Recruit and Hire Employees

Hiring employees in Japan requires a thorough understanding of local labor laws, employment practices, and regulatory requirements. In this section, we will cover topics ranging from selecting the appropriate type of employment and drafting contracts to navigating social insurance requirements for recruiting and hiring employees.

How to Hire Employees in Japan

Once you establish an office in Japan, hiring employees becomes an essential next step. There are several ways to recruit employees in Japan and this includes:

Direct Recruitment: Through personal connections or via own company’s website.
Public Employment Security Offices: Known as Kokyoshokugyoanteijo: 公共職業安定所 or Harowaku: ハローワーク, these are government-run offices which provide free job placement services.
Media Advertisements: Using newspapers, magazines, and online recruitment platforms.
Educational Institutions: Free job placement services conducted by colleges, universities and public organizations.
Private Recruitment Firms: Fee-based job placement services offered by private recruitment agencies.

If you are seeking employees with specific work experience and language skills, fee-based services provided by private recruitment firms might be an efficient and reliable option. However, the placement fees might be a significant cost added upon the new business and there is a risk on the uncertainty in the continued employment of the new hire.

By carefully evaluating these recruitment options, you can choose the method that best fits your needs and budget while minimizing potential risks.

Types of Employment

In Japan, there are different types of employment contracts for hiring employees. The main employment types include:

Permanent Employment Contracts (Seishain: 正社員): For full-time, permanent employees.
Fixed Term Employment Contracts (Yuuki koyou keiyaku: 有期雇用契約): Temporary contracts with a specific duration.
Part-Time Employment Contracts (Paato keiyaku: パートタイム契約): For employees working fewer hours than full-time employees; on a part-time basis.
Agency Workers Contracts (Hakenrodosha: 派遣労働者): Employees dispatched by staffing agencies for specific projects and durations.

When starting your business, you may want to choose to use agency workers who are dispatched by staffing agencies. Unlike hiring employees directly, companies using agency workers are not required to handle social insurance related procedures or withhold income taxes on them. Essentially, they are employed and managed by the staffing agencies, but they work under your direction.

In addition, agency workers are not subject to strict labor law restrictions on dismissal, providing you with greater flexibility to adjust headcounts as needed. This can be especially advantageous during the start-up phase, when your business administrative functions may not yet be fully established.

Employment Contract

When hiring an employee in Japan, it is essential to sign an employment contract that clearly outlines the following working terms and conditions in writing:

i) Duration of the Labor Contract: Specify the contract duration, including criteria for renewal in the case of fixed-term contracts.

ii) Place of Employment and Assigned Duties: Define the location of the work and the employee’s specific responsibilities.

iii) Working hours, Breaks, Holidays, and Vacations: Clearly detail the working hours and rest periods and leave entitlements.

iv) Wages: Include details on salary, allowances and payment terms.

v) Retirement and Resignation: Outline the rules for retirement, voluntary resignation, or termination

The Labor Standards Law (Rodokijunho: 労働基準法) and other relevant laws regulate the working conditions in Japan. It is necessary to ensure that the terms stipulated in the employment contract comply with these legal requirements. In addition, when ten or more workers are employed regularly, you must prepare the employment handbook (Shugyokisoku: 就業規則) and notify the Labor Standards Inspection Office (RodoKijunKantokusyo: 労働基準監督署).

Overview of the Social Insurance System and Registration Procedures

All residents in Japan are required to join the social insurance systems administered by the Japanese government. Below are the four types of social insurance systems which employees are required to participate:

Health Insurance (Kenko Hoken: 健康保険): Covers medical expenses and provides allowances for sickness and maternity.
Pension Insurance (Kosei Nenkin: 厚生年金): Provides benefit for retirement, disability, and survivors.
Unemployment Insurance (Koyo Hoken: 雇用保険): Offers financial support to workers who lose their jobs and helps with re-employment.
Worker’s Accident Compensation Insurance (Rosai Hoken: 労災保険): Covers injuries, illnesses, and death related to work.

When a Japanese entity hires an employee, it is required to register the enrollment procedures for these insurances on behalf of the employee. In fact, whenever an employee joins or leaves the company, the entity is responsible for handling the necessary updates to their social insurance records.

Employment-Related Registration with the Local Government

When you hire employees in Japan, you must complete the registrations regarding employment. The main registrations are as follows:

1) Registration with the Local City Office (Shiyakusho: 市役所) or Ward Office (Kuyakusho: 区役所) for Enrollment in Social Insurances like Health Insurance (Kenko Hoken: 健康保険) and Pension Insurance (Kosei Nenkin: 厚生年金)

If your company employs one or more directors or employees who meet the requirements for social insurance, it is mandatory to enroll them in the social insurance program.

2) Registration with the Labor Standards Inspection Office (Rodo Kijun Kantokusyo: 労働基準監督署) for Enrollment for Workers’ Accident Insurance (Rosai Hoken: 労災保険)

If your company employs one or more employees (excluding directors and contractors), it is mandatory to enroll them in the workers' accident insurance (Rosai Hoken: 労災保険).

In addition, you must report and pay the estimated premium for labor insurance (Rodo Hoken: 労働保険), meaning both workers' accident insurance and unemployment insurance (Koyo Hoken: 雇用保険), for the first fiscal year ending March 31st. Labor insurance premiums are calculated annually, for period beginning on April 1st and ending on March 31st.

3) Registration with the Public Employment Security Office (Kokyo Shokugyo Anteijyo: 公共職業安定所) for Enrollment of Unemployment Insurance

If your company employs one or more employees who meet the requirements for enrollment in unemployment insurance, you are required to enroll them in the program. Before enrolling in the unemployment insurance, the enrollment for the worker’s accident insurance with the Labor Standards Inspection Office (as explained above) must first be completed.

All registration procedures can be completed on paper (by mail or in person) or electronically. Filing electronically is an option, but it requires some preparation in advance, such as setting up the necessary digital certifications and permissions. You may refer to e-GOV Electronic Application website トップ | e-Govポータル for more details.

Notifications that Must Be Submitted Annually or Upon Certain Events

Employers in Japan are required to submit notification relating to social insurance programs whenever employees join, leave or experience specific events, as well as at required deadlines. Although the specific requirements vary from each social insurance program, the following key situations require actions by the employer:

1) Changes Related to Employees

Notifications are required in the following cases:

When an employee joins, resigns, deceases, or experience changes in their working conditions that affect their eligibility for social insurance.
When an employee takes a leave of absence due to injury, illness, childbirth, nursing care or other circumstances. In such cases, the necessary procedures must be completed and submitted to ensure that employees can receive the corresponding benefits.

*As of December 2024, health insurance cards issued through companies have been discontinued. Currently, My Number Card (Individual Number Card) serves as an integrated "Maina" insurance card (Maina hoken sho: マイナ保険証) for health insurance purposes.

2) Procedures for Calculating Insurance Premiums

Employers are responsible for calculating and paying social insurances premiums as follows:

Workers' Accident Insurance and Unemployment Insurance: Premium must be calculated and paid annually between June 1st and July 1st.
Health Insurance, Long-term Care Insurance, and Employees' Pension: Premium calculation for all eligible employees must be completed by July 10th each year.
Notifications are also required for significant salary revisions or payments of bonuses.

3) Procedures Related to the Entity

Notifications are also required for changes related to the entity itself, including:

Relocation of the entity’s relocation
Change of the entity’s name
Change of representative

Additionally, under the Labor Standards Law, labor management agreements must also be submitted. Failure to provide these notifications may result in penalties, so employers should ensure compliance with these requirements.

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6STEPS

Here we explain each task divided into six steps

Make a Business Plan

Determine the Ideal Corporate Structure

Register Your Business

Open a Japanese Bank Account

Address Taxation Requirements