Employer of Record Japan
Infotree Global 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
What is an Employer of Record in Japan?
An employer of record (EOR) sometimes known as PEO (Professional Service Organization) or “Haken” in Japanese is a specialized service provider that helps companies to expand in Japan without the need of setting up an entity. It takes care of the HR, payroll, compliance, and taxation on behalf of the foreign client. Thus, it helps businesses save time, cost, and energy and enables them to remain focused on the core areas of operations. Utilizing Infotree Global EOR services mitigates the complexity associated with hiring and compliance. When an organization operates in a foreign location like Japan, there is a whole set of legal and administrative obligations to be met when recruiting local employees. These include obligations like processing payroll, labor laws, tax, compliance, benefits, and social security contributions. Infotree excels in handling all these crucial aspects that further ensure that your company operates easily in Japan and abides by country compliance and regulations.
Hiring in Japan
Employment law in Japan aims at protecting every individual’s rights. 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 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 draft 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. However, some businesses are allowed up to 44 hours a week with a maximum of eight hours a day. Work contacts must clearly state the maximum hours of overtime.
Minimum overtime rates are as follows:
|The standard overtime||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)||150% of the hourly wage|
|For late-night overtime (on a rest day)||160% of the hourly wage overtime|
|Overtime work that exceeds 60 hours per month||150% of the hourly wage|
|For late-night overtime that exceeds 60 hours per month||175% of the hourly wage|
The final two points do not apply to small and medium-sized companies. Additionally, the above overtime rates do not apply to managers and supervisors.
Compensation – 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 ¥931 per hour, or $6.39. however, it will increase to ¥961 on April 1, 2023, or later as announced by the country’s Labor Ministry in 2023.
Probationary Period – Probation periods are a regular practice in Japan. Initially, it is for 3 months and should not exceed one year. An employee can be terminated during or at the end of the probationary period if the employer has objectively reasonable grounds to do so and is socially acceptable. It is considered reasonably easier to terminate an employee in their termination period than afterward. Hiring an Employer of record in Japan can help in guiding the employment terms.
Termination and Severance – Employers are entitled to give employees 1 month’s notice for dismissal. If the employer, does it without notice, then employees are entitled to 30 days’ wages as a notice allowance. In exceptional cases, employers may do it without notice and allowance.
Bonus – 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, female employees are entitled to 14 weeks of maternity leave, of which six weeks can be taken before childbirth and eight weeks after the child is born. Female employees are not encouraged to resume work if it causes medical issues. Both parents can apply for childcare leave which starts the day after maternity leave and ends until the child grows one year old. The childcare leaves maximum duration cannot exceed one year.
Vacation – For employees who are associated with the company for more than six months, they can get 10 days of paid annual leave. It may increase every year post two years of service. After that, the annual rise will be increased by two and a maximum of 20 days per year. Unused annual leaves expire 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, a social pension serves as the statutory fund for people aged 65 years and over. The pension rate may differ. However, for social pension, the cap is for monthly compensation of 605,000 Yen or more.
Payroll Tax in Japan
Setting up payroll in Japan requires a good understanding of country regulations. It is vital to know your employee’s job profile to refer to the applicable act accordingly. Taxations become mandatory to carry out the process smoothly. However, an EOR can help you understand the complexities and overcome them. Besides, it is a time-saving and cost-effective option.
The corporate tax rate in Japan is 15% in case the profit is up to 4000000 JPY and if it’s greater than 8000000 JPY, then the applicable tax rate is 23.30%. The withholding tax for non-residents includes 20% dividends, 20% rent, and 20% royalties with an interest rate of 15-20%. The sales tax applicable in Japan is 8%. The employer and employee have to contribute towards social security, the employer’s contribution is from 14.685 – 16.63% while the employees need to contribute from 14.35 – 15.69%.
Japan follows a progressive tax system that is based on employees’ salaries. Taking the assistance of an Employer of record in Japan is highly recommended to handle the payroll complexities. Below is the income tax applied to an employee’s salary
|Grossed Income (in JYP)||Tax Rate|
|Up to 1950000 JPY||5%|
|Between 1950000 JPY and 3300000 JPY||10%|
|Between 3300000 JPY and 6950000 JPY||20%|
|Between 6950000 JPY and 9000000 JPY||23%|
|Between 9000000 JPY and 18000000 JPY||33%|
|Between 18000000 JPY and 40000000 JPY||40%|
|Greater than 40000000 JPY||45%|
Challenges when Expanding into Japan
The country offers numerous growth options for foreign business owners. When it comes to ease of operating business, Japan secures 29th rank. However, businesses need to come across regulatory and bureaucratic considerations that are different from their domestic location.
Companies must be prepared for the exhaustive tax-paying process in the country. It brings along 129 hours every year to process the required 19 payments. Paying taxes in Japan may seem different from your home country.
Though Japan shares a close relationship with a number of Western markets, the culture is very different. In Japan, most businesses follow a formal hierarchical structure. It may cause communication challenges for foreign companies that may find it difficult to close a deal.
Benefits of Engaging an Employer of Record in Japan
To simplify your expansion process let Infotree Global assist you in dealing with all the complexities. Whether hiring employees distributing payroll or taking care of expenses, we help 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, expense 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 in an international location or you are going to establish 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 it can present an effective solution to tax and accounting responsibilities in the country.
Why Infotree Global Solutions?
Infotree Global is dedicated to providing professional assistance to help you set up a business in Japan. We provide the support of our in-country team of professionals to undertake all the legal formalities associated with employment in Japan and help you stay compliant with country labor laws. Owing to our rich industry experience, we help you hire the most talented individuals for your company and embrace all payroll-related jobs. Thus, we help you save time without worrying about legal hassles so that you can stay focused on your expansion endeavors. With our global payroll and employer of record solutions, you can experience professional assistance at every step and expand your business without worrying about legal complexities.
Make the most of our professional services and overcome the challenges associated with international hiring. If you want to hire our Japan Employer of Record and need assistance, connect with us!