Japan is an island country in east Asia that is located within the Pacific Ocean. The country is part of the Ring of Fire and spans an archipelago of 6,852 islands, the 5 main islands being Honshu (the "mainland"), Hokkaido, Shikoku, Kyushu, and Okinawa.

Japan has the world’s 3rd-largest economy, and is built on powerful technology. The population is very welcoming, making Japan one of the most desirable places to do business.

RemoFirst is able to offer multiple hiring options in Japan, which allow people the flexibility to choose.

Employment types:

• Full-time employment roles
• Part-time employment roles
• Hourly workers
• Expat workers

Contract types:

• Indefinite term contract
• Fixed-term contract (The minimum duration of a fixed-term contract should be 3 months, and a maximum of 3 years.)

Working conditions in Japan:

Beginning April 2025, Japan’s average minimum hourly wage has been raised to 1,121 JPY.

The standard working day consists of 8 hours; 40 hours per week.

Overtime is regulated by contracts and collective agreements. The employees have been prescribed a legal limit of up to 45 hours/month and 360 hours/year.

The employees are entitled to premium rates for overtime, which are as follows-

• Overtime (exceeding 8 hrs/day) = 125% of base wage.
• Late-night work (10 PM – 5 AM) = 125% + 25% = 150%
• Work on a statutory holiday (legal rest day)= 135%
• Overtime on holiday after 8 hours= 135% + 25% = 160%

Exception: Managers (kanojikan-shoku) may be exempt from certain overtime pay, though this must be strictly defined in the contract.

All contract types are equally protected under working hours and overtime rules.

Employee lifecycle:

Full-Time (Indefinite/Regular Employment)

• Probation period: 3–6 months.
• Notice period during probation: Often 14 days, but legally still expected to give 30 days unless contract specifies shorter.
• Termination during probation:
• Employer can terminate more easily, but must still have a legally justifiable reason; arbitrary dismissal can be challenged in court.
• Severance is usually not required unless stipulated in the contract.
• After probation: Full labour protections apply, including standard 30-day notice.

Fixed-Term Contracts

• Probation period: Usually 1–3 months, depending on contract length.
• Notice during probation: Contract can specify shorter notice (e.g., 7–14 days).
• Termination:
• Can terminate during probation if performance is unsatisfactory, subject to contract terms.
• At contract end, no notice is required unless early termination is intended.
• After probation: Standard fixed-term rules apply; contract simply expires at the end date.

Part-Time / Hourly Employees

• Probation period: Often 1–3 months, rarely longer.
• Notice during probation: Shorter periods are common (7–14 days), but the legal minimum still applies unless mutually agreed.
• Termination: Easier than full-time; employer generally not required to provide severance.
• After probation: Standard part-time rules apply (typically 30-day notice).

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Employee Taxes

Income Tax (Shotoku-zei)Japan applies a national income tax on employment income at progressive rates:

Annual incomeRateUp to JPY 1,950,0005%JPY 1,950,001–3,300,00010%JPY 3,300,001–6,950,00020%JPY 6,950,001–9,000,00023%JPY 9,000,001–18,000,00033%JPY 18,000,001–40,000,00040%Above JPY 40,000,00045%

In addition, Residence Tax (Jūmin-zei) of approximately 10% is levied by the municipality on the prior year's income, collected via payroll from June each year.

Employee Social Insurance Contributions

• Health Insurance (Kenkō Hoken): ~5.0% of standard remuneration (employee share; varies by insurer)
• Pension Insurance (Kōsei Nenkin): 9.15% of standard remuneration
• Employment Insurance (Koyō Hoken): 0.6% of gross wages

Total employee social insurance: approximately ~14.75% of gross salary.

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Employer Taxes & Contributions

Employers must pay the following contributions in addition to the employee's gross salary:

ContributionRateHealth Insurance (Kenkō Hoken — employer share)~5.00% of standard remunerationPension Insurance (Kōsei Nenkin — employer share)9.15% of standard remunerationEmployment Insurance (Koyō Hoken — employer share)0.95% of gross wagesWork Accident Insurance (Rōdō Saigai Hoken)~0.30% (variable by industry)

Total estimated employer contribution: ~15–16% of gross salary.

Contributions are calculated on standard remuneration (Hyōjun Hōshū) — a banded figure set by the government based on actual monthly pay, updated in October each year.

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Paid Leave

Employees are entitled to paid leave based on how long they’ve worked at their company. In order for an employee to be eligible for paid time off, they should have worked ≥6 months and attended ≥80% of scheduled work days. The annual leaves increase at the following rate-

• 0-6 months = 10 days of paid leave
• 6-18 months = 11 days of paid leave
• 1.5-2.5 years = 12 days of paid leave
• 2.5-3.5 years = 14 days of paid leave
• 3.5-4.5 years = 16 days of paid leave
• 4.5-5.5 years = 18 days of paid leave
• 5.5-6.5 years = 20 days of paid leave

Employees can also receive leave for bereavement, hospitalisation, marriage, menstruation, or civic duty.

• Bereavement: 3–5 days
• Hospitalization: 5–10 days typical
• Marriage: 1–5 days
• Menstruation: 1 day/month
• Civic Duty: As required by duty

Mandatory leave usage (2019 reform): Employers are legally required to ensure employees take at least 5 days of annual paid leave per year (Labour Standards Act Art. 39, para. 7). Employers who fail to manage this obligation face fines of up to JPY 300,000 per employee. This places an active duty on the employer to schedule and confirm leave — not just to offer it.

Parental Leave

Pregnant employees are entitled to 14 weeks of paid maternity leave beginning 6 weeks before the due date and 8 weeks after the birth. This leave is paid at a rate equivalent to 2/3 (67%) of their standard remuneration, funded by the Health Insurance fund (Kenkō Hoken).

Fathers have two distinct paternity leave entitlements under the 2022 Childcare Leave Reform:

1. Sankou Ikuji (Birth/Paternity Childcare Leave): Up to 4 weeks (28 days) within the first 8 weeks after birth, taken in up to 2 separate blocks. Employment Insurance pays 67% of standard remuneration during this period.

2. Standard Ikuji Kyūgyō (Parental Leave): Up to 1 year total (extendable to 2 years in exceptional cases). Employment Insurance pays 67% of standard remuneration for the first 6 months, then 50% for months 7–12.

Employers are prohibited from pressuring employees not to take parental leave. Since April 2023, companies with 1,000+ employees must publicly disclose their paternity leave take-up rates.

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Sick Leave

Employees are not explicitly entitled to sick leave in Japan, but can use their paid vacation time as sick leave.

While employers have no statutory sick pay obligation, employees who have been enrolled in Health Insurance for at least 3 days and cannot work due to illness are entitled to Sickness Allowance (Shōbyō Tegata) from the Health Insurance fund from day 4 of absence. This pays approximately 2/3 of standard remuneration for up to 18 months for the same illness. Employers should inform employees of this benefit when they go on extended sick leave.

Many companies provide 5–10 days of paid sick leave or allow use of annual leave.

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Process

In Japan, employer-initiated terminations are tightly regulated and difficult to execute due to strong employee protections under the Labour Standards Act and judicial precedent. Dismissal must be objectively reasonable and socially acceptable, or it may be ruled invalid by courts.

• In Japan, dismissal of an employee is prohibited during pregnancy, maternity leave, and for 30 days following the end of maternity leave. In addition, employers may not dismiss or subject employees to disadvantageous treatment on the grounds that they have applied for, are taking, or have taken childcare leave.
• Termination on the grounds of medical absence or illness is highly restricted in Japan. For work-related injuries or illnesses, dismissal is expressly prohibited during the medical leave and for 30 days thereafter (Labour Standards Act).
• Employees are protected from dismissal for participating in union activities or reporting legal violations.
• Fixed-term and permanent employees are equally covered under these legal restrictions.

Abuse of Dismissal Rights Doctrine (Kaikou-ken Ranyo Hori): Japan's courts apply a strict 'abuse of rights' standard to all dismissals. Even where the Labour Standards Act's procedural requirements are met, a dismissal will be ruled invalid if it is not: (1) objectively reasonable, (2) socially acceptable, and (3) proportionate. In practice this means Japan has some of the strongest de facto employment protection in the world. EOR clients should plan for the possibility that a contested dismissal may result in reinstatement orders or significant compensation. Always seek legal counsel before initiating dismissal proceedings in Japan.

Notice Period

Minimum notice: 30 days before dismissal.

Employer option: If 30 days’ notice is not given, the employer must pay 30 days’ average wages in lieu of notice (or the shortfall if partial notice is given).

Employee resignation: Employees are expected to give at least 2 weeks’ notice under the Civil Code (Article 627), but in practice, employers expect 30 days.

Severance Pay

There are no requirements for employers to offer severance packages, but employees can dispute to receive a severance package equal to one month of pay for each year at the company.

Labour Standards Act (Article 23) requires all outstanding wages, allowances, and accrued paid leave encashment to be settled within 7 days of termination if the employee requests payment.

Components:

• Unpaid wages and overtime.
• Allowances (commuting, housing, bonuses if already earned).
• Payment in lieu of unused annual paid leave (mandatory).
• Payment in lieu of notice (if less than 30 days’ notice given).

Bonuses: It is customary (but not legally required) in Japan to pay seasonal bonuses — typically a summer bonus (June–July) and a larger year-end/winter bonus (December). Bonus amounts vary by company and year and are not fixed by law; if promised in contract or work rules, they are enforceable.

Digital nomad visa:

In 2024, Japan introduced a digital nomad visa.

This short-term digital nomad (designated activities) visa effective March 2024 allowing eligible remote workers to stay for up to six months under specified conditions.