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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

FAQ's

What are the legal requirements to hire employees in Japan?

Hiring employees in Japan requires an employer to provide clear written employment terms, operate compliant payroll and meet the relevant labour and social-insurance obligations. Whether a company hires directly or uses an employer of record in Japan, the employment arrangement must reflect the employee’s actual role, work location, pay and working time.

Key requirements commonly include:

Confirming the individual’s right to work in Japan where immigration permission is needed.

Giving written notice of core working conditions, including wages, hours, duties and contract duration, as required by the Labour Standards Act. The required conditions may be provided electronically where the employee requests this and the applicable requirements are met.

Registering and administering applicable health insurance, pension, employment insurance and workers’ accident compensation insurance.

Withholding income tax and managing local tax payroll processes.

Filing work rules with the Labour Standards Inspection Office when a workplace regularly employs 10 or more workers.

Overtime also requires a valid Article 36 agreement before it is worked. The agreement must be concluded with the relevant majority union or properly selected employee representative and filed with the Labour Standards Inspection Office. It does not remove the statutory overtime limits or the obligation to pay overtime premiums. A sound set-up starts with matching the contract, payroll and actual working arrangements.

Do you need a local entity to hire employees in Japan?

A company does not necessarily need to incorporate its own Japanese subsidiary to hire employees, but the proposed structure must be assessed carefully. A foreign company may be able to employ personnel directly after completing the necessary employer, payroll, tax and social-insurance registrations, or it may use a properly structured local employment provider.If a company hires employees directly, it needs to meet Japanese employer requirements. This includes employment contracts, payroll and tax withholding, social insurance and ongoing HR administration. Setting this up can require additional time and local expertise, particularly for a company making its first hires in Japan. The arrangement may also create corporate-tax or permanent-establishment considerations that should be reviewed separately.

An EOR in Japan provides an alternative. The EOR becomes the employee’s legal employer in Japan and manages the local employment requirements, while the employee works for your business.

This can be useful if you want to hire in Japan without setting up an entity, need to make your first few hires, or want local employment and payroll support already in place, provided the division of responsibilities complies with Japanese employment and worker-dispatch legislation.

How long does it take to hire employees in Japan?

Hiring an employee in Japan can take a few days to a few weeks once you have selected a candidate who already has the right to work and your local employment setup is ready.

The timeline is usually longer if you need to set up a Japanese entity before making the hire. Company registrations, payroll, social insurance and other employer requirements need to be in place before the employee can be properly onboarded.

Hiring someone who needs a Japanese work visa will also take longer. The immigration process needs to be completed before the employee can start work, and processing times vary based on the visa type and individual application.

Using an Employer of Record in Japan can reduce the setup time because the local employment and payroll infrastructure is already in place. This can be particularly useful when making a first hire or when the business does not plan to establish a Japanese entity.

When should companies use EOR services in Japan?

Companies should consider using an Employer of Record (EOR) in Japan when they want to hire employees without setting up a Japanese entity or do not have the local HR and payroll expertise to employ them directly.

An EOR can also be useful when a company:

is making its first few hires in Japan.

wants to start hiring while deciding whether to establish a local entity.

needs local support with Japanese payroll, social insurance and employment requirements.

has a small Japanese team and does not need its own local HR and payroll operation.

The EOR becomes the legal employer and manages employment contracts, payroll, statutory deductions, social insurance and ongoing employment administration.

For international companies expanding into Japan, this provides a way to hire locally without first building the employment infrastructure needed to manage employees directly.

How much does an employer of record cost in Japan?

There is no statutory or standard EOR fee in Japan. Providers may charge a fixed monthly fee per employee, a percentage of payroll or a customised enterprise rate. Pricing depends on factors including headcount, salary, benefits, immigration needs and the scope of HR support. The monthly EOR fee generally covers services such as local employment contracts, payroll processing, social insurance administration, tax withholding and ongoing employment support. Some providers charge separately for visa support, onboarding, offboarding or other additional services.

Businesses also need to budget for employer social insurance and labour insurance contributions, which are separate from the EOR service fee. For a typical office employee, these can add roughly around 15% or more of salary, although the actual amount varies with factors such as salary, location and insurance rates.

Employees’ Pension Insurance contributions are generally shared equally between employer and employee, while health-insurance rates can vary. Employment insurance and workers’ accident compensation insurance must also be considered. When comparing EOR providers in Japan, check what is included in the monthly fee and whether there are additional setup, immigration, foreign exchange or termination charges.

What should you look for in an EOR provider in Japan?

When choosing an EOR provider in Japan, look for strong local employment expertise, compliant payroll and social insurance support, transparent pricing and reliable HR support for employees.

Key things to check include:

Japanese employment contracts and written working-condition notices.

Payroll, income tax withholding, social insurance and year-end tax adjustment support.

Working hours, overtime, leave and other employment records.

Local HR support for employee questions, performance issues and workplace matters.

Visa and immigration support for foreign employees, where required.

Support with resignations, terminations and offboarding.

Transparent pricing, including onboarding, monthly and exit fees.

You should also ask how the employment arrangement works in Japan. The provider should explain who legally employs the worker, which responsibilities it manages, and which responsibilities remain with your company. The service agreement and day-to-day practice should reflect the same allocation of responsibilities.

Before signing, check the provider’s experience in Japan and who will support your employees locally. This is particularly important when employment issues need a quick response or knowledge of Japanese labour requirements.

What happens when you stop using an employer of record in Japan?

Stopping an employer of record in Japan does not automatically transfer the employee to the client company. The EOR remains the legal employer until the employment relationship is validly ended or the individual agrees to a new arrangement with another employer.

A planned transition usually involves agreeing the future employer, reviewing the employee’s consent, preparing new employment terms and coordinating the final payroll and social-insurance processes. Accrued annual leave, unpaid expenses, bonuses and notice rights must be handled under the existing contract and Japanese employment rules.

If the client intends to employ the person directly, it must be ready to take on payroll, tax, insurance, employment-record and workplace obligations from the agreed transfer date. A new employer should not assume it can simply reset service-related rights or impose a new probation period.

Where the employee holds a work status linked to their role or affiliated organisation, immigration implications also need checking before the change takes effect. Certain mid- to long-term residents must notify the Immigration Services Agency of a change in their affiliated organisation, generally within 14 days.

A well-managed exit protects continuity for the employee and avoids creating a gap between legal employment arrangements.

What are the risks of not using an EOR in Japan?

Not using an EOR in Japan is not inherently risky if the company has a compliant local entity, payroll capability and experienced employment support. The risk arises when a foreign business hires directly without an equally robust way to meet Japanese employer obligations.

Common problem areas include unclear working-condition notices, missed insurance registration, incorrect income-tax withholding, poor overtime controls and incomplete leave records. Employers may also face difficulties if they classify a person as an independent contractor when the real working relationship looks like employment. Classification depends on the substance of the relationship, including control, working arrangements, remuneration and economic dependence, rather than the title of the agreement alone.

Termination is another sensitive area. Japanese law generally gives employees significant protection, so a dismissal cannot be treated as a routine commercial decision. Under the Labour Contract Act, a dismissal that lacks objectively reasonable grounds and is not considered appropriate in general societal terms can be invalid. Employment disputes, unpaid amounts and reputational damage can follow where processes are handled informally.

An EOR in Japan can provide a local employment structure, but it is one of several compliant options. Companies with their own entity still need country-specific payroll, HR and legal controls. The right approach is the one that gives the business clear accountability for every employer duty.

How do EOR services in Japan manage the Nenmatsu Chousei?

EOR services in Japan manage Nenmatsu Chōsei by collecting the employee’s year-end tax information, calculating the correct annual income tax, adjusting any difference through payroll and completing the required year-end reporting.

Nenmatsu Chōsei is Japan’s year-end tax adjustment process. Because the EOR is the legal employer, it generally manages this process for eligible employees as part of Japanese payroll. The adjustment reconciles national income tax and special reconstruction income tax withheld from salary; it is separate from the calculation and collection of local inhabitant tax.

The process usually involves:

Asking employees to submit the required year-end tax forms and information by a set deadline.

Checking eligible deductions, such as dependent, spouse and insurance deductions.

Comparing the income tax already withheld during the year with the employee’s final annual tax calculation.

Refunding overpaid tax or collecting any shortfall through payroll.

Issuing the employee’s annual withholding certificate, known as the Gensen Chōshūhyō.

Not every employee can complete their tax obligations through Nenmatsu Chōsei. Some employees may still need to file their own Japanese income tax return, for example where their circumstances fall outside the employer-led year-end adjustment process. This commonly includes employees whose annual employment income exceeds JPY 20 million, certain employees with income from multiple sources, and employees who need to claim deductions that cannot be completed through the employer’s adjustment.

For companies using an EOR in Japan, the EOR typically manages the payroll administration and employee communication needed to complete the year-end adjustment on time. Employees must still provide complete and accurate declarations and supporting documents by the provider’s deadline.

What makes CXC a reliable employer of record partners in Japan?

CXC is an experienced Employer of Record partner in Japan, backed by more than 30 years in workforce management and the capability to support businesses across 100+ countries.

In Japan, CXC can legally employ workers on behalf of companies that do not have a local entity, while managing the employment administration required throughout the employee lifecycle.

CXC’s EOR support in Japan includes:

Compliant employment contracts and onboarding.

Monthly payroll and salary payments.

Income tax withholding and year-end tax processes.

Social insurance enrolment and statutory contributions.

Leave, benefits and ongoing HR administration.

Support with employment changes and offboarding.

Local support for employees and employers when questions arise.

This gives companies one partner for their Japanese workforce and wider international hiring, particularly when expanding into Japan or hiring across several countries.

Speak to our team today to discuss your hiring plans in Japan.

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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