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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
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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.
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:
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.
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.
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.
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 (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.
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.
Several laws and regulations grant disabled foreign workers employment rights, which are equally accessible to Japanese nationals. Some key policies and regulations include:
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.
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.
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.
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.
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.
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.
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.
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:
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.
Fixed-term contracts are primarily governed by the Labour Contract Act. Here are some key points about fixed-term contracts under this law:
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.
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.
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:
Monday – Friday
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.
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.
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.
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.
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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