Japan — 11 min

How to use an Employer of Record in Japan

Link copied
to clipboard

Thanks to a strong economy, innovative spirit, and highly educated workforce, Japan is among the top countries in the world to do business. Plus, Japan has a strong technology ecosystem that’s produced an army of talented developers, designers, and marketers. As your company grows, you might consider hiring a few highly skilled remote employees in the country,

To hire employees in Japan, you’ll not only have to set up a legal entity in the country (a complex undertaking, in itself), you’ll have to comply with several local labor laws and regulations. Additionally, you’ll have to manage your employees, pay them in the local currency, and handle a host of HR functions.

Jump straight to a key chapter

Six steps to hiring employees in Japan using an employer of record
What are the benefits of using an employer of record in Japan?
How much does it cost to use an EOR in Japan?
Hiring in Japan
What are the risks of employee misclassification in Japan?
Get started with an employer of record for Japan

Sounds like a lot, right? Well, it is. But, international hiring doesn’t need to be a hassle. Partner with an employer of record (EOR) and the process of hiring employees in Japan can become simple! An EOR has its own local entity in Japan and provides the infrastructure you need to manage remote employees and handle payroll, benefits, and compliance easily.

This article will help you understand how to use an EOR in Japan so that you can grow your team with confidence. We’ll also walk you through how EORs work and the benefits they offer for businesses looking to hire international employees.

Six steps to hiring employees in Japan using an employer of record

An employer of record makes it easy to hire remote workers in Japan. An EOR has its own local entity through which you can hire employees in Japan. But how do you choose an EOR that has the infrastructure to support your needs? Here are six steps to choose the right EOR for your business.

Step 1: Weigh up the pros and cons of each potential partner

Make a shortlist of the services you require an employer of record to handle for you while you get started on your global expansion journey. Your EOR should typically offer services like:

A local entity in the country of hiring through which you can hire Japanese employees
A simple but engaging onboarding experience for your employees
Comprehensive benefits management
Access to Japanese legal experts that can help you understand and navigate Japan’s employment laws
Compliance with local laws and regulations
Intellectual property protection
A global payroll system to pay your workers in the local currency
Enhanced data security backed by SOC 2 and GDPR compliance

Step 2: Take the time to select the most appropriate EOR service provider

Ideally, an employer of record should own its own local entity in the country of hiring. Note that some EOR providers outsource some or part of their services to external companies, which is not ideal for you. That’s because costs can fluctuate if those companies change their prices. Additionally, there could be security risks associated with third-party providers because they may not have strict measures in place to protect employee data. REad our comprehensive article on why you should stick with EORs that own their local entities.

Step 3: Check the reviews, testimonials, and coverage of your shortlisted providers

Verified reviews on platforms like G2 and Trustpilot can help you better understand the quality of an EOR’s service based on the ratings provided by previous and existing clients. You could also read press coverage and client testimonials online to discover more about how the company operates and how it treats its customers.

Step 4: Ensure that the EOR solution for Japan will provide a best-in-class employee experience

Your EOR must treat your employees well throughout the time you work with them. That includes paying salaries on time, onboarding employees, answering questions clearly, and providing explanations for any payroll deductions withheld by the employer.

Step 5: Work with your partner to make sure you always provide a fair and equitable compensation package

Working with an employer of record is a low-cost way to figure out competitive salaries for the roles you’re hiring for so that you can attract motivated candidates without breaking the bank. It’s essential to offer a modern benefits package to your potential recruits, keeping in mind local labor laws, and the employee’s role, experience, and skill level.

Step 6: Make sure your EOR partner will guard your intellectual property and maintain data security for your business

Your potential EOR partner must have high standards of security and compliance to ensure that your data and intellectual property are well-protected. An EOR should have data protection certifications like SOC 2 and GDPR that guarantee your data will be secure in their custody.

Hire and pay your global team with speed and security

Start using Remote’s employer of record services and local entities to avoid the time, cost, and risk of building your own.

Get started now

Remote is the G2 top-ranked multi-country payroll software

What are the benefits of using an employer of record in Japan?

Using an EOR saves you the hassle of opening a legal entity and dealing with all the compliance legwork needed to hire your employees in Japan. Plus, you won’t have to worry about the HR and admin work involved in managing your employees — onboarding, benefits, payroll, taxes, and compliance — your EOR will handle it all for you.

Using an EOR in Japan can help you:

Hire employees compliantly through a local entity
Draft employment contracts that clearly state the terms of employment for your employees
Create a simple onboarding process for getting your new employees up to speed
Handle employee terminations compliantly
Access legal guidance on Japanese employment rules
Secure your business and customer data and protect your intellectual property.

An employer of record essentially provides the infrastructure that makes it possible to hire remote employees in Japan, or all over the world.

How much does it cost to use an EOR in Japan?

EOR costs depend on the services required by your company, the number of workers you want to recruit, and where they are based.

Generally, traditional EORs can charge hefty enterprise rates of $1,600 and upwards per employee per month and beyond. Some companies charge a percentage (up to 18%) of your total payroll expense. Smaller EORs can charge you low rates. However, you’ll have to check that the provider is not cutting corners on essential features like data security or compliance.

In contrast, Remote offers the complete suite of HR tools needed to hire employees in Japan quickly and compliantly, at an affordable flat-rate. Our fair price guarantee means that there are no hidden fees or commitments.

We made a comprehensive breakdown of how Remote compares with our competitors, so you can figure out who offers the best value for your money.

Hiring in Japan

Employment regulations in Japan are mainly outlined in the 1947 Constitution, the Labor Standards Law of 1947, and the Labor Contract Act of 2008.

Japan enforces strong labor protections for all classes of employees, and getting acquainted with the Japanese Labor code will help you stay out of trouble with the law.

Employment contracts and agreements in Japan

Japanese employment contracts can either be verbal or written, but must clearly outline:

The duration of the contract
The designated workplace
Job description
Effective working hours
How wages are calculated
Time off
Provisions for overtime work and dismissal

Labor compliance in Japan

Japan’s employment security law prohibits discrimination due to a previous profession, union membership, race, nationality, creed, sex, social status, and family origin.

Likewise, female employees must be protected from discriminatory treatment due to marriage, pregnancy, childbirth, or requesting time off work.

Japanese labor compliance statutes state that:

Employment agreements should be clearly stated in writing.
Regular working hours for employees be limited to eight hours per day and 40 hours per week.
Employees must be paid a premium if they’re required to do overtime (25% – 50%) or night work (25%).
Employees must be protected from unreasonable or unfair dismissal. Employees can only be dismissed for just cause and have to receive severance payments.
Employees must also be provided with dignified and safe working conditions

Payroll and payroll taxes in Japan

Employers are required to make payroll contributions of between 14.94% to 24.37% of their payroll expenses, covering pensions, health insurance, unemployment insurance, work injury, and family allowance.

Employee income and payroll taxes are capped at 45% and 14.39% respectively and have to be withheld by the employer.

Employment benefits and compensation in Japan

In addition to the statutory benefits, Remote can help you roll out localized benefits that will help you attract and retain world-class talent in Japan and across the world.

Maternity

Expectant mothers are entitled to 14 weeks of paid maternity leave, starting six weeks before delivery. Maternity benefits are equal to two-thirds of the mother’s normal salary, paid by the labor insurance office.

Paternity and parental leave

Both parents are entitled to 12 months of paid parental leave once maternity leave ends or until their child turns one year and two months old.

Vacations and public holidays

Japanese employees are entitled to anywhere between 10 and 20 days of paid vacation, depending on their tenure — our guide to hiring in Japan explains this in detail.

Healthcare

Japan’s healthcare provides universal coverage for all citizens and foreigners staying in the country for at least a year.

Remote can help you roll out private health insurance coverage for your remote employees based in Japan, especially if they’re digital nomads or foreigners.

Other benefits that Remote can help you roll out

Remote offers a wide range of localized benefits for wherever you’re hiring from. These include:

Medical insurance
Dental and vision insurance
Pensions
Paid holidays
401k retirement accounts, and
Life insurance

Our benefits packages can be adapted to your employees' needs whether you’re hiring in Japan, or elsewhere in the world, helping you to build a truly global team with the best talent from around the world.

Severance pay and employee termination in Japan

You'll have to be careful about terminating employees in Japan, as there are laws in place that protect employees from unlawful termination. For example, employees can appeal to the authorities and get a severance package equal to a month’s pay for every year worked.

If you’re hiring Japanese employees, it’s good practice to clearly outline under which provisions the employment contract can be terminated. Employers are required to provide 30 days of notice or compensate the employee in lieu.

Japan —

9 min

Employee benefits in Japan: all you need to know

Use this guide to employee benefits in Japan to help your team understand how to set up and manage a compliant benefits program for new starters.

What are the risks of employee misclassification in Japan?

Japan treats independent contractors differently from employees. You’ll have to be careful about classifying your workers correctly, as independent contractors can seek legal redress if they assume they’ve been misclassified as employees. Additionally, you could face hefty fines, and penalties, and suffer reputational damage if you’ve been found to have classified your workers incorrectly.

Partnering with a reliable EOR is the best way to mitigate misclassification risks. An EOR like Remote has a team of legal experts that have in-depth knowledge of Japanese employment laws. Remote can help you classify your workers correctly, and advise you on how you can stay compliant with local regulations.

Get started with an employer of record for Japan

Building a successful remote team abroad is not easy. To hire employees in Japan, you’ll have to spend a significant amount of time and money to set up a local entity, manage the onboarding process, establish a payroll system, and ensure compliance with complex local regulations.

A global HR platform like Remote can save you the hassle of international hiring by doing the heavy lifting, leaving you to focus on business growth. Remote makes it simple to hire employees in Japan without you having to worry about paying salaries, processing invoices, managing benefits, or staying compliant with Japanese labor laws.

Learn more about Remote’s global employment services and how we can help you scale your team globally at a fraction of the cost. If you're ready to start employing workers in Japan, get started with Remote and grow your global team today.