Employee benefits in Japan: all you need to know

As one of the world’s largest and most powerful economies, Japan is an excellent place to find and hire talented employees.

As the traditional focus on professional conformity gradually makes way for remote work, younger Japanese workers are looking to embrace the freedoms, better work-life balance, and other advantages that remote work brings. As a result, Japan is a burgeoning market for hiring remote employees and contractors.

To attract the country’s top talent, though, you need to offer a compensation plan that is attractive, competitive, and — crucially — fully compliant with Japenese employment laws. After all, you don’t want to accidentally misclassify your people and face penalties and fines.

To save you time and streamline the process, we’ve broken down everything you need to know about employee benefits in Japan. This guide will help you choose the most desirable benefits and then set them up and manage them — all while staying within the lines.

So let’s begin.

Who is entitled to benefits in Japan?

In Japan, all full-time employees are entitled to statutory benefits.

What about independent contractors?

Independent contractors are classed as self-employed, and — as in most countries — are not entitled to the same statutory benefits as employees.

You can still choose to offer benefits to any independent contractors that you’re working with, but be careful. If the authorities believe that you’re misclassifying contractors as employees (or vice versa), you could receive significant fines and penalties, and potentially even be restricted from doing business in Japan.

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So what kind of benefits should you offer your Japanese workforce?

Statutory and common employee benefits in Japan

As in most countries, certain employee benefits — such as leave entitlement and minimum wage — are protected by law. As a minimum, you are required to provide:

Overtime

The Japanese workday is deemed to be eight hours long, with a workweek of 40 hours.

Any overtime worked is paid at 125% of the base hourly rate, with higher rates for nighttime hours and weekends. Note that recent legislative reform has capped overtime hours for Japanese employees at 45 hours per month (or 360 hours annually).

Leave and holiday entitlements

In Japan, leave entitlements are relative to the following periods of tenure:

• six months of tenure entitles 10 days paid vacation

• 1.5 years entitles 11 days paid vacation

• 2.5 years entitles 12 days paid vacation

• 3.5 years entitles 14 days paid vacation

• 4.5 years entitles 16 days paid vacation

• 5.5 years entitles 18 days paid vacation

• 6.5 years and above entitles 20 days paid vacation

It’s not mandatory to pay employees for time worked on public holidays, but it is widely practiced (and encouraged) to do so. There are 16 recognized national bank holidays in Japan.

Insurance

As an employer, you’re required to make insurance contributions to the state. You must pay into the Health Insurance for Employees scheme for your employees, and the National Health Insurance scheme for contractors.

These schemes provide your workforce with basic coverage, high-cost medical care, and loss-of-income insurance due to medical reasons.

Employees in Japan are also entitled to Japanese Workers’ Compensation and Employment Insurance, unemployment, and various old-age related insurance types.

Minimum wage

Minimum wages are set at a prefectural level to align with local costs of living. These wages range from ¥790 (around $6) to ¥1,040 (around $8) per hour. Industry standards heavily affect minimum wages; if the prefectural and industrial minimum standards are different, the higher of the two will usually apply.

Maternity and paternity leave

New mothers are entitled to 14 weeks of paid maternity leave at two thirds of their base pay, and can be taken any time from the third month of pregnancy to eight months post-birth.

Recent legislative changes now allow fathers to take a total of four weeks off (within eight weeks of their child being born) at 80% of their base salary. They can choose to take a single extended leave, or break it up into two parts.

Pension and retirement contributions

Japanese employees who make contributions for 10 years are entitled to a basic old-age pension at 65. The full basic pension, however, requires 40 years of contributions, and the benefits are proportional to the contribution periods.

Pension contributions are split between employer and employee, with both contributing 9.15% of wages.

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Supplemental benefits to consider for Japanese employees

The benefits listed so far are mandated by law. However, to attract and retain the best talent — and get a leg up on your competitors — you need to go beyond the basic requirements. This is where supplemental benefits come into play.

A robust, modern benefits stack can be a key decision-maker for potential hires, and ensures that your existing employees feel valued and motivated at your company.

Some of the most attractive benefits you can offer your Japanese workforce include:

Supplemental insurance

Across the world, it’s common for employers to supplement compulsory insurance with additional coverage. In Japan, employees typically expect you to offer group life, group long-term disability, group medical allowances, and group personal accident insurance.

Stipends and development programs

Your employees will either be telecommuting or working from home full-time, so consider providing allowances and stipends that support this unique working arrangement. For example, you can cover (or partially cover) home office supplies and equipment, or work with local coworking businesses to provide monthly allowances.

Additional soft benefits

You don’t need to break the bank to offer appealing, valuable benefits, especially if you’re a small business. You can easily customize soft, remote-tailored benefits, such as:

Flexibility in work hours

Genuine flexitime is invaluable for remote employees. A flexible or asynchronous schedule allows them to schedule their lives more efficiently, and ensures that they don’t have to work unsocial hours to align with a global team.

Increased team diversity

Globally distributed teams are, by nature, more diverse. This can easily become a selling point for remote employees who are interested in working with teammates from different cultures and with different viewpoints, and developing their cultural and interpersonal skills.

These kinds of benefits provide long-term value, and reflect positively on your employer brand. They show potential hires and existing employees that you are focused on investing in their engagement, and in tune with what makes their working situation unique.

How to set up and manage benefits for international employees

Once you’ve decided what your benefits stack is going to look like for your Japanese workforce, you need to put the wheels in motion. This is where things can start to get tricky.

First, you need to walk the tightrope between your employees’ needs and your in-house resources. If you’re a smaller organization trying to scale through outsourcing, you can easily get bogged down in costly benefits packages.

And then there’s the issue of compliance. If you accidentally fall foul of the rules along the way, you can incur fines and penalties, and significantly damage your growth.

When you then factor in the process of setting up payroll, managing leave entitlements, and getting to grips with the whole whirlpool of tax consequences and obligations... well, it can all start to get a little daunting.

Which is why it’s a good idea to let a global employment services provider — like Remote — do all the heavy lifting for you.

In particular, our employer of record (EOR) service allows you to quickly and conveniently manage all the intricacies of your Japanese operation, including:

• Organizing payroll and leave

• Distributing local employment taxes

• Maintaining compliance with statutory and supplementary benefits

• Offering competitive global compensation packages

• Scaling your team

All you have to do is focus on hiring the right people for your organization, and our team of local, in-house, on-the-ground experts will guide you the rest of the way.

Staying compliant with Remote

There you have it. When it comes to offering benefits to your Japan-based employees and new hires, it doesn’t have to be a stressful experience.

However, Japanese employment laws can be complex and subject to change. This can make it difficult to know if your business is doing everything by the book.

To make sure you don’t encounter any nasty surprises, check out our detailed process for hiring and managing international employees. Not only will you save yourself time, headaches, and, potentially, a world of legal trouble, but you’ll be free to focus your energy on standing out in a competitive, remote-first world.

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