Country Information

One of the most densely populated countries in the world, Japan is an eastern Asian island in the Pacific Ocean. Japanese is the official language. Its economy is the third largest in the world, rivaled only by the United States and China. Japan relies heavily on exports to drive its economy. It exports transportation equipment, motor vehicles and a variety of metals. Japan’s Gross Domestic Product (GDP) is number two in the Asia Pacific region.

Employment Contracts

Companies who have more than 10 employees must write a contract which includes pay details, hours of work, breaks, rest days and leaves, shift timings and other terms and conditions related to employment. The employment contract must be written in English. The employment contract is necessary for part time employment and must include eligibility for pay increases and bonuses and eligibility for retirement. Most employment contracts in Japan are of an unspecified period, with a probationary period of three to six months. Employers are not required to conduct pre-hire background checks but may choose to do so.

Working Hours

The standard work period in Japan is a 40-hour week over five days. Employers are expected to pay their employees at an overtime rate unless that employee is working in a management position. Overtime is to be capped at five hours a day, 45 hours per month and 360 hours per year. Overtime is paid at between 125% and 175% of the employee’s basic wage.

Sick Leave

Employers are not required to provide their employees sick leave. Many employment contracts in Japan do provide for sick leave, and employees can use their paid time off days to cover days they miss due to illness.

Maternity/Paternity Leave

Female employees receive 14 weeks of maternity leave. Employers are not required to pay employees during this time but may choose to do so. Employees may also be eligible for maternity benefits under Japan’s social security program. Any amounts paid by the employer will generally be reduced by amounts received from social security.

Employees receive up to one and a half years of partially paid childcare leave. Mothers may start their childcare leave from the day after maternity leave ends. For fathers, their childcare leave may begin anywhere between a child’s birth and the day the child turns one years old. Leave may be extended until the child is one and a half if childcare is not available. Employees are exempt from income tax, labor insurance and social insurance payments during childcare leave. Income tax and labor insurance will also be postponed while an employee is on maternity leave, unless the employee provides all or part of the payments during maternity leave. Employees are allowed five days a year for leave in connection with a sick or injured child.

Compensation

Employers are not required to provide bonuses to their employees unless bonuses are written into an employment contract. Common practice is for employers to pay bonuses as part of employees’ remuneration packages, with seasonal bonuses paid to salaried workers twice a year in June or July and in December.

Vacation Leave

In addition to public holidays, employees receive 10 days of paid annual leave after six months of employment, provided they have worked at least 80% of total workdays. This increases by one day per year for the following one and a half years and by two days per year thereafter up to a maximum of 20 days per year. Unused annual leave expires after two years.

Public Holidays
  • New Year’s Day
  • Coming of Age Day
  • Foundation Day
  • The Emperor’s Birthday
  • Vernal Equinox Day
  • Showa Day
  • Constitution Memorial Day
  • Greenery Day
  • Children’s Day
  • Marine Day
  • Mountain Day
  • Respect for the Aged Day
  • Autumnal Equinox Day
  • Health and Sports Day
  • Culture Day
  • Labor Thanksgiving Day
Health Insurance Benefits

The state provides universal healthcare and employees may be required to make out of pocket payments for some medical treatments and procedures. Japan’s statutory health insurance contribution program covers 98.3% of the population with the Public Social Assistance Program covering the remaining 1.7%. Citizens and resident non-citizens are required to enroll. Employment based plans cover roughly 59% of the population. Social health insurance is for every employed person in which employers and employees contribute 5% of the salary.

Employment / Termination / Severance

Employment contracts in Japan may be terminated at the end of the contract (if for a fixed term), by the employer or by the employee. Employers must provide employees 30 days of notice prior to dismissal, or payment in lieu of notice, and have a valid reason for the termination. Dismissal on fair grounds includes:

  • Employee lacks the ability to perform the work properly
  • Employee is ineligible for the assigned work
  • Employee violates the employer’s rules of employment
  • Financial hardship of the employer
  • Agreement between union and employer to terminate an employee

The 30-day notice does not apply to some workers employed on a very temporary, short-term basis, such as seasonal workers who are employed for no more than four months. There is no requirement to pay severance upon dismissal.

Local Laws & Regulations

We understand that local laws and regulations change and sourcing an accurate reference guide is not easy. Our data is researched and verified by our team of local international Employment Attorneys, HR and Benefit Professionals and Tax Accountants through our Atlas team and consultants, to ensure information up-to-date and accurate.

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Partnering with Atlas when expanding into Japan, can dramatically reduce the standard brick and mortar processes of doing business in foreign markets and allow you to focus on what you do best, growing your company! To discover more about how Atlas can simplify your ability to expand globally, please feel free to contact us.
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