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Employment contracts policy in Japan

Terms of contract in Japan

Contract extension in Japan

Fixed-term contracts in Japan

Japan working hours

Remote work in Japan

Tailored employment contracts in 100+ countries

Employment contracts in Japan

If you want to hire workers and build your local team in Japan, you need to make sure your employment contracts are compliant and legally enforceable.

In this guide, you’ll have all the information you need to draft compliant employment contracts in Japan, such as contract terms, regulations around remote work, working hours, and more.

Employment contract laws in Japan

To protect workers’ rights, Japan has established various labour laws that regulate employment contracts. As an employer, you must be well-versed in these regulations to ensure seamless operations and maintain harmonious relationships with your workers. Here are some key laws you need to keep in mind:

Labour standards law: This law sets the minimum standards for working conditions, such as wages, working hours, rest periods, and holidays.
Minimum wages law: The law mandates employers to pay at least the minimum wage, which varies depending on the region and industry. This ensures workers receive a fair wage from their employers.
Health Insurance Law and Employees’ Pension Insurance Law: These laws require employers to enrol their employees in health insurance and pension plans.
Act on Securing, Etc., Equal Opportunity and Treatment between Men and Women in Employment: This law ensures that all employees have equal opportunities and are free from discrimination.
Child Care and Family Care Leave Law: This law allows for leave related to childbirth, childcare, and family care, enabling employees to balance work with family responsibilities.
Employment Security Act: This act focuses on the stability of employment, facilitating job searches, and providing vocational guidance and training.

Breach of employment contract by employer in Japan

When an employer breaches an employment contract in Japan, various legal repercussions may arise, depending upon the nature and severity of the breach. The Labour Standards Law imposes strict requirements on employers, and if they fail to meet these standards, employees can pursue various forms of redress.

For example, if an employer fails to pay the mandated minimum wage as per the Minimum Wages Law, the employee may be entitled to claim the unpaid wages. In cases where the breach involves dismissal, employers must comply with the Labour Standards Law, which requires at least 30 days’ notice or payment instead of notice.

If an employee is unfairly terminated, the employer may be legally required to reinstate the worker or pay compensation. Moreover, if an employer does not provide annual paid leave, this violates the Work-Style Reform Laws and could result in administrative guidance, penalties, or legal action from the employee to enforce their rights.

Disputes over contract breaches can be handled in Japan’s civil court system, or they may be resolved through mediation and arbitration services offered by Labour Commissions.

Permanent employment contracts implications on visas in Japan

In Japan, the type of employment contract can have direct implications on the type of working visa that an individual may obtain. A permanent employment contract may qualify an individual for certain types of working visas that require stable and long-term employment.

For most professional work visas, like the “engineer/specialist in humanities/international services” visa, immigration authorities typically require a confirmed job offer that outlines contract details, including the duration of employment, salary, job description, and other conditions. While a permanent contract isn’t mandatory, having one can show job stability, which is beneficial for visa applications or renewals. It indicates a long-term commitment from the employer, potentially leading to a longer-term visa.

Individuals with permanent contracts generally have a better chance of obtaining or renewing their visas compared to those with temporary or less stable employment. However, it’s important to remember that each visa case depends on the individual’s specific circumstances and the details of their employment contract.

Employment contracts policy in Japan

While it’s not mandatory for employers to draft a written employment contract, they are still required to provide employees with certain essential terms and conditions of employment in a written format.

Businesses that have established work rules must communicate them in writing to their employees.

Japan’s employment policies

Businesses with 10 or more employees are required to establish formal work rules and register these with the Labour Standards Inspection Office. These work rules lay out the key terms and conditions of employment, which include wages, breaks, work hours, holidays, termination procedures, disciplinary protocols, and other important workplace policies.

In addition, these work rules set the baseline for employment conditions, which cannot be reduced by individual employment agreements. This is to make sure that employees understand their rights and responsibilities.

Employment insurance policy in Japan

Employment insurance (often referred to as koyou hoken in Japanese) serves a social insurance program funded by the government to support workers through periods of unemployment.

This system is in place to offer financial assistance to employees who might be laid off or whose contracts are terminated. The program intends to help these workers while they are in transition, looking for new employment opportunities. The employment insurance policy is compulsory and applies to any enterprise employing more than one worker.

Lifetime employment policy in Japan

The concept of lifetime employment is more of a work culture than a formal policy in Japan. This workplace practice is more common in larger companies, where employees typically stay with the same company from the early stages of their career until retirement.

If you want to attract Japanese talent, you must incorporate both traditional and modern practices and respect cultural norms, such as the principle of loyalty and stability.

Employment policy for disabled foreign workers in Japan

Several laws and regulations grant disabled foreign workers employment rights, which are equally accessible to Japanese nationals. Some key policies and regulations include:

Discrimination protection: The Law for the Promotion of Employment of Persons with Disabilities prohibits discrimination against individuals with disabilities in hiring and employment practices. This applies to both Japanese citizens and foreign workers.
Reasonable accommodations: Employers are required to make reasonable accommodations to enable disabled workers to perform their job duties effectively. This may include adjustments to the workplace or work schedule.

Like any other countries, Japan has its own rules and regulations when it comes to employment contracts — and non-compliance could land your company in hot water.

Probationary periods in Japan

While there is no statutory limit, the standard duration of a probationary period usually ranges from three to six months.

A probationary employee with at least 14 days with the company is entitled to the same dismissal rules as permanent employees. This includes a requirement for employers to provide 30-day advance notice or to pay the employee at least 30 days’ worth of average wages if the notice is not given before termination.

Third-party approval in Japan

When establishing your company’s work rules, it’s important to share them with an employee representative or a labour union, if possible, to get their input or feedback. While you are not required to implement their suggestions, taking them into consideration can be a good practice.

Once you have completed this step, you will need to submit these work rules to the Labour Standards Inspection Bureau.

Terms of contract in Japan

Employers and employees have the freedom to enter into fixed-term contracts. These contracts are not automatically renewed; they only continue if both parties agree to do so.

If a contract that began on or after April 1, 2013, is extended past three years, the employee earns the right to ask for a permanent or open-ended contract. However, an employee can extend their contracts up to five years if they have specialised skills or if they are over 60 years old.

In addition, Japanese labour law protects older workers by prohibiting mandatory retirement before age 60. If your company’s retirement age is set below 65, you must either increase it to 65, offer a re-employment option to those who wish to continue working until they turn 65, or entirely remove the retirement age limit.

Indefinite-term employment contracts in Japan

An indefinite-term contract refers to an employment agreement that does not have a specified end date. Employees on such contracts enjoy stable employment conditions, similar to permanent staff.

Under certain conditions, employees on fixed-term contracts can request to convert to an indefinite-term contract. Specifically, if a fixed-term employment contract is renewed beyond a total period of five years or more, the employee gains the right to apply for conversion to an indefinite-term employment status.

The introduction of the right to request a conversion to an indefinite-term contract serves as a protective measure for workers, ensuring they do not face less favourable work conditions than their counterparts on indefinite or permanent contracts due to the term of their contract.

Contract extension in Japan

Employment contract extensions are subject to the Labour Contract Act, which limits how many times certain fixed-term contracts can be renewed. After five consecutive years of renewing these contracts, an employee has the right to request that their contract be converted to an indefinite-term contact. This is to prevent the ongoing use of fixed-term contracts for the same position, which could harm job security and worker benefits.

However, the law does not set a specific limit on how many times a contract can be renewed for independent contractors. This allows the contractor and your company to customise and agree on terms and conditions, such as contract renewals or extensions.

Extension of working visa in Japan

The policy for extending a working visa depends on the specific visa category under which a foreign national is sponsored. For example, the period of stay for a work visa can be set for 1 year, 3 years, 5 years, or even as short as 3 months.

However, extensions are not automatically granted. It requires application and approval based on satisfying the Immigration Services Agency of Japan’s conditions, which include but are not limited to continued employment, financial stability, and adherence to Japanese laws.

Required documents for work visa extension in Japan

To extend a work visa in Japan, foreign nationals generally need to submit several documents to the Immigration Services Agency of Japan. The required documents typically include:

Valid passport
Residence card.
An application form for the extension of the period of stay.
A photograph taken within the last three months.
Documents detailing the activities you will engage in while in Japan, such as a contract or a letter of employment from the company.
Documents proving the company’s eligibility to hire foreign workers, such as financial statements.
Proof of payment for the revenue stamp (application fee).

Fixed-term contracts in Japan

Fixed-term employment contracts have a set duration, usually lasting up to three years. However, an employee can extend their contract for up to five years if they possess special skills or knowledge, or if they are 60 years of age or older.

In addition, if an employee continues to work beyond the standard retirement age or possesses specialised skills, the Director General of the relevant Labour Bureau can approve the extended contract.

Meanwhile, if an employee has been working with a business through a series of fixed-term contracts for more than five years, they have the right to change their contract to a permanent one. This change takes effect right after their current contract ends, and the employer must accept this request.

Japan’s labour law on fixed-term contract

Fixed-term contracts are primarily governed by the Labour Contract Act. Here are some key points about fixed-term contracts under this law:

Equal Treatment: Employees on fixed-term contracts should not be treated less favourably than those on indefinite contracts in terms of pay, benefits, and working conditions, unless there is a justified reason for the difference.
Notice of Termination: Employers must provide notice before terminating a fixed-term contract, especially if it is nearing its end. If they do not intend to renew, they should communicate this clearly.

Breach of fixed-term contract in Japan

When a fixed-term employment contract is prematurely terminated, several legal implications come into play. If an employer chooses not to renew a fixed-term contract, this can have consequences similar to dismissing an employee. Japanese labour legislation requires that employers have a valid reason for not renewing a fixed-term contract if the employee expects the contract to be renewed and if it has been renewed continuously in the past.

Should an employer terminate a fixed-term contract without a substantial reason or prior to its expiry, the employee may be entitled to seek remedies such as compensation for the remaining period of the contract or for any damages suffered due to the premature termination.

Moreover, if an employer frequently renews fixed-term contracts, and the total period of continuous employment exceeds five years, the employee may request to convert their employment contract into an indefinite term, effectively turning it into a permanent position.

Japan working hours

Full-time employees typically work 40 hours per week, which is usually divided into 8-hour days across five days. Employers are expected to comply with these regulations to support the well-being of their employees. Any work beyond these standard hours is regarded as overtime and should be compensated accordingly.

Overtime policy in Japan

When employees work more than their regular weekly hours, it’sit is classified as overtime and should be compensated beyond their regular pay according to their employment contract or any collective agreement. When overtime consistently becomes necessary, a formal agreement should be recorded with the Labour Inspection Office.

There are restrictions on the amount of overtime you can work to protect your employees’ welfare. Overtime should be no more than 5 hours in a single day, 45 hours in a month, or 365 hours across a year. Regulations also dictate the additional compensation required for overtime work.

For up to 60 hours a month of overtime, you should add at least 25% on top of the regular hourly pay. If an employee works more than 60 hours overtime in a month, the rate goes up to at least 50%.

Keep in mind that managers and supervisors might have different rules under the Labour Standards Act, although they still receive extra for late-night hours.

Here is a simple way to figure out the additional pay for overtime:

For overtime work (more than 8 hours a day), add 25% to the base hourly wage.
For late-night work (from 10 p.m. to 5 a.m.), increase it by another 25%.
On weekends and public holidays, provide an additional 35%.
For late-night hours that extend from a day’s overtime, pay an additional 50%.
And if these late-night hours happen to fall on a holiday, the additional payment is 60%.

Working week in Japan

Monday – Friday

Remote work in Japan

While there is not a single law that specifically governs remote work, there are various regulations that provide guidelines around it. For example, the Labour Standards Act (LSA) lays down core working conditions and rights that would also apply to remote work situations.

The Japanese Ministry of Health, Labour and Welfare has issued guidelines for managing telework or remote work. These guidelines advocate for allowing all workers, regular or non-regular, to work from home. Employers are encouraged to adopt remote work options to meet the changing needs of the workplace.

Remote work for foreigners in Japan

Foreigners can work remotely in Japan, but there are specific considerations you need to keep in mind. Japan has introduced a “Digital Nomad” visa for remote workers, which allows them to stay and work remotely in Japan for up to six months. Individuals can apply for the digital nomad visa if they have an annual income of ten million yen or more.

Remote work visa in Japan

The remote work visa, commonly referred to as the “Digital NomafNomad” visa, allows remote workers with an annual income of at least 68,300 USD to live in Japan for up to six months.

To be eligible for this visa, applicants must demonstrate their remote work status and prove that they work for a company outside of Japan. They should also obtain international health insurance coverage for the entire duration of their stay.

Tailored employment contracts in 100+ countries

Like any other countries, Japan has its own rules and regulations when it comes to employment contracts — and non-compliance could land your company in hot water.

Thankfully, our team is experienced in drawing up tailored, compliant contracts in Japan (and more than 100 countries worldwide). That means that, when you work with us, you won’t need to waste time worrying about whether you’ve got it right. Instead, you can focus on what matters: your business.

Get in touch with us today and start building your global teams.

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FAQ's

What is the legal framework for employment contracts in Japan?

Employment contracts in Japan are mainly governed by the Labour Standards Act and the Labour Contract Act. These laws set the main rules for employment terms, working conditions and the rights and responsibilities of employers and employees.

The Labour Standards Act covers minimum employment standards such as wages, working hours, overtime, rest periods, holidays and dismissal notice. The Labour Contract Act covers how employment contracts are agreed, changed and terminated, including rules around dismissal.

Other legislation may also apply. The Minimum Wage Act sets minimum wage requirements, while the Part-Time and Fixed-Term Employment Act provides protections for part-time and fixed-term employees. The Industrial Safety and Health Act, Equal Employment Opportunity Act and Child Care and Family Care Leave Act may also affect the employment relationship. Workplace rules and collective agreements can also form part of the employment terms.

Employers cannot use an employment contract to provide terms below Japan’s statutory minimum employment standards. Where a contract does so, the applicable legal minimum generally takes precedence. The non-compliant part of the contract is invalid and is replaced by the applicable statutory standard.

Are written employment contracts required in Japan?

A labour contract can generally be formed without a single signed contract document. However,employers must provide employees with written details of their key working conditions when they are hired.

This written information should cover important employment terms such as:

contract period.

workplace and job duties.

working hours, breaks and days off.

wages and payment dates.

leave.

rules around resignation and dismissal.

Other applicable conditions, such as pay rises, bonuses, expenses borne by the employee, safety and health, vocational training and disciplinary rules, must also be disclosed, although not all of them are subject to the same written-document requirement. The information can also be provided electronically by email or another permitted method if the employee requests it and can retain or print the record.

Since April 2024, employers must provide some additional information. This includes the possible future locations and duties an employee may be assigned. For fixed-term employees, employers may also need to explain renewal limits and when the employee could become eligible for an indefinite-term contract.

For international hires, employers may choose to provide the employment terms in both Japanese and English. A bilingual version can assist understanding, but the documents should identify which version prevails if the wording differs.

What types of employment contracts exist in Japan?

The main types of employment contracts in Japan are indefinite-term and fixed-term contracts. An indefinite-term contract has no agreed end date and is the usual arrangement for permanent employees. A fixed-term contract in Japan ends on a specified date unless it is renewed or converted.

Employers may also use part-time arrangements, probationary employment, secondments and shorter-working-hours arrangements. These are not separate ways to avoid core employment protections; the applicable rights depend on the individual’s status, hours, duties and the actual working relationship.

Temporary agency work has a different structure. The agency is normally the legal employer, while the individual performs work for an end user under rules that regulate worker dispatching. It should not be confused with direct employment.

A contractor agreement is also distinct from a labour contract in Japan. Calling someone a contractor does not decide their legal status if the business controls their work in a manner consistent with employment.

The right contract type should follow the role’s genuine commercial purpose and working arrangements, rather than a preference for short-term flexibility.

What must be included in an employment contract in Japan?

Employment terms in Japan must include key information about the employee’s contract period, workplace, job duties, working hours, wages, leave and rules for resignation or dismissal.

Employers must provide written information covering:

the start date and contract period.

renewal terms for fixed-term contracts.

workplace, job duties and the scope of possible changes.

working hours, breaks, days off and leave.

wages, including how and when they are paid.

rules on resignation, retirement and dismissal.

Since April 2024, employers must also state the possible scope of future changes to an employee’s workplace and duties. Fixed-term employees must also be told about any limit on renewals. If an employer introduces or shortens a renewal limit after the initial contract, it must explain the reason to the employee in advance.

When a fixed-term employee obtains the right to request indefinite-term conversion, the employer must notify the employee of that right during the relevant renewal and state the employment conditions that would apply after conversion. Other terms, such as probation, bonuses, benefits, confidentiality, intellectual property and remote working arrangements, can also be included where relevant.

Employment terms must comply with Japanese labour law and any applicable workplace rules. For example, an employer cannot use an employment contract to create an unrestricted right to dismiss an employee.

How do fixed-term contracts work in Japan?

Fixed-term employment contracts in Japan are agreed for a specific period and usually cannot exceed three years for a single contract. Employers should state the contract length and explain whether the contract can be renewed and any conditions that apply to renewal. They must also disclose any limit on the number of renewals or total contract duration.

In some cases, a fixed-term contract can run for up to five years, including contracts for certain highly skilled professionals and employees aged 60 or over. A contract linked to the completion of a specific project may also run for the period needed to complete that project.

Employers should also be careful with repeated renewals. If a fixed-term contract has been renewed several times, the employee may have stronger protection against the employer simply deciding not to renew it.

Another important rule is the five-year conversion rule. If an employee has worked for the same employer on renewed fixed-term contracts for more than five years, they can generally request conversion to an indefinite-term contract.

Fixed-term employees are also covered by Japanese employment protections, including paid annual leave and applicable social insurance.

What is the 5-year fixed-term conversion rule in Japan?

The five-year rule allows employees who have worked for the same employer on renewed fixed-term contracts for more than five years to request an indefinite-term contract.

The rule generally applies when an employee has had two or more fixed-term contracts with the same employer and the total contract period goes beyond five years. A break between contracts may affect the calculation. In general, a break of six months or more resets the aggregate period, although a shorter break can be sufficient where the preceding contract period was less than one year.

The employee needs to request the change while their current fixed-term contract is still active. If they do, their employment becomes indefinite after the current contract ends. Their other employment conditions generally stay the same unless different terms have been agreed or lawful work rules provide otherwise.

Employers should keep track of contract start dates and renewals, so they know when an employee is approaching the five-year point.

There are some exceptions. For example, special rules can apply to certain highly skilled professionals and employees who continue working on fixed-term contracts after reaching retirement age.

Can employers modify or terminate employment contracts in Japan?

Yes. Employers can change or terminate employment contracts in Japan, but they must follow Japanese employment law and cannot generally make significant changes to agreed terms without a valid basis.

Changes to salary, working hours, duties or other agreed employment conditions will often require the employee’s agreement. Employers may be able to change conditions through workplace rules in some circumstances, but the changes need to be reasonable and communicated to employees.

Employers can also dismiss an employee, but Japan has strong protections against unfair dismissal. There generally needs to be a valid reason, such as serious misconduct, ongoing performance issues or genuine business circumstances, and the employer should follow a fair process. More precisely, a dismissal is invalid if it lacks objectively reasonable grounds and is not considered appropriate in general societal terms.

Employers generally need to provide at least 30 days’ notice or payment instead of notice. However, giving notice alone does not make a dismissal valid.

Fixed-term contracts normally end on their agreed end date, although additional rules can apply where a contract has been repeatedly renewed.An employer generally cannot dismiss a fixed-term employee before the agreed expiry date unless unavoidable circumstances exist. Non-renewal may also be restricted where the employee has a reasonable expectation that the contract will be renewed.

What are work rules (就業規則) in Japan and how do they affect employment contracts?

Work rules, or shūgyō kisoku, are written workplace rules covering matters such as working hours, wages, leave, discipline, retirement and dismissal. They are a central part of employment contracts in Japan because they can apply across the workforce alongside each employee’s individual agreement.

An employer that continuously employs 10 or more workers at a workplace must prepare work rules and file them with the relevant Labour Standards Inspection Office. The employer must also obtain the opinion of the majority trade union or, where there is none, a representative of most workers.

The rules must be made available to employees. They cannot provide conditions below statutory minimums, and a contractual term that is less favourable than the applicable work rules may be invalid. An individually agreed term that is more favourable to the employee is not generally displaced merely because the work rules provide a lower standard. Work rules should not be copied from another country’s employee handbook. They must reflect the Japanese workplace, including its pay structure, working-time model and disciplinary process. Consistent work rules give the business a stable foundation, but only when employees can access and understand them.

What is the Freelance Protection Act and how does it affect employment contracts in Japan?

Japan’s Act on Improvement of Transactions between Freelancers and Business Operators, commonly known as the Freelance Act,protects freelancers when they work with businesses and helps companies distinguish between engaging a freelancer and hiring an employee. It took effect on 1 November 2024 and applies to certain transactions between businesses and freelancers.

Under the Act, businesses engaging covered freelancers must clearly communicate key terms such as the work to be completed, payment amount and payment date. The Act also includes rules around late payments, unfair treatment and harassment. Where the statutory payment deadline applies, remuneration must generally be paid as soon as possible and no later than 60 days after the freelancer supplies the relevant goods or services.

Additional requirements can apply to longer-term freelance arrangements, including support relating to pregnancy, childcare and family care, as well as advance notice when certain ongoing engagements are ended or not renewed. For covered engagements lasting six months or more, the commissioning business must generally provide at least 30 days’ advance notice of termination or non-renewal, subject to limited exceptions.

For employers, the important point is that calling someone a freelancer does not automatically make them one. If the person works under conditions that are more like employment, they may still be treated as an employee under Japanese labour law and receive the relevant employment protections.

How does CXC ensure legally compliant employment contracts in Japan?

CXC helps companies prepare employment contracts in Japan that meet local labour requirements and reflect the employee’s actual role and working conditions.

Through our Employer of Record service in Japan, we manage locally compliant employment contracts as part of the hiring and onboarding process. This includes important terms covering salary, working hours, leave, probation, workplace and duties, fixed-term arrangements and termination.

We also account for Japanese requirements that may not appear in a company’s standard global employment contract. For example, fixed-term contracts need the appropriate renewal information, while workplace rules can affect an employee’s working conditions.

With more than 30 years of workforce management experience, CXC supports global and enterprise companies hiring across Japan and other international markets. This helps businesses maintain consistent employment processes while meeting the local requirements in each country.

Speak to our team to learn more about hiring employees in Japan with CXC.

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