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Hiring in Japan

Background checks in Japan

Hiring employees and other types of workers in Japan

Main language used in Japan

Japan's payroll system

Easily and compliantly hire workers in Japan

Employer of Record (EoR) in Japan

As one of the world’s leading economies, Japan is an attractive destination for companies looking to expand their market reach and grow. However, starting a business in Japan can be challenging due to cultural differences and local regulations, including the costly and time-consuming process of setting up a local entity.

To overcome these challenges, it’s important to find a partner who has deep local knowledge and expertise—one that can provide a tailored approach to help ensure seamless market entry. Many modern companies are now using services like employer of record (EoR) to effectively build their local teams in Japan.

What is an employer of record (EoR) services?

An Employer of Record (EOR) is an external service provider or organisation that legally employs workers in a country or region where you do not have a local office or entity. With an EoR, you can offload the administrative and legal tasks related to hiring international workers, including payroll, taxes, benefits, and compliance.

Choosing to partner with a reputable EoR provider, such as CXC, allows your business to seamlessly manage international workers without facing legal challenges. This means the EoR provider will ensure full compliance from onboarding to offboarding of your workers, enabling you to focus on other important aspects of your business.

Using EoR solutions in Japan

Employer of Record (EoR) services are highly recommended for companies looking to establish a presence in Japan for several reasons, such as:

Speeds up hiring process: An EoR can significantly speed up the process of entering the Japanese market. This is because using an EoR service bypasses the need to set up a legal entity in Japan, which can be a time-consuming and complex process. Companies can start operations and hire employees more quickly through an EoR’s established infrastructure.
Compliance with local labour laws: Japan’s employment laws and business regulations are complex and can be difficult for companies unfamiliar with the market. EoRs ensure that employment practices are compliant with local laws, reducing the risk of legal issues and fines.
Cost-effectiveness: Setting up a legal entity in Japan can be expensive. EoR services offer a more cost-effective solution by allowing companies to hire talent without the overhead associated with creating and maintaining a local subsidiary.
Risk mitigation: You can mitigate the risks associated with hiring international talent, such as employment disputes or issues related to termination. The EoR provider takes on these responsibilities, protecting your companies from potential legal and financial risks. .
HR and administrative support: An EOR takes care all aspects of human resources and payroll administration, including tax withholding, social security, and other benefits. This enables you to focus on other important aspects of your business.

Hiring in Japan

If you are planning to build a local team in Japan, you need to be creative with your recruitment practices, as hiring in the country has traditionally been difficult. In addition to offering an attractive compensation benefit package, you should also consider cultural factors and norms to understand what local talent wants.

Typically, local talent looks for job stability. Many Japanese professionals prioritise working for a stable, reputable company with a strong track record. A company’s brand, history, and market position are important factors for them when choosing their next employer.

Opportunities for career growth and advancement are also highly valued. Professionals seek employers who offer clear career paths, training, and development programs.

While Japanese workers are known for being notoriously hardworking, they are looking for companies that support a healthy work-life balance. Your company can offer flexible working hours, remote work options, and reasonable overtime expectations to stand out from the crowd.

Aside from flexibility, you need to craft a compelling and attractive salary packages and benefits. This includes offering bonuses, health benefits, retirement plans, and other perks.

In addition, long-term employment matters in Japanese culture. Professionals often look for companies that offer stable and secure positions.

Hiring challenges in Japan

Hiring a local talent in Japan can be quite challenging. It requires a tailoired recruitment approach that meets the needs of the Japanese market. Here are some key reasons why hiring in Japan can be difficult:

Demographic factors: With low birth rates and an ageing population, Japan faces a shrinking working-age population. This leads to a smaller pool of available workers, creating a talent shortage across various industries.
Cultural work preferences: Generally, many Japanese workers prefer stable, long-term employment over job-hopping, which can limit the number of applicants for new positions or opportunities. Companies sometimes struggle to find candidates willing to change employers.
Skilled labour shortage: Japan’s advanced technology and manufacturing sectors have specific skill requirements, and there’s often a mismatch between the skills available in the job market and the needs of these high-tech industries.
Immigration policies: Japan has traditionally had strict immigration controls which limit the inflow of foreign workers to fill labour gaps, although there has been some easing of these policies in recent years.
Language barrier: Proficiency in the Japanese language is often a prerequisite for employment, which can be a barrier for foreign workers and limits the pool to native speakers or those willing to invest in language proficiency.

These challenges combined make it particularly difficult for companies looking to expand in Japan, and they often have to adopt creative strategies to overcome these issues.

Hiring practices in Japan

Given these hiring challenges, it’s important to do your own research and understand the unique aspects of the Japanese job market. This includes getting a hand on local employment trends, salary expectations, and cultural nuances that influence job searching and hiring practices.

Traditionally, job security has been a major factor for Japanese job seekers, often their top priority over other considerations. While this is slowly changing, a company’s reputation and stability remain important factors for prospective employees. Highlighting your company’s stability, growth prospects, and reputation can help attract local talent.

Although evolving, the concepts of lifetime employment and seniority-based progression still influence the Japanese job market. As an employer, you need to understand these cultural nuances and consider how they might align or conflict with your own corporate culture and hiring practices. Providing cultural sensitivity training to your local and foreign employee can help foster a harmonious workplace.

And if you want to build your local team quickly and compliantly, leveraging specialised recruitment agencies or workforce solution providers, such as CXC, can help you understand the local market and achieve your recruitment goals. Maximising your networks for referrals can also work to tap highly skilled local talent. You also need to build a strong employer brand and offer appealing career development opportunities to stand out.

Background checks in Japan

Are employee background checks legal in Japan?

Yes, Japan conducts employment background checks, but the process is governed by strict laws related to data privacy. Before conducting a background check, companies must obtain explicit, written consent from the candidate, which outlines the purpose and scope of the check.

How to do background check in Japan

Conducting employee background check in Japan must be done carefully to avoid facing any legal trouble. Some factors you need to consider include:

You must obtain the candidate’s consent: Before anything else, you must obtain explicit, written consent from the candidate. The candidate must be aware of the purpose and scope of the investigation.
Understand Japan’s privacy laws: Japan has strict privacy regulations governed by the Act on the Protection of Personal Information (APPI). You have to make sure you are compliant with these laws when collecting, storing, and using personal data for background checks.
Verify personal information: In Japan, the background check process generally starts with verifying the applicant’s identity, such as the candidate’s full name, date of birth, residential address, nationality, marriage status, and family history.
Verify employment history: After obtaining consent, companies can contact the candidate’s previous employers to confirm employment dates, job titles, and responsibilities. Japanese companies may be cautious about providing detailed references, so prepare to work with general confirmation of employment.
Verify professional licenses: If the candidate holds any professional licenses or certifications, companies typically verify their validity with the relevant Japanese regulatory bodies.

Aside from conducting background checks, some employers request a general health check to ensure that candidates are fit for the job and capable of performing job-related tasks safely. This might include assessments for overall physical health, vision, or hearing, depending on the nature of the job. Certain types of health checks, such as HIV testing and genetic diagnostics, are subject to strict regulations.

Conducting criminal record checks in Japan

Criminal record checks are usually done through local police departments. Individuals need to request their own criminal record check from local police stations or the appropriate authorities. Employers typically can’t access this information directly. The candidate must obtain a certificate of criminal record (often called a “Certificate of No Criminal Record”) and provide it to the employer.

Foreign nationals working in Japan

Before hiring international workers, companies need to make sure that candidates have the right visa to work legally in Japan. Each candidate must hold a valid status of residence that allows them to work. Different types of visas come with specific rules about what kind of work is allowed and how long the individual can stay. It’s important to check that the candidate’s visa matches the job responsibilities. For example, a visa meant for a specific type of work may not be valid for other roles.

Hiring employees and other types of workers in Japan

Hiring employees in Japan

Employees are typically categorised into one of three main groups: regular employees, fixed-term contract employees, and dispatched employees. They are categorised based on their employment type and contract terms.

Regular employees: Regular employees, also known as “seishain” (正社員), are permanent, full-time workers. Companies often hire regular employees with the expectation of long-term employment. They generally receive benefits such as health insurance, pension plans, and other company-specific perks.
Fixed-term contract employees: Fixed-term contract employees, or “kikan keiyaku shain” (期間契約社員), are hired on contracts that specify a set period of employment. The Japanese labour law mandates if a fixed-term contract employee works under a fixed-term contract for more than 5 years, with renewals and no breaks in employment of 6 months or more, the employer must offer the employee an indefinite-term (permanent) contract upon the employee’s request. This regulation provides more job security for fixed-term employees and prevent indefinite renewals of temporary contracts.
Dispatched Employees: Dispatched employees, or “haken shain” (派遣社員), are workers provided by a staffing agency to work for another company on a temporary basis.

Hiring independent contractors in Japan

Unlike in employment contracts, independent contractor agreements are entered into not between “”workers”” (労働者 or “”rodo-sha””) and “”employers”” (使用者 or “”shiyo-sha””) but rather between two parties as separate entities on a more equal footing.

They have the autonomy in terms of how they want to execute their work, without the level of supervision or control typically seen in an employer-employee relationship. Moreover, independent contractors in Japan operate under a consumption tax (CT) system rather than VAT, with obligations to register for and charge CT if their business income exceeds ¥10 million over two calendar years.

Hiring agency workers in Japan

Commonly referred to as dispatched workers, agency workers are individuals employed by a staffing agency and then dispatched to work at a client company.

A staffing agency employs dispatched workers, not the company for whom they work directly. This means that the agency, not the client company, handles their employment terms. Hiring dispatched workers is a common practice because it can help companies lessen some of the burden associated with the employment relationship.

However, there are strict rules about the roles that dispatched workers can fill. These regulations cover things like the level of control a company can exert over these workers and how long they can be assigned to the same position. The sector is heavily regulated, and violating these rules can lead to serious penalties. Therefore, it’s important to work with reputable and licensed dispatching agencies.

Moreover, the Ministry of Health, Labour, and Welfare issued new guidelines, effective April 1, 2021, mandating that dispatched workers receive the same pay as regular employees when performing the same or similar tasks. Companies cannot have wage differences without valid reasons.

Hiring foreign workers in Japan

Japan offers various visa categories for foreign workers, depending on their field of work, qualifications, and the duration of their stay. When hiring foreign workers in Japan, you should ensure that the potential hire obtain the correct work visa before starting the employment.

As per the Japan employment laws, companies must report the hiring of a foreign employee to Hello Work (ハローワーク), the government’s Employment Service Centre. This notification must include information about the employee, such as their full name and visa status.

Moreover, foreign workers in Japan are protected under the same labour laws as Japanese nationals, such as regulations around work hours, minimum wage, overtime compensation, and safe working conditions. As an employer, you must ensure compliance with these laws to provide a fair and safe working environment.

As an employer, you are also expected to assist foreign workers with the integration process. This can include support for finding housing, understanding Japanese customs and practices, and navigating the local healthcare system. Providing language support or training can also be helpful, as it facilitates smoother communication within the workplace and eases the employee’s adjustment to living in Japan.

Meanwhile, the Japanese Ministry of Health, Labour and Welfare offers a “”Consultation Line for Foreign Employees”” in multiple languages to assist foreign workers with questions related to working conditions, laws, regulations, and referrals to relevant agencies. Employers should make their foreign employees aware of these resources.

Main language used in Japan

In business settings, Japanese is the main language used. However, it is important to provide employees with employment agreements and work rules in a language they can understand. This ensures that all employees fully comprehend their rights, obligations, and the company’s expectations.

In addition, the local labour bureau must receive a Japanese translation of any documents that are originally in a foreign language, like English. This requirement helps ensure that all employees, regardless of their language skills, can access and understand their employment terms.

For business owners looking to expand into the Japanese market, investing in Japanese language training for key employees or hiring bilingual staff can be beneficial. In international business contexts, English is often used as a secondary language, especially in situations where language skills are still being developed. Many Japanese business professionals have some proficiency in English, so companies may use it during meetings with foreign partners.

Japan's payroll system

To run payroll in Japan, you need to establish a legal entity. This requirement ensures that your business complies with Japan’s strict labour and tax laws.

However, international companies looking to build a workforce in Japan have another option: using an Employer of Record (EoR) service. An EoR acts as the legal employer for your staff in Japan and handles the complicated local payroll, including taxes and social security contributions. This enables your company to quickly and compliantly build your local team and establish your presence in the local market right away.

Japan payroll process and best practices

To implement payroll effectively in Japan, companies should consider these best practices:

Properly classify employment status: Determine whether your workers will be freelancers or full-time employees as their status affects tax and insurance obligations.
Setup accurate payroll calculations: Ensure that payroll calculations consider all necessary deductions, contributions, and withholdings. Familiarity with local wage laws, including minimum wage variations across different regions, is vital.
Pay attention to cultural norms: The punctual nature of wage payments is a reflection of broader Japanese cultural expectations that value precision and reliability.
Employ the right tools and services: Using global payroll solutions or consulting with firms that understand the intricacies of the Japanese payroll system can greatly reduce the risks of non-compliance.

Japan’s payroll laws

When managing payroll in Japan, there are various labour laws and regulations set in place to ensure your employees are paid and treated fairly. Here are some of the key payroll laws in Japan to keep in mind:

Labour Standards Act: This sets the minimum standards for working conditions, including wages, work hours, and safety.
Health Insurance Act: It mandates employee enrolment in public health insurance systems, detailing the contributions for both employer and employee.
Welfare Pension Insurance Act: This mandates employer and employee contributions to the national pension system for the employees’ retirement.
Employment Insurance Act: This Act establishes the requirement for participation in employment insurance to provide benefits in the event of job loss.
Worker’s Accident Compensation Insurance Act: It covers industrial accident insurance that protects employees in case of work-related injuries, illnesses, or deaths.
Income Tax Act: It regulates the withholding of income tax from employees’ salaries, as well as the necessary annual reporting requirements.
Local Tax Act: This governs the assessment and collection of inhabitants (local) taxes from employees’ wages.
Act on the Protection of Personal Information (APPI): The Act outlines the handling and protection of personal information, which should be considered when managing the employee’s personal information.

Easily and compliantly hire workers in Japan

Hiring employees in Japan usually means setting up a legal entity, which can be expensive and time-consuming. Employers can avoid this hassle by working with an Employer of Record (EoR), like CXC.

Through our EoR solution, you can confidently hire workers in Japan, without worrying about compliance issues. We’ll handle everything from payroll to benefits to employment contracts on your behalf — so all you have to think about is finding the right person for the job.

Speak to our team and learn how we can support your global expansion journey in more than 100 countries worldwide.

Read about EoR services

Compliantly hire workers anywhere with CXC

With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.

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