Employer of Record Japan
Infotree Global Solutions assists organizations planning for expansion in Japan by providing employer of record services in Japan. If you wish to recruit professionals in Japan, you can easily accomplish it with us without even having an establishment in Japan. Our team of dedicated professionals would take up all the recruitment and payroll management responsibilities for your organization. From searching for ideal employees to hiring and onboarding them, we take every step on your behalf in total compliance.
Our Japan employer of record would give you insights into the compensation, benefits, and facilities required for your employees in Japan. Here are some of the important factors you need to know before you start hiring in Japan:
Table of Contents
• Hiring in Japan
• Employment Compliance
• Employee Entitlements
• Payroll Tax in Japan
• Challenges when Expanding into Japan
• Benefits of Employer of Record Japan
• Why Infotree Global Solutions?
Hiring in Japan
Employment law in Japan aims at protecting every individual’s right. Most of the work conditions are specified in the Work Rules. Employers with more than 10 employees are obligated to file work rules with the local Labor Standards Inspection Bureau. The Work Rules will have terms of employment like holidays, work hours, wages, and termination. However, employees hired via Employer of record Japan are covered under local teamwork rules. Termination is very difficult and maintaining the work rules is critical. Handshakes are common however, bowing is considered as a sign of respect. It is recommended to utilize a few Japanese phrases if you are confident. As your Japan Employer of Record, we simplify the hiring for your businesses ensuring to follow all the legal steps required for employment compliance.
Though there is no exact format of contract in Japanese laws, employers are required to draft written contracts with specifications of all work agreements. An Employer of Record helps you drafting the employment contract specifying all the terms and conditions. A copy of the work rules should be provided to employees. The employment term should include all the details of the employee’s salary, benefits, rules, job responsibilities, and termination policy.
• Working hours
In Japan, a standard week starts from Monday till Friday with a maximum of eight hours a day. The total weekly work limit is 40 hours for a full-time employee. Work contacts must clearly state the maximum hours of overtime.
Minimum overtime rates are as follows:
- The standard overtime rate is 125% of an hourly wage
- For work on a designated rest day, 135% of an hourly wage
- For late-night overtime (between10pm and 5 am) – the overtime rate is 150% of the hourly wage
- For late-night overtime (on a rest day), 160% of the hourly wage
- Overtime work that exceeds 60 hours per month, the overtime rate is 150% of the hourly wage
- For late-night overtime that exceeds 60 hours per month, the overtime rate is 175% of the hourly wage
The final two points are not applicable for small and medium-sized companies. Additionally, the above overtime rates are not applicable to managers and supervisors.
Minimum wages in Japan may vary depending on locations and industries. However, if an employee is somehow subject to two different minimums, the chances of getting a great amount are on the higher side. The national minimum wage in the country is set as ¥901 per hour, or $8.45. however, it will increase to ¥902 on October 1, 2020, or later as announced by the country’s Labor Ministry announced in 2020.
• Probationary Period
Probation periods are a regular practice in Japan. Initially, it is for 3 months which may be extended by the employers if required. Hiring an Employer of record Japan can help in guiding the employment terms.
• Termination and Severance
Employers are entitled to give employees 1 months’ notice for dismissal. If the employer, does it without notice, he must be entitled to pay 30 days’ wages as a notice allowance to the dismissed employee, known as a notice allowance. In exceptional cases, employers may do it without notice and allowance.
Employers are entitled to pay bonuses twice every year, once in the summer and then in winter. The amount may vary but management and labor negotiations hold the right to specify the amounts and conditions. Company performance plays a vital role in the amount paid. These companies are obligated to pay bonuses once management and labor mutually agree.
Compensation and benefits in Japan form an important part of employment law compliance. To maintain it, employers are entitled to pay the minimum wage. However, it has been observed that many employers add more benefits to stay competitive in the challenging business environment. Being your Japan Employer of Record, we provide you with the required guidance.
• Maternity leaves
In Japan, six weeks of maternity leave is granted for female employees. After childbirth, eight weeks are provided for child care. Female employees are not encouraged to resume work if its causes medical issues. Employees in Japan are also granted family care leave that can go up to 93 days per member. Maternity allowance is up to 3 months’ salary during the maternity leave period.
For employees that are associated with the company for more than six months, they can get 10 days of paid annual leave. It may increase after every year post two years’ service. After that, the annual rise will be increased by two and a maximum of 20 days per year. Unused annual leaves are expired after two years.
• Sick leave
In Japan, employers are generally not entitled to offer paid leave due to illness or injury. However, in exceptional cases, this employment rule can be otherwise. It is better to check with the Employer of record about the leaves.
• Health Benefits
Japan’s social security system encourages excellent health care coverage for employees. Many employers do not offer additional health benefits. The law also encourages employers to provide annual check-ups and stress check-ups if required. Employers should be ready to offer 10% to 15% on top of the salary for employee benefits.
• Pension Benefits
According to country employment law, social pension serves as the statutory fund for people age 65 years and over. The pension rate may differ. However, for social pension, the cap is for monthly compensation of 605,000Yen or more.
Payroll Tax in Japan
Japan follows a progressive tax system that is increased with an employee’s salary. Taking assistance of Employer of record in Japan is highly recommended to handle the payroll complexities. The salary income is entitled to the country income tax a local tax that varies depending upon the location. However, the national income tax may vary from 5% to 45%. Both parties contribute to the social security system of Japan, which provides several benefits including unemployment, pension, health care, and more. Since the system is vast, many employers do not provide extra insurance benefits. Employers and staff each agree to pay 50% of the premiums for welfare pension insurance.
The social security system in the country has a plan for both parties. It pays benefits to an employee if he has been paying for at least 25 years. The pension is received once a worker turns 65 years old.
In Japan, the National Universal Health care system is applicable, which is based on 4 types of insurance. Hiring an Employer of Record can help you access the required details.
• Health insurance
• Welfare pension insurance
• Employee compensation
• Unemployment insurance
Health and welfare pension insurance are considered as social insurance and both parties have to bear the premiums. Unemployment insurance and Employees’ compensation are considered labor insurance and the employer is solely responsible for 100% of workers’ salary premiums. Employment income like salary is entitled to national income tax and local tax. While the National income tax is applicable at progressive rates, the local tax is subject to apply at a flat rate. Check with the Japan Employer of Record about the taxes.
Federal Insurance Contributions Act (FICA) is the tax that includes social security and Medicare benefits. The employer here pays FICA taxes, but the costs are divided between the employer and the worker. The tax rate is 15.3% of the worker’s pay – 12.4% for Social Security as well as 2.9% for Medicare. This calculation indicates employers pay 6.2% for Social Security and 1.45% for Medicare for their workers.
Federal Income Tax
Employers are required to withhold income tax from their worker’s paychecks. After that, they have to deposit the tax to the IRS. Form W-4 can be checked to calculate the amount that is withheld.
Federal Unemployment Tax Act (FUTA) is a tax paid by the employer which is meant to help fund unemployment insurance as well as state employment agencies. Sometimes, it is known as the social security tax. It comes as the employer’s expense and this type of tax is not received from employees’ paychecks.
State and Local Taxes
Every state and local administration has some taxes including the state income tax. So, it is recommended to choose the best employer of record in Japan to learn about the local tax authority to understand the applicable tax.
Challenges when Expanding into Japan
Though the country abounds in growth opportunities it presents its own set of challenges for companies. Ranked 29th for ease of doing business, it has regulatory factors that may not be in practice in the home country. For doing business in Japan, it is a requisite to anticipate bureaucratic factors that are not familiar. As an expanding company, you need to plan for the lengthy tax-paying process in the country. The taxes may vary in different locations.
The country is closely related to various Western markets. The business culture however is different from the Western norms. Hiring an Employer of Record can really make a difference by bringing awareness about the country’s local laws and cultural nuisance to ease you off with your business operations. Most of the businesses have to operate under a formal structure that brings along challenges in terms of deal-making and communication for aspiring companies.
Benefits of Employer of Record Japan
To simplify your expansion process let Infotree Global assist you to deal with all the complexities. Be it hiring employees or distributing payroll or taking care of expenses, we are there to assist you at every step. Partner with us and start your global business without worries.
• Market Access
Relying on the professional expertise of an Employer of Record is the best way to enter an unknown market quickly. By using EOR services, an international organization can avail the expertise of a Japanese employee to work for its company. Besides quick access to the Japanese market, the employer of record also enables the client to ease off worries related to payroll and HR.
• In Country Laws
It is hard to ignore the importance of regulations and compliance in a foreign country. If you are operating a business in Japan, you need to be well aware of the payroll and taxation rules. With Employer of Record services, a company can hire a foreign individual or local employees and deal with the complexities of the country’s rules. Be it income tax, social security contribution, expanse management, withholding charges, or business tax, an EOR or PEO company takes care of it all with total compliance.
• Diverse Solutions
No matter whether you already have a company on international location or you are going to establish the one, an employer of record can help you significantly. The employer of record Company can hire staff on your behalf without setting up a subsidiary in Japan. If your firm is already operating, using EOR for managing payroll tasks can be a great idea as they can present an effective solution to tax and accounting responsibilities in the country.
Why Infotree Global Solutions?
Setting up a branch office or just a subsidiary in Japan to assist with a micro-level team is a time-consuming and complicated process. There are stronger worker protections for labor law in Japan that need greater attention and expert details to understand the best practices.
As an Employer of Record Japan, we take all the responsibility to make it a smooth and easy journey for you to expand into Japan as we help you to hire your employees. We also offer customized end-to-end solutions to handle your HR matters to ensure that your practices comply with the regulations without suffering from the burden of establishing a foreign subsidiary or branch office hassle-free.
In addition to this, you get immense value and benefits including, but not limited to –
• Power-packed strategies and consultation to expand your business to Japan. We will help you with proven and powerful strategies to expand your business in Japan with proper Visa and regulation compliance from starting to the end.
• Easy onboarding and administrative activities for employment locally. We will also take care of payroll management systems and payments for all of your employees.
• We provide you with the supply of local benefits administration for recruitment expenses including employment arrangements.
• Hassle-free compliance with local laws and regulations so you don’t have to worry about any placement laws in Japan for your recruitment needs.
• You also won’t have to stress about any additional payroll taxes. It can immensely save countless hours that go into processing and submitting taxes for each specific case and business operation.
If you wish to share your concerns or discuss any issues with us regarding solutions of Japan PEO Services, feel free to get in touch with us. An executive from our team will get back to you shortly and get all the details on your concern to understand your problems from your perspective!
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