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How to hire and pay employees in Japan
Slasify
Jun 21, 2025
| Key Takeaways |
|---|
| 1. Payroll is monthly, with regional minimum wages, Tokyo at JPY 1,226/hour, ensuring predictable payments for employees. |
| 2. Income tax is progressive, 5–45% for residents, plus 10% local tax; non-residents pay 20.42% flat including surtax. Employer contributions include health, welfare pension, child allowance, unemployment, and work injury insurance. |
| 3. Standard working hours are 8/day or 40/week, with overtime capped at 45 hours/month and 360 hours/year under the "36 agreement." Overtime pay rates range from 125–150% of normal wages. |
| 4. Annual leave starts at 10 days after 6 months, increasing to 20 days over 6+ years of service, plus 16 public holidays, maternity/paternity leave, and childcare leave options. |
| 5. Termination rules require objective grounds or mutual agreement, with minimum 30-day notice for dismissals. Severance is customary but not mandatory, and probation periods typically last 3–6 months. |
Discover the global hiring and employment landscape in Japan – as an advanced economy, Japan offers a large consumer market and market stability.
Personal Income Tax
Japanese tax residents are subject to a personal income tax on their income and a 2.1% restoration income surtax on the amount of their income tax. Personal income tax rates are as follows:
| Taxable Income (JPY) | Tax Rate (%) |
|---|---|
| Up to 1,950,000 | 5 |
| 1,950,001–3,300,000 | 10 |
| 3,300,001–6,950,000 | 20 |
| 6,959,001–9,000,000 | 23 |
| 9,000,001–18,000,000 | 33 |
| 18,000,001–40,000,000 | 40 |
| Over 40,000,000 | 45 |
On the other hand, non-residents are taxed at a flat rate of 20.42% on their gross employment income. This rate already includes the restoration income surtax, i.e. 20% * 102.1% = 20.42%
Local Taxes
Local inhabitants who are residents of Japan as of January 1 of the current year are generally taxed at a flat rate of 10% on their prior year income by their respective local, i.e. prefectural and municipal, governments. Furthermore, a per capita tax is also assessed at the standard annual amount of JPY 5,000, though this may vary based on the prefecture/municipality.
A non-resident taxpayer may be subject to the local inhabitant's tax at a rate of 10% if they are registered as a resident as of 1 January of the following year.
Statutory Contributions
The following statutory contributions generally apply to both locals and foreigners as long as they are paid in Japan by a local employer, including a Japanese branch of a foreign corporation.
In determining one's contributory obligations, it is important to keep in mind the following ceilings on the wages used to calculate the contribution amount:
| Standard Monthly Remuneration | Standard Bonus | |
|---|---|---|
| Health Insurance, Long-Term Care Insurance | JPY 1,390,000 | JPY 5,730,000 per year |
| Welfare Pension Insurance, Child Allowance Premium | JPY 650,000 | JPY 1,500,000 per month |
For exact amounts of contribution, refer to the following contribution tables: Health Insurance | Welfare Pension Insurance | Unemployment Insurance | Workers' Compensation Insurance.
Employer Contributions
| Contribution Rate | Note | |
|---|---|---|
| Health Insurance | 4.72%–5.39% | The rate of contribution varies by region, with the respective rates being accessible here. |
| Long-Term Care Insurance | 0.795% | For individuals who are between 40 and 64 years old. |
| Welfare Pension Insurance | 9.15% | - |
| Child Allowance Premium | 0.36% | - |
| Unemployment Insurance | 0.90% | - |
| Work Injury | 0.25%–8.8% | The rate of contribution varies by the employer's industry type. |
Employee Contributions
| Contribution Rate | Note | |
|---|---|---|
| Health insurance | 4.72%–5.39% | The rate of contribution varies by region, with the respective rates being accessible here. |
| Long-Term Care Insurance | 0.795% | For individuals who are between 40 and 64 years old. |
| Welfare Pension Insurance | 9.15% | - |
| Unemployment Insurance | 0.55% | - |
Payment of Wages
Wages, except for those paid on an ad-hoc basis and bonuses, shall be paid at least once per month on a fixed date. Employees may request advance payments for the hours already worked to cover the expenses of childbirth, an illness or injury, or any other emergencies.
Employees paid on a piece-rate basis shall be guaranteed a fixed amount of wages proportionate to their hours of work.
Minimum Wage
Minimum wages in Japan varies by region, as follows:
| Prefecture | Hourly minimum wage (JPY) |
|---|---|
| Aichi | 1,140 |
| Akita | 1,031 |
| Aomori | 1,029 |
| Chiba | 1,140 |
| Ehime | 1,033 |
| Fukui | 1,053 |
| Fukuoka | 1,057 |
| Fukushima | 1,033 |
| Gifu | 1,065 |
| Gunma | 1,063 |
| Hiroshima | 1,085 |
| Hokkaido | 1,075 |
| Hyogo | 1,116 |
| Ibaraki | 1,074 |
| Ishikawa | 1,054 |
| Iwate | 1,031 |
| Kagawa | 1,036 |
| Kagoshima | 1,026 |
| Kanagawa | 1,225 |
| Kochi | 1,023 |
| Kumamoto | 1,034 |
| Kyoto | 1,122 |
| Mie | 1,087 |
| Miyagi | 1,038 |
| Miyazaki | 1,023 |
| Nagano | 1,061 |
| Nagasaki | 1,031 |
| Nara | 1,051 |
| Niigata | 1,050 |
| Oita | 1,035 |
| Okayama | 1,047 |
| Okinawa | 1,023 |
| Osaka | 1,177 |
| Saga | 1,030 |
| Saitama | 1,141 |
| Shiga | 1,080 |
| Shimane | 1,033 |
| Shizuoka | 1,097 |
| Tochigi | 1,068 |
| Tokushima | 1,046 |
| Tokyo | 1,226 |
| Tottori | 1,030 |
| Toyama | 1,062 |
| Wakayama | 1,045 |
| Yamagata | 1,032 |
| Yamaguchi | 1,043 |
| Yamanashi | 1,052 |
Moreover, some industries may have their own respective minimum wages, with more information on industry-specific minimum wages being available here.
Statutory Bonus
There is no statutory bonus in Japan, though it is common practice to give employees semi-annual bonuses during the summer and winter time.
Termination
If an employee is dismissed without objectively reasonable grounds and their dismissal is not considered to be appropriate in general societal terms, the dismissal shall be deemed invalid.
In order for the termination to be considered reasonable and appropriate, the employer can either produce a valid justification or come to a mutual agreement with the employee.
| Negotiated voluntary resignation | There must be a mutual settlement between the employer and the employee, provided that the negotiation is fair and that the employer does not employ unjust tactics or coercion against the employee. |
|---|---|
| Dismissal for employee misconduct | This can be based on the employer's written rules of employment, which in turn must adhere to the applicable laws. Disciplinary dismissals can be issued for serious misconduct, while employers are expected to be more lenient for less severe offences. |
| Dismissal for business-related reasons | This can be done if the company is experiencing financial distress (e.g. insolvency or bankruptcy). In any case, the employer must attempt alternative cost reduction measures before resorting to laying off their employees. Furthermore, the selection of employees to be laid off must be based on objective and reasonable grounds, and the process of laying off employees must be done in consultation with the relevant labor unions in good faith. |
It is important to note that some employees simply cannot be dismissed. These include, among others, those on maternity leave and those who are on leave for work-related illness or injury, especially if the employer still have outstanding obligations to pay medical compensation.
Notice Period
Employee resignation is subject to a notice period of 2 weeks, which shall be waived if their resignation is caused by the employer's breach of contract terms.
On the other hand, the dismissal of an employee is subject to a notice period of at least 30 days. Employers choosing to not observe the required notice shall pay their employees in lieu, calculated on the basis of their average wage. That being said, notice period is not required if business continuance has become impossible due to a compelling reason or if the employee is dismissed due to reasons attributable to the employee themselves.
Severance Pay
Severance pay is not obligatory in Japan, though it is a common practice for employers to have a severance pay system set up.
Probationary Period
There are no regulations surrounding probationary period in Japan, though it is common to have 3-6 months as probation.
In any case, employees on probation can be dismissed without notice on their first 14 days of employment. This effectively means that the rules surrounding notice period must be observed if they have been employed consecutively for a period of more than 14 days.
Work Time Rules
Standard Working Hours
Standard working hours are subject to a maximum of 8 hours per day or 40 hours per week.
The limits to the employee's standard working hours may be exceeded if there exist a written agreement with the relevant labor union or employee representative, provided that the average working hours over the course of a month does not exceed 40 hours per week.
The different working hours arrangements that can be agreed upon is covered extensively under Articles 32-3–32-5 of the Labor Standards Act. In any case, an agreement to extend working hours shall be reported to the relevant government agency.
Break Period
Employees are entitled to at least 45 minutes of break time if their working hours exceed 6 hours, and at least an hour of break time if their working hours exceed 8 hours. These break periods shall not be counted as part of their working hours for the day.
Break time shall be granted to all employees at the same time unless a written agreement has been made with the relevant labor union or employee representative stating otherwise.
In addition, female employees raising an infant born less than a year prior are entitled to a 30-minute break to care for their child twice per day.
Overtime
Employees may be required to work overtime if there exist a written agreement, also known as the "36 agreement," with the relevant labor union or employee representative. These agreements must be filed with the relevant government agency.
Generally, overtime hours are subject to a maximum of 45 hours per month and 360 hours per year, and can only be further extended if there are exceptional circumstances justifying it. In any case, the combined hours of work performed during rest days and overtime shall not exceed 100 hours per month.
Overtime work and work performed on rest days shall be paid at the following rate:
| Overtime Classification | Overtime Rate |
|---|---|
| Work in excess of statutory working hours | 125% of normal hourly wage |
| Work in excess of statutory working hours exceeding 60 hours in a month | 150% of normal hourly wage |
| Work on statutory days off | 135% of normal hourly wage |
| Work at night (between 10:00 p.m. and 5:00 a.m.) | 125% of normal hourly wage |
Weekly Rest Days
Employees are entitled to at least a day off per week or, if this is not possible, 4 days off in any 4-week period.
Employees may be required to on their days off if there exist a written agreement, also known as the "36 agreement," with the relevant labor union or employee representative. These agreements must be filed with the relevant government agency.
Holiday and Leave Entitlements
Public Holidays
While employers are not obligated to let employees off on public holidays, they are usually observed. There are 16 days of public holidays in Japan for 2025.
| Holiday | Date |
|---|---|
| New Year's Day | January 1 |
| Coming of Age Day | January 13 |
| Foundation Day | February 11 |
| Emperor's Birthday | February 23 (Sunday) |
| Vernal Equinox Day | March 20 |
| Showa Day | April 29 |
| Constitution Day | May 3 |
| Greenery Day | May 4 (Sunday) |
| Children's Day | May 5 |
| Marine Day | July 21 |
| Mountain Day | August 11 |
| Respect for the Aged Day | September 15 |
| Autumnal Equinox Day | September 23 |
| Sports Day | October 13 |
| Culture Day | November 3 |
| Labor Appreciation Day | November 23 (Sunday) |
Note: When a public holiday falls on a Sunday, the next working day shall be considered a holiday.
Annual Leave
Employees are entitled to 10 days of paid annual leave, provided that they have at least 6 continuous months of service and have been present for 80% of their working hours.
Furthermore, this leave entitlement shall increase every year following the initial 6-month period qualifying them for their leave, as follows:
| Years of service following the 6-month mark | Annual Leave |
|---|---|
| 1 | 11 days |
| 2 | 12 days |
| 3 | 14 days |
| 4 | 16 days |
| 5 | 18 days |
| 6 and over | 20 days |
Employees entitled to 10 or more days of annual leave must take at least 5 days off the year following their accrual, While any remaining leave can be carried forward to the following year, they shall expire if they are still not taken by the end of that year.
The employees themselves can decide on when to take their leave, provided that it does not interfere with the normal operation of the business. Employers can only determine the dates of annual leave in excess of the initial 5 days of leave per year, provided that there is a written agreement to this effect with the relevant labor union or employee representative.
Sick Leave
There is no statutory sick leave in Japan and employees usually use their annual leave days to cover for their absence due to non-work related illness or injury.
If an employee is not eligible for any annual leave and receive no pay for their absence (or receive less than their entitled sickness allowance), they may be entitled to receive the injury and sickness allowance from their health insurance provider.
Maternity Leave
Female employees are entitled to the following maternity leave period, with any delay in birth from the expected date of delivery being added to the pre-natal period:
| Single births | Multiple births | |
|---|---|---|
| Pre-natal | 6 weeks | 14 weeks |
| Post-natal | 8 weeks | 8 weeks |
Employers are not required to continue wage payments to employees on maternity leave, but employees may still be entitled to maternity leave benefits from their health insurance provider.
Paternity Leave
Working fathers are entitled to 4 weeks of paternity leave, taken in one or two installments within 8 weeks of childbirth. This leave is an addition to the childcare leave/parental leave claimable by both parents.
Employers are not required to continue wage payments to employees on paternity leave, but employees may still be entitled to some allowance from their insurance provider.
Parental Leave
Eligible parents may be entitled to Childcare Leave and Parental Childcare Leave Plus, which shall be unpaid by the employer, but with childcare allowances provided by the relevant insurance provider.
To be eligible for these leaves, the employee must have at least a continuous year of service, work more than 2 days per week and must not cease their employment within a year of applying for childcare leave.
Childcare Leave
This leave can be taken by eligible working parents at any time after the expiry of any post-natal leave period until the child turns a year old. If they are unable to enroll their child into daycare, this leave may be extended until the child turns 2 years old.
Employers shall be notified of their employees' intentions to take this leave at least a month in advance.
Parental Childcare Leave Plus
This leave serves as an extension of the Childcare Leave, which allows both parents to take up to a year off before their children reach the age of 1 year and 2 months old. This can either be taken by both parents together or in turns.
Other Leave
| Leave | Paid/Unpaid | Duration | Notes |
|---|---|---|---|
| Employer-Induced Leave | Paid | - | Any reasons attributable to the employer that prevents the employee from working. Employees shall be paid at 60% of their average wage for the period not worked. |
| Court Leave | Unpaid | - | If the employee is selected as a lay judge and is required to be absent from work. |
| Nursing Care Leave (Children)** | Unpaid | 5–10 days per year |
For employees who work for at least 2 days per week to take care of children who have not completed their 3rd grade of elementary school. The leave entitlement for one such child is 5 days and can be extended to 10 days for multiple eligible children. This leave can be taken in half-day units (for employees working 4 hours and more per day) or in hourly units (for those working less than 4 hours per day). |
| Nursing Care Leave (Family Members)** | Unpaid | 5–10 days per year | For employees who have at least 6 months of service and work at least 2 days per week to take care of eligible family members. The leave entitlement for one such family member is 5 days, and can be extended to 10 days for multiple family members. |
| Menstrual Leave | Unpaid | 1 day per menstrual cycle | For female employees who find it difficult to work. This leave can be taken in half-day units or in hourly units. |
**This leave can be taken in half-day units (for employees working 4 hours and more per day) or in hourly units (for employees working less than 4 hours per day).
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