Employer of Record (EOR) in Japan: How to Hire, What It Costs, and How to Stay Compliant

An Employer of Record (EOR) in Japan lets a foreign company hire Japanese employees legally without setting up a local entity. The EOR becomes the legal employer — running payroll in yen, withholding income and resident tax, and enrolling staff in social insurance (shakai hoken) — while you keep operational control. Employer social-insurance costs are moderate (about 16% on top of gross), but two things shape the total: semi-annual bonuses are customary, and a mandatory 30-day dismissal rule reflects Japan’s strong job protection.

Japan offers a highly skilled, stable workforce and the world’s fourth-largest economy, but its employment, payroll, and social-insurance rules are detailed and precisely enforced. An EOR is a fast, low-risk way to enter the market — handling contracts, payroll, and compliance while you focus on growth.

Key benefits of hiring in Japan through an EOR

• No need to establish a Japanese subsidiary
• Full compliance with Japan’s labour, tax, and social-insurance laws
• Seamless onboarding and monthly payroll management
• Quick market entry and low administrative overhead
• Access to bilingual HR and legal experts

Why choose an EOR in Japan?

An EOR acts as the legal employer of your team while you retain operational control. It handles complex HR, payroll, and social-insurance procedures — ideal for sales, marketing, business development, and technical roles — without incorporating and taking on Japanese compliance directly.

How much does it cost to employ someone in Japan in 2026?

On top of gross salary, an employer pays roughly 16% in social insurance — welfare pension, health insurance, employment insurance, and workers’ accident insurance. The employee pays a similar ~15% in social insurance, plus national income tax and local resident tax. The example below uses ¥400,000/month gross (≈$2,560).

Japan at a glance

Employment framework

Employment contracts

Employment is governed by the Labour Standards Act. A written contract is mandatory and must specify job title and duties, compensation and benefits (in yen), working hours and overtime, contract type, probation, and termination conditions. Contracts are usually indefinite (the norm, for stability) or fixed-term for temporary or project work, generally not exceeding three years.

Probation period

Typically 3–6 months; any extension must be explicitly stated in the contract. Even during probation, dismissal requires reasonable grounds.

Working hours & overtime

The standard week is 40 hours (8 hours/day). Overtime requires a labour-management “36 Agreement” (saburoku kyōtei) and is generally capped at 45 hours/month and 360 hours/year. Premiums are 25% for standard overtime (50% for hours over 60/month) and an extra 25% for night work.

Minimum wage (2026)

Japan sets the minimum wage hourly and by prefecture — there is no single national rate. Following a record increase in October 2025, the national weighted average is ¥1,121/hour, and for the first time all 47 prefectures exceed ¥1,000. Tokyo is highest at ¥1,226, with the lowest prefectures at ¥1,023. The next revision is due in October 2026, and the government is targeting a ¥1,500 average by the late 2020s.

Bonuses

Semi-annual bonuses (shōyo), paid in summer and winter, are a customary part of Japanese compensation — often totalling several months’ salary a year. They are not legally mandatory, but employees expect them, and they are subject to social insurance and tax.

Payroll & taxation

Income tax 2026

Japan uses a progressive national income tax, with a 2026 reform that raised the tax-free threshold (basic plus employment-income deduction) so income tax now starts above roughly ¥1.78 million. A 2.1% reconstruction surtax applies on the income tax, and a separate local resident tax (juminzei) of about 10% is withheld based on the prior year’s income.

Social insurance

Both sides pay into Japan’s social-insurance system. The employer contributes about 16% of gross (welfare pension 9.15%, health ~5%, employment insurance ~0.95%, workers’ accident insurance, plus long-term care for staff 40+), and the employee about 15%. A new child-rearing contribution takes effect in April 2026, modestly raising employer cost.

Employee benefits & leave

• Annual leave: 10 days after 6 months, rising to a maximum of 20 days after 6.5 years. Employers must ensure employees take at least 5 days per year.
• Public holidays: 16 national holidays.
• Maternity leave: 14 weeks (6 before and 8 after birth), paid at two-thirds by health insurance.
• Childcare leave: up to the child’s first birthday (extendable to two years), paid by employment insurance at roughly 67% then 50%.
• Paternity leave: up to 4 weeks within 8 weeks of birth, around 80% paid, and can be split into two parts.
• Sick leave: not legally required as paid leave — employees typically use annual leave — though many employers offer it by policy.
• Health check-ups: annual employee health check-ups are mandatory, alongside workers’ accident coverage.

Termination & notice periods

Japanese law provides strong job protection: dismissal requires a valid reason and a fair process. Valid grounds include serious misconduct, redundancy/restructuring, documented performance issues, or mutual agreement. Employers must give at least 30 days’ notice (or pay in lieu), and employees customarily give the same. There is no statutory severance, though retirement/severance allowances (taishokukin) are common by company policy. Dismissals without reasonable cause can be ruled invalid by the labour courts.

Work permits & immigration

Foreign nationals need an appropriate status of residence to work — commonly the “Engineer/Specialist in Humanities/International Services” visa, intra-company transfer, or Highly Skilled Professional visa. An EOR can act as the sponsoring employer and coordinate the certificate of eligibility and registration with the immigration authorities.

NDA & IP rights

Confidentiality clauses are enforceable where reasonable. Non-competition clauses must be limited in scope, duration, and geography, and often require compensation to be valid. Intellectual property created during employment generally belongs to the employer, subject to fair compensation for employee inventions.

What changed for 2026

• Record minimum-wage rise: the October 2025 revision lifted the national average to ¥1,121/hour — the largest annual increase on record — with all prefectures now above ¥1,000.
• Higher tax-free threshold: the 2026 tax reform raised the basic and employment-income deductions, so income tax now starts above roughly ¥1.78 million.
• New child-rearing levy: an additional employer contribution takes effect in April 2026, slightly increasing social-insurance cost.
• Toward ¥1,500: the government continues to push the minimum wage toward a ¥1,500 average by the late 2020s, so further increases are expected each October.

Frequently asked questions