and temporary employees. 

Probationary Period

The labor law of Japan does not offer provisions regarding the minimum and maximum duration of the probationary period. Most companies include a probationary period of three months. The employee who has been working for at least 14 days under probation is entitled to a 30-day notification period prior to being terminated by the employer.

Working Hours

In Japan, the maximum working hours are 40 hours a week and eight hours a day. These hours may be extended under special circumstances, such as a disaster and other unavoidable events, not exceeding ten hours a day. Minor employees 15-17 years of age are not allowed to work for more than 7 hours a day, or 40 hours a week, including school hours. Japan has introduced new guidelines for remote work. It allows working from home or any other location. Duration of working hours and other terms of work are discussed between employer and employees. Employers must introduce tools to facilitate remote work and track hours of work. 

Holidays / PTO

• Statutory Holidays

New Year’s Day, January 1; Coming of Age Day, Second Monday of January; Foundation Day, February 11; The Emperor's Birthday, February 23; Vernal Equinox Day, Around March 20; Shōwa Day, April 29; Constitution Memorial Day, May 3; Greenery Day, May 4; Children’s Day, May 5; Marine Day, Third Monday of July; Mountain Day, August 11; Respect for the Aged Day, Third Monday of September; Autumnal Equinox Day, Around September 23; Health and Sports Day, Second Monday of October; Culture Day, November 3; Labour Thanksgiving Day, November 23.

• Paid Annual Leave

In Japan, employees are entitled to at least 10 days of paid annual leave (can either be consecutive or distributed throughout the calendar year), if they meet the following conditions: Have been employed for at least 6 months Have reported to work at least 80% of the total working days Persons employed for at least 1.5 years receive one additional day for each year of continuous service, up to a maximum of 20 days. Unused annual paid leave may be carried over and taken the next year only. Payment in lieu of unused leave is subject to the agreement between the employee and the employer.

• Sick Leave

Under the labor law of Japan, sick leave is not mandatory unless agreed upon in the employment contract. Employees must use their paid annual vacation days as sick leave, or else it is not compensated. Employees are paid 60% of their average wage during absence from work due to work-related sickness or injury. 

• Maternity Leave

Maternity leave in Japan is set at 14 weeks, including six weeks of prenatal and eight weeks of postnatal leave. It is paid at the rate of two-thirds of the employee's daily wage if she is enrolled in the Employees' Health Insurance Scheme. Employers are prohibited from dismissing employees due to marriage, pregnancy, or childbirth. Dismissal of pregnant workers or employees in the first year after delivery is void unless the employer can prove just reasons for dismissal.

• Paternity Leave

Paternity leave is provided and can be taken for 4 weeks (within the first 8 weeks) and is counted as parental leave and falls under child care leave taken by either parent until the child turns one year old. When both parents take child care leave, its duration will be extended until the child reaches one year and two months of age. The first 180 days of parental leave are paid at 67% of the average earnings and the remaining period at 50%. Fathers who have taken child care leave within eight weeks of the birth of their child can take second leave within one year. Beginning April 2022, fixed-term contract employees will be entitled to parental leave and employers must inform employees of the parental leave framework and take measures to facilitate the use of child care leave.

Termination of Employment

• Notice Period

Employers are required to provide at least 30 days' notice or pay in lieu of it, irrespective of the duration of the employee's service. The notice period requirement does not apply to employees on probationary period who have worked for less than 14 days. 

• Severance Benefits

The labor law of Japan severance pay is not a mandatory benefit unless it is issued in lieu of a notice of dismissal. Employees, however, are entitled to compensation for unfair dismissal. Typical compensation at 20 years' tenure equals six months of income.