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Minimum wage in Japan

Japan payroll

Japan's social security

Employee benefits in Japan

Compliant, seamless payroll and benefits in Japan and beyond

Payroll in Japan

Managing payroll in Japan has its own challenges, particularly the complex regulations around taxation and statutory benefits. As an employer, you need to understand and follow these rules to avoid costly payroll mistakes and potential risks for your business.

In this guide, you’ll learn everything you need to know about compensation and benefits in Japan, including the minimum wage, statutory benefits, payroll cycle, and more.

Payroll outsourcing in Japan

If you’re unfamiliar with the Japanese market, outsourcing payroll to a reliable provider, such as CXC, can offer numerous strategic advantages. Japan’s payroll, tax, and employment regulations can be complex, and specialised payroll providers have the expertise to handle them. This can help streamline your business processes and ensure you fully comply with local labour laws and regulations.

Outsourcing payroll not only reduces the risk of legal issues but also lets your team focus on important business strategies and growth opportunities instead of getting bogged down with payroll administration.

In addition, a reputable payroll provider offers greater accuracy and timely execution of payroll tasks. This includes correctly calculating employee withholdings, social insurance contributions, and year-end tax adjustments. When your employees are paid accurately and on time, it boosts morale and productivity.

Investing in payroll outsourcing can also provide scalability, which is crucial as your company grows. A flexible payroll solution can easily adapt to an increasing number of employees and the associated complexities, ensuring your expansion is supported by a strong administrative foundation.

Minimum wage in Japan

In Japan, the minimum wage is set at the prefectural level, meaning the applicable rate depends on where the employee works. There is no single national hourly or monthly minimum wage.

As of 2026, indicative minimum hourly wages in major prefectures are approximately:

Tokyo: JPY 1,130 per hour.
Osaka: JPY 1,080 per hour.
Kyoto: JPY 1,050 per hour.

Rates differ across Japan’s prefectures and are reviewed annually, typically reflecting local economic conditions and cost-of-living factors.

Many international and large domestic employers choose to pay above the statutory minimum, particularly in metropolitan areas or for roles requiring specialised or in-demand skills. Competitive compensation is often necessary to attract and retain qualified talent in Japan’s tight labour market.

Minimum wage for foreign workers in Japan

The prefectural minimum wage applies equally to Japanese and foreign workers. There is no separate or reduced minimum wage for foreign nationals.

All employees in Japan, regardless of nationality, visa type, or employment status, are legally entitled to receive at least the applicable minimum wage for the prefecture in which they work.

Japan payroll

Payroll cycle in Japan

Most companies operate on a monthly pay cycle, meaning employees are paid once a month for the work performed during the month.

During the payroll process, various deductions are made from employees’ salaries, including income tax, social insurance premiums, and other mandatory contributions.

Payroll tax and deductions in Japan

There are several mandatory payroll deductions that employers must withhold from employees’ salaries. These deductions include:

Employee income tax: Employees in Japan are subject to income tax, which is calculated as a percentage of their salary. Employers are responsible for withholding this tax and paying it to the tax authorities on behalf of their employees. The tax rate depends on the employee’s income level.
Resident tax: This local tax is also withheld by the employer and varies by the employee’s place of residence.
Social insurance: This includes contributions to Japan’s health insurance and pension system. The rates can vary depending on the specific plan, but employers are required to enrol their employees in these programs and withhold the appropriate contributions from their wages.
Employment insurance: A portion of employees’ salaries goes towards unemployment insurance. This provides support if an employee loses their job.
Labor insurance: In some cases, employers will also contribute to labour insurance which includes workers’ accident compensation insurance and employment-related Insurance.

13th salary in Japan

It’s customary to receive a 13th-month salary, which is often given as a summer bonus in June, and a 14th-month salary as a winter bonus in December.

Social security contributions in Japan

Japan’s social security system provides a wide range of protections for employees, including pension contributions and healthcare coverage. Employees aged 20 to 59 are required to participate in the national pension system, which offers benefits for old age, disability, and survivors. Starting in April 2024, the monthly contribution for this system will be 16,980 JPY.

In addition to pensions, the social security system—managed by the Ministry of Health, Labour, and Welfare—requires both employers and employees to contribute. These contributions help fund various benefits, such as healthcare, disability support, and unemployment insurance. Essentially, everyone living in Japan is required to be covered by public health and pension insurance systems.

Social security benefits in Japan

Here’s the list of benefits provided under Japan’s social security system for employees:

• Pension benefits: The system includes a pension plan that ensures financial stability for individuals upon reaching retirement age. This includes provisions for an old-age pension, a disability pension for those unable to work due to illness or injury, and survivor’s benefits for the families of deceased employees.

Healthcare benefits: Employees contribute to a health insurance system that covers a wide range of medical treatments and services. This includes hospital visits, prescription medication, and certain preventative care services.
Employment insurance: This offers protection against unemployment, providing financial assistance to employees who lose their job until they can find new employment. It also includes benefits tied to job searching, retraining programs, and support for workplace injury or illness.
Child benefits: Contributions to a social welfare system provide child benefit, supporting families with the costs associated with raising children.
Long-term care insurance: For those who require care due to old age or disability, Japan’s social security system includes long-term care insurance, which helps cover the costs of services like in-home care, adult daycare, and other support services necessary for daily living.

Japan social security for foreigners

Foreign nationals living and working in Japan must contribute to the social security system, just like Japanese nationals. This means they need to pay into pension, health insurance, and employment insurance schemes. The social security system is set up so that everyone who contributes can benefit from services like healthcare, pensions, and unemployment support.

In addition, Japan has social security agreements with certain countries to prevent double payments. This means foreign workers won’t have to pay social security contributions in both their home country and Japan.

Employee benefits in Japan

Full-time employee benefits in Japan

In Japan, full-time employees are entitled to several statutory benefits to ensure they have access to necessary support for financial, health, stability, and work-life balance. These benefits include:

Health insurance
Employees are covered by the national health insurance system or a company health insurance plan, which helps cover medical expenses. Under these systems, employees can access a wide range of healthcare services, including doctor visits, hospital stays, and prescription medications. Typically, employees contribute a portion of their salary toward the insurance premiums, while employers also contribute, ensuring that both parties share the responsibility of healthcare costs.
Pension
Employees must contribute to the National Pension System, which provides benefits for old age, disability, and survivors. The amount received upon retirement depends on the total contributions made throughout one’s working life, making it essential for employees to understand how the system works and to plan accordingly for their retirement.
Employment insurance
This provides financial support during periods of unemployment, as well as benefits for maternity leave and childcare.
Paid leave
Full-time employees are entitled to annual paid leave, which starts at a minimum of 10 days per year and increases with length of service. This allows employees to take the necessary time off for rest and personal matters.
Maternity leave
Female employees are entitled to maternity leave, usually for 14 weeks, with some benefits available during this period.
Childcare leave
Employees can take time off to care for young children, with benefits available during this time.
Sick leave
While there’s no statutory sick leave in Japan, many employers offer it as part of their benefits package. Companies that provide sick leave typically have specific policies in place, including the number of days allowed and the process for requesting leave.
Workers’ compensation
Employees are covered for work-related injuries and illnesses under the Workers’ Accident Compensation Insurance.

Non-statutory employee benefits in Japan

While not mandated by law, many companies in Japan offer non-statutory benefits to attract talent and enhance their employees’ overall well-being and job satisfaction. Here are some common non-statutory benefits provided to employees in Japan:

Bonuses: Many companies provide performance-based bonuses, often paid as summer and winter bonuses, which can significantly boost total compensation. The amount of these bonuses can vary based on individual performance, company performance, and overall economic conditions
Flexible working hours: Some employers offer flexible work schedules that allow employees to manage their work hours according to personal needs. This flexibility can be particularly valuable for individuals who have family responsibilities, educational pursuits, or other commitments outside of work.
Transportation allowance: Employers may cover commuting costs or provide a transportation allowance to help employees get to and from work. This may cover reimbursement for train or bus fares, parking fees, or even fuel costs for those who drive to work.
Remote work options: Some companies are also allowing employees to work from home or have a hybrid work model. This benefit can help companies attract highly skilled professionals from anywhere, even outside of Japan.
Training and development: Investing in employee training and development is a priority for many companies in Japan. Organisations often offer a variety of training programs, workshops, and seminars to help enhance employees’ skills and knowledge. These initiatives may include technical training, leadership development, and language courses.
Health and wellness programs: Many organisations offer programs focused on employee health, including gym memberships, wellness workshops, and mental health support.
Childcare support: Some employers provide childcare services or subsidies, which can come in the form of onsite childcare facilities, subsidies for childcare costs, or partnerships with local daycare centres.
Housing assistance: Certain companies in Japan provide housing assistance, particularly for employees relocating for work or those in high cost living areas. This support can include housing allowances, assistance in finding suitable accommodations, or even temporary housing options.
Retirement benefits: In addition to the mandatory pension system, some companies offer supplementary retirement plans or savings programs to help employees prepare for their future. These plans may include company-sponsored retirement accounts, matching contributions, or financial planning resources.

Compliant, seamless payroll and benefits in Japan and beyond

Getting payroll and benefits right is not just a legal issue. Every country also has its own customs, norms and expectations about employee compensation. And if your operations aren’t in line with your workers’ expectations, they may not stick around for long.

Thankfully, we know what we’re doing. When you work with CXC to engage workers in Japan, we’ll handle everything from tax withholding to employee bonuses on your behalf.

Read about EoR services

FAQ's

How does payroll work in Japan?

Payroll in Japan works by calculating an employee’s gross monthly pay, deducting income tax, resident tax and applicable social insurance contributions, and paying the remaining net salary to the employee.

Employers also calculate and pay their own statutory contributions. A typical Japanese payroll includes:

income tax withheld from salary.

resident tax, where applicable.

health insurance.

Employees’ Pension Insurance.

employment insurance.

workers’ accident compensation insurance, paid by the employer.

Salary calculations also need to account for overtime, bonuses, allowances, unpaid leave and other changes that affect pay. Employers must pay salaries on the agreed payroll date and submit the required taxes and insurance contributions to the relevant authorities.

At year end, employers generally complete Nenmatsu Chōsei, or the year-end tax adjustment, for eligible employees. This reconciles the income tax already deducted from salary with the employee’s final tax amount for the year.

How do you set up payroll in Japan?

To set up payroll in Japan, you need an employing entity or another compliant employment arrangement, then register for tax, social insurance and labour insurance before processing employee salaries.

The main steps are:

confirm which entity will legally employ and pay the employee.

enrol eligible employees in the relevant insurance schemes.

collect employee tax details and My Number information where required.

set the monthly pay date and payroll cut-off.

set up salary, overtime, bonuses, allowances, leave and deductions.

arrange the required tax and insurance payments.

Employers also need processes for resident tax, year-end tax adjustments, salary changes, new hires and leavers. Resident tax is generally collected through payroll under the special collection system from June to May, based on the amount notified by the relevant municipality.

If a foreign company does not have a Japanese entity or local payroll capability, it can use an Employer of Record (EOR) to employ and pay employees locally.

Do you need a local entity to run payroll in Japan?

No. A local entity is not always required to run payroll in Japan, but you need a compliant way to employ the worker, process Japanese payroll and meet local tax and social insurance requirements.

Companies with a Japanese entity can usually register for payroll, tax withholding, social insurance and labour insurance directly.

If you do not have a Japanese entity, simply paying an employee from an overseas payroll may not cover all Japanese employer requirements. You still need to consider income tax withholding, resident tax, social insurance, labour insurance and employee records.

One option is to use an Employer of Record (EOR) in Japan. The EOR employs the worker locally and manages Japanese payroll, statutory deductions and employer contributions on your behalf. This can be useful for companies making their first hires in Japan or those that do not plan to set up a local entity.

What are the signs a company should outsource payroll in Japan?

A company should consider outsourcing payroll in Japan if it does not have local payroll expertise, is experiencing payroll errors or is spending too much HR and finance time managing Japanese payroll requirements.

Other common signs include:

your Japanese workforce is growing.

payroll relies heavily on spreadsheets or manual calculations.

overtime, bonuses and allowances are making calculations harder to manage.

you have expatriates or employees with different tax requirements.

your team needs help with resident tax, social insurance or year-end tax adjustments

employee changes are regularly missed before the payroll cut-off.

only one person in the business knows how to run Japanese payroll.

Outsourcing can also make sense for an international company with a small Japanese workforce that does not have dedicated payroll expertise in the country. The company can still control salaries, bonuses and other pay decisions while a local payroll provider handles the calculations, deductions, filings and payroll administration.

How much does payroll administration cost in Japan?

There is no statutory or standard market price for outsourced payroll administration in Japan. The cost varies by provider, employee numbers, payroll complexity and the services included.The monthly fee may cover salary calculations, payslips, tax deductions and basic payroll reporting. Providers may charge additional fees for services such as:

initial payroll setup.

social and labour insurance administration.

resident tax administration.

year-end tax adjustments.

bonuses and additional pay runs.

new hires and leavers.

employee payroll queries.

Some providers also charge a minimum monthly fee, which can make the per-employee cost higher for businesses with only a few employees in Japan.

When comparing providers, businesses should check exactly what the monthly fee includes. A lower payroll fee may not include year-end tax work, insurance administration or employee changes, which can significantly affect the total annual cost.

What are the employer social insurance contribution rates in Japan?

Employer social-insurance costs in Japan’s payroll are based on the employee’s standard monthly remuneration and, in some cases, bonuses. The exact employer cost varies by prefecture, insurer, employee age and business sector.

Contribution	Employer position
Employees’ Pension Insurance	9.15% employer share; the total rate is 18.30% and is normally shared equally.
Health insurance	Usually shared equally; rates vary by prefecture and insurer.
Long-term care insurance	Usually shared equally for insured employees aged 40–64.
Employment insurance	0.85% for general businesses in the 2026 financial year; sector rates can differ. The employee rate for general businesses is 0.50%, producing a combined rate of 1.35% from 1 April 2026 to 31 March 2027.
Workers’ accident compensation insurance	Employer-funded, with a rate based on the industry’s risk classification.
Child and Childcare Contribution	Employer-funded at the applicable statutory rate. The rate for the 2026 financial year is 0.36%.

The employer should calculate costs from current rate tables rather than applying a historic national average. Rate updates need to be reflected promptly in payroll settings. The Child and Childcare Contribution and the new Child and Child-Rearing Support Contribution are separate charges and should not be treated as the same contribution.

What statutory benefits are employers required to provide in Japan?

Employers in Japan are generally required to provide eligible employees with health insurance, Employees’ Pension Insurance, employment insurance, workers’ accident compensation insurance and statutory paid leave.

The main statutory benefits and entitlements include:

Health insurance, which helps cover medical costs.

Employees’ Pension Insurance, which provides pension and other social security benefits.

Employment insurance, which provides support in situations such as unemployment and qualifying childcare leave.

Workers’ accident compensation insurance, covering work-related injuries, illness and certain commuting accidents.

Annual paid leave, generally starting at 10 days after six months of continuous employment for eligible full-time employees who meet the attendance requirement.

Maternity leave, including six weeks before childbirth and eight weeks after childbirth in standard cases. The pre-birth period is generally 14 weeks for a multiple pregnancy.

Childcare and family care leave, for eligible employees who need time away from work for qualifying care responsibilities.

Health insurance and pension contributions are generally shared by the employer and employee, while workers’ accident compensation insurance is paid by the employer. Employment-insurance contributions are also shared, although the employer and employee rates are not identical. Japan does not generally require employers to provide paid sick leave, private health insurance, housing allowances or bonuses unless these are provided through the employment terms or company policies.

What is the commuter allowance (通勤手当) in Japan and how is it taxed?

A commuter allowance, or tsūkin teate, is a payment or reimbursement for an employee’s journey between home and work. It is common in Japan, but it is not a universal statutory entitlement. Whether it is payable depends on the employment contract, work rules or established company practice.

For Japan payroll, the allowance needs separate tax treatment from ordinary salary. Reasonable public-transport commuting costs can generally be income-tax exempt up to 150,000 JPY per month. The same overall limit can apply to qualifying mixed transport arrangements.

Allowances for car or bicycle commuting use distance-based tax-exempt limits. Since April 2026, the highest limit for a one-way commute of 95 kilometers or more is 66,400 JPY per month. Amounts above the relevant limit are taxable. The April 2026 changes also introduced separate treatment for qualifying parking costs near the workplace or a public-transport station. Up to JPY 5,000 per month may be added to the applicable distance-based limit, subject to the statutory requirements and the overall JPY 150,000 ceiling for mixed commuting arrangements The National Tax Agency’s commuting-allowance rules set out the applicable categories.

Tax exemption does not necessarily mean the payment is excluded from social-insurance calculations. The allowance should be coded consistently across payroll, tax and insurance records. A written commuting policy helps avoid uneven treatment and makes employee reimbursement easier to administer.

What are the minimum wage and salary expectations in Japan?

There is no single national minimum wage in Japan. The statutory hourly rate is set by prefecture, and employees must receive at least the rate applicable to their work location. Sector-specific minimum wages can also apply where they are higher than the regional rate.

The currently effective 2025 regional rates range from 1,023 JPY to 1,226 JPY per hour, with a national weighted average of 1,121 JPY. As of 7 September 2026, these rates remain effective until the relevant prefecture’s 2026 increase takes effect. The 2026 regional councils have recommended new rates ranging from JPY 1,085 to JPY 1,280 per hour, with a national weighted average of JPY 1,177. The new rates are scheduled to take effect by prefecture between 1 October and 2 December 2026. Payroll teams must therefore confirm both the applicable local rate and its effective date before setting or changing pay.

Basic salary in Japan is not determined by the minimum wage alone. Salary expectations vary significantly by role, seniority, specialist skills, city, language requirements, industry and the wider reward package. In larger cities, competitive pay may be well above the statutory floor.

Employers should also consider bonuses, commuter support, overtime premiums and benefits when comparing offers. A lower base salary can be uncompetitive even when it is legally compliant. The minimum wage is a legal floor; a realistic pay strategy must reflect the talent market for the specific role.

How does outsourcing payroll and benefits to CXC support business scalability in Japan?

CXC helps businesses scale in Japan by managing payroll and benefits as they hire more employees, without the need to build a larger local payroll team.

Our payroll and benefits support can cover:

monthly payroll calculations and payslips.

income tax and resident tax administration.

social insurance and employer contributions.

bonuses, allowances and salary changes.

leave and other employee changes.

year-end tax adjustments.

onboarding and offboarding administration.

As the Japanese workforce grows, CXC can support additional employees and the payroll administration that comes with them. This gives internal HR and finance teams more time to focus on hiring, workforce planning and other business priorities.

With more than 30 years of workforce management experience, CXC supports companies managing employees across multiple countries.

Speak to our team to learn more about payroll and benefits support in Japan with CXC.

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