Guide to Hiring in Japan

Employment trends and job market analysis

Japan remains a global leader in industries such as automotive, robotics, electronics, artificial intelligence, gaming, and pharmaceuticals, creating strong demand for skilled professionals across both domestic and international employers.

Despite economic growth ambitions with 87% of employers citing organisational growth as a strategic priority in 2026 Japan continues to face significant workforce shortages driven by an ageing population and a shrinking labour force.

As a result, hiring is increasingly focused on critical skills and specialist roles rather than large-scale headcount expansion. Foreign talent also plays an important role in the labour market, particularly in manufacturing, services, and wholesale and retail sectors, with Tokyo, Aichi, and Osaka remaining the country's leading employment hubs.

Payroll and taxes

The National Tax Agency publishes an updated Withholding Tax Guide 2026 each year, and the 2026 tables took effect from January 2026. Japan's fiscal year runs from 1 January to 31 December.

Every employer must:

• Issue a written employment contract before the start date covering wages, hours, workplace, duties, and termination terms.

• Withhold income tax (gensen chōshū) monthly under the PAYE system and remit to the National Tax Agency (NTA) by the 10th of the following month.

• Enrol every eligible employee in health insurance, pension, employment and workers' accident insurance at the point of hire.

• Perform the year-end tax adjustment (nenmatsu chōsei) in December, reconciling withholdings against annual liability. 

Employer social insurance contributions

Japan's employer obligations fall into two administrative categories: Social Insurance (shakai hoken), administered by the Japan Pension Service, and Labour Insurance (rōdō hoken).

See below for Japan's current social insurance premium rates:

Employee contributions

Japan operates a progressive national income tax on residents plus a special reconstruction surtax of 2.1% on the tax due. For 2026, the standard deduction is JPY580,000 for residents and JPY480,000 for non-residents. Non-residents are typically taxed at a flat rate of 20.42% on Japan-sourced employment income.

Personal income tax rates

Resident tax (juuminzei)

 In addition to national income tax, every resident of Japan pays a local prefectural and municipal resident tax (juuminzei) of approximately 10% of taxable income (6% municipal + 4% prefectural, plus a small per-capita fixed levy). It is calculated on the prior year's income and billed from June of the following year, meaning new hires typically do not pay resident tax in their first year of employment.

Minimum wage

Japan does not have a single national minimum wage. Instead, rates are set annually by each of Japan's 47 prefectural minimum wage councils, based on a target recommended by the Central Minimum Wages Council under MHLW. New rates typically take effect between October and March of the following year.

The current national weighted average is JPY 1,121 per hour. For the first time in Japanese history, every one of the 47 prefectures is now above the ¥1,000 threshold.

Labour laws and employee rights

Japan's employment law rests on a small number of core statutes: Labour Standards (LSA), minimum working conditions, hours, wages, leave and dismissal notice.

• Labour Contract Act ( LCA): Contract formation, indefinite-term conversion, and Article 16's abuse-of-dismissal-rights doctrine

• Industrial Safety and Health Act (ISHA): Occupational health, stress checks, safety measures. 

• Equal Employment Opportunity Act (EEOA) and Act on the Promotion of Women's Participation and Advancement in the Workplace: Anti-discrimination and gender equality disclosure. 

• Worker Dispatch Law: Governs staffing agency (haken) engagements and tenure limits.

Working hours

The standard work week in Japan is 40 hours, with employees typically working eight hours a day, five days a week.

Overtime

Any work beyond 8 hours a day or 40 hours a week is overtime, and it can only be lawfully worked if the employer has filed a 36 Agreement (saburoku kyōtei ) with the Labor Standards Inspection Office. 

• Standard cap: 45 hours per month, 360 hours per year.

• Special temporary circumstances: Up to 100 hours in a single month (including holiday work) and 720 hours per year, with the average not exceeding 80 hours over any two to six month period, usable no more than 6 months per year.

Overtime is paid at a 25% premium, raising to 50% for work that occurs between the hours of 10pm to 5am. Rest day work carries a 35% premium.  

Employee benefits

Mandatory benefits

All employees in Japan,  regardless of nationality,  must be enrolled in four insurance schemes from day one of employment (subject to hours/earnings thresholds for part-timers):

• Employees' Health Insurance covers medical care, hospitalisation, prescriptions and dependents at no additional premium.

• Employees' Pension Insurance provides old-age, disability and survivor benefits; requires 10 years of contributions to receive the Old-Age Basic Pension at age 65. [navigatorjapan.com]

• Employment Insurance funds unemployment allowances via Hello Work, plus parental and family-care leave benefits. [navigatorjapan.com]

• Workers' Accident Compensation Insurance fully employer-funded, covers work-related injuries and illnesses.

Additional statutory contributions from FY2026 include the new Child & Childcare Support Contribution (0.23%) and the existing Child-Rearing Contribution (0.36%, employer-only).

Common market standard supplementary benefits

As base salaries in Japan are generally comparable to (or lower than) other developed markets, employers typically use allowances and non-cash benefits to differentiate offers.

Some common examples of supplementary benefits can be seen in the table below:

Types of leave available

Annual paid leave (yūkyū kyūka)

Under Article 39 of the Labour Standards Act, paid annual leave accrues based on tenure:

Eligibility requires continuous employment for at least six months and 80% attendance.

Since the 2019 Work Style Reform, employers must ensure each employee actually takes at least five days of annual leave per year, or face fines of up to JPY300,000 per employee.

Unused leave carries forward for up to 2 years, and any balance must be paid out on termination.

Public holidays

Japan observes 16 national public holidays in 2026. If a holiday falls on a Sunday, it is observed on the following Monday.

• New Year's Day, 1 Jan

• Coming of Age Day, 12 Jan

• National Foundation Day, 11 Feb

• Emperor's Birthday, 23 Feb

• Vernal Equinox Day, 20 Mar

• Shōwa Day, 29 Apr

• Constitution Memorial Day, 3 May

• Greenery Day, 4 May

• Children's Day, 5 May

• Marine Day, 20 Jul

• Mountain Day, 11 Aug

• Respect for the Aged Day, 21 Sep

• Autumnal Equinox Day, 23 Sep

• Sports Day, 12 Oct

• Culture Day, 3 Nov

Sick leave

Japan has no statutory paid sick leave. Employees typically use accrued paid annual leave when ill. However, once sick leave extends beyond a few days, employees may claim Injury and Sickness Allowance through Employees' Health Insurance at approximately two-thirds of standard remuneration for up to 18 months, provided the absence exceeds three consecutive days. Some employers offer additional paid sick days as a supplementary benefit. 

Maternity leave (sango kyūgyō)

Under LSA Article 65, all female employees are entitled to six weeks pre-natal leave (extendable to 14 weeks for multiple births), taken on employee request.

• Eight weeks post-natal leave with the first six weeks mandatory, even if the employee wishes to return early.
• The employee receives Maternity Allowance at 2/3 (67%) of standard monthly remuneration, paid via the health insurance system (not the employer).
• Health insurance and pension contributions are fully waived (employee + employer) during leave, and the allowance is tax-exempt - meaning effective net replacement is closer to 83% of pre-leave net pay.

Paternity and childcare leave (ikuji kyūgyō)

Both parents can take childcare leave until the child turns 1 year old, extendable to one and a half years and then two years if daycare is unavailable. Benefits are paid via Employment Insurance.

• 67% of the average monthly salary for the first 6 months
• 50% thereafter, up to the two-year maximum
• Tax-exempt and exempt from social insurance contributions

Dedicated postpartum paternity leave (sango papa ikukyū) of up to four weeks can be taken within eight weeks of birth, split into two periods.

From April 2025, the new Post-Childbirth Leave Support Benefit adds a 13% top-up, bringing total replacement to 80% when both parents each take at least 14 days of qualifying childcare leave - a major policy lever to raise Japan's historically low paternity uptake.

Family care leave (kaigo kyūgyō)

Employees may take up to 93 days of family care leave per family member (splittable into up to three periods) at approximately 67% of wages via Employment Insurance, to care for a family member requiring constant nursing care.

Bereavement leave (kibiki kyūka)

There is no statutory bereavement leave, but almost all Japanese employers grant paid bereavement leave as a matter of work rules. Typical durations:

• Spouse: 7 to 10 days
• Parent/child: 5 to 7 days
• Sibling/parent-in-law: 3 days
• Grandparent/grandchild: 1 to 3 days

Other statutory leave

• Menstrual leave: Under LSA Article 68, a woman with painful menstruation may request leave; payment is at the employer's discretion.
• Physical exam/prenatal check-up time for pregnant employees.
• Jury/civic duty leave for court and election duties.
• Nursing care leave: 5 days per year per child (10 for 2+ children) to care for sick children.

Attracting talent

Japan's labour market is defined by three linked realities: acute shortage, higher candidate expectations, and cautious employer hiring

To compete for scarce talent in this environment, foreign employers should think about attraction across four axes:

1. Compensation and total rewards

• Position semi-annual bonuses correctly — Japanese candidates negotiate on total annual cash (base × 12 + summer + winter), not monthly salary alone.
• Include commuting and housing allowances: These are near-universal expectations, and tax-favoured up to statutory ceilings.
• Consider ESOP / equity for senior hires: Increasingly attractive at foreign-capital tech firms as a differentiator vs. traditional Japanese employers.

2. Employer branding

• Publish a clear, credible value proposition in both Japanese and English: Job seekers increasingly cross-reference Glassdoor, OpenWork (formerly Vorkers) and LinkedIn.
• Highlight stability, long-term investment in Japan and multi-year career pathways: Japanese professionals still weigh perceived commitment heavily.
• Communicate DEI progress and gender pay-gap disclosure readiness: Mandatory public disclosure for 101+ employee firms from 1 April 2026 makes this both a compliance and branding lever.

3. Cultural and workplace expectations

• Respect Japanese business etiquettefirst meetings, business-card exchange (meishi), on-time behaviour, decision-making by consensus (nemawashi and ringisho).

• Provide Japanese-language onboarding and internal communications wherever possible, even in "English-primary" firms.

• Recognise the persistence of the traditional employment contract (long tenure, seniority-based progression) — even as skills-based hiring rises, most professionals still expect a multi-year horizon.

• Build manager-led engagement: Hays' 2026 data identifies "career development clarity and manager-led engagement" as the top emerging retention differentiators

4. Bilingual and cross-cultural talent

Demand for bilingual JP-EN professionals continues to outpace supply and defines the top of the market. A candidate's Japanese level materially affects pay, for example, in hourly retail/service roles, N3+ Japanese lifts pay 30 to 50% over a no-Japanese candidate, and N2+ Japanese can lift pay to JPY 1,800 to JPY 2,50 per hour. For technical hires:[

• English-only technical roles are viable in Tokyo tech hubs but candidate pool is narrower.
• N2 or above is often required for customer-facing, sales, and government-facing roles.
• Foreign employers frequently offer company-paid Japanese lessons as both an attraction and retention lever (JPY 300,000 to JPY800,000 per year.

The onboarding process for Japan employees

Required documents from the new hire

Under Japan's standard new-hire process, employers collect the following documents:

• My Number: Japan's tax and social security ID; required for payroll registration.
• Basic Pension Number for pension enrolment.
• Bank account details for salary payment.
• Dependent Deduction Declaration for accurate income tax withholding.
• Copy of Residence Card and Status of Residence details for foreign nationals.
• Employment history and diplomas/certifications where relevant.
• Health check-up report (mandatory pre-employment check for permanent hires)

Statutory registrations by the employer

Cultural onboarding

Even when statutory boxes are ticked, first-year retention hinges on integration. Companies with strong integration programs see 40 to 60% lower turnover on foreign hires, and cultural misfit is the #1 driver of Japan's 25 to 35% three-year foreign-hire turnover rate. 

• Assign a Japanese-speaking buddy or mentor for the first 90 days.
• Provide company-paid language support (JPY 300,000 to JPY 800,000 per year is common).
• Deliver structured cultural onboarding meeting etiquette, business-card protocol, decision-making norms, and sensitivity to overtime culture.
• Explain the payslip including the year 2 resident tax step and the 15% social insurance load.
• Schedule a first-week safety induction under ISHA.
• Book the first stress-check. From 2026 onwards, all employers (must conduct stress checks. 

Visa specifics for foreign nationals working in Japan

Almost all work visas in Japan require employer sponsorship, beginning with a Certificate of Eligibility (CoE) issued by the Immigration Services Agency. Common visa categories used by foreign employers include:

• Highly Skilled Professional (HSP) – A points-based visa that offers expedited immigration processing and additional benefits for highly qualified professionals.
• Engineer / Specialist in Humanities / International Services – The most common work visa for professional, technical, and office-based roles.
• Specified Skilled Worker (SSW) Type 1 and Type 2 – Available across 14 designated industries. SSW Type 2 provides a pathway to long-term or indefinite residence.
• Business Manager – Designed for executives and entrepreneurs establishing or managing business operations in Japan, typically requiring at least JPY 5 million in capital investment.
• Intra-Company Transferee – For employees transferring from an overseas office to a Japanese branch or subsidiary within the same corporate group.
• Spouse or Dependent Visa – Allows eligible family members to reside in Japan, with limited work authorisation available upon approval.

Employers must report significant changes such as salary adjustments, role changes, or address updates, to the Immigration Services Agency within the required reporting periods.

They must also ensure that the employee's duties remain consistent with the conditions of their approved visa category.

Termination of employment

Japan's dismissal framework is one of the strictest in the developed world. Foreign employers must understand this before their first hire.

Categories of termination in Japan

Japan recognises several types of employment termination, each with different legal requirements and risks:

• Ordinary dismissal (futsū kaiko) – Used for performance issues, capability concerns, or unsuitability for the role. Employers must meet a high evidentiary standard to justify the dismissal.
• Disciplinary dismissal (chōkai kaiko) – Reserved for serious misconduct. The grounds for disciplinary dismissal must be clearly defined in the company's work rules.
• Redundancy dismissal (seiri kaiko) – Used when reducing headcount for business reasons. Employers must satisfy the strict "Four Requirements" for redundancy dismissals.
• Non-renewal of a fixed-term contract (yatoi-dome) – Applies to contract employees at the end of their employment term. While not technically a dismissal, employers face greater restrictions where contracts have been repeatedly renewed or the employee has more than five years of service.
• Employee resignation (taishoku) – Initiated by the employee. Under the Civil Code, employees can generally resign by providing at least two weeks' notice.
• Mutual agreement termination (gōi taishoku) – A mutually agreed separation between employer and employee. This is often the preferred approach for foreign employers as it reduces the risk of legal disputes.
• Business necessity – There must be a genuine and documented need to reduce headcount.
• Efforts to avoid dismissal – The employer must demonstrate that alternative measures were considered, such as hiring freezes, redeployment, reduced overtime, or voluntary retirement programmes.
• Reasonable selection criteria – Employees selected for redundancy must be chosen using objective and non-discriminatory criteria.
• Adequate consultation – Employers should engage in meaningful discussions with affected employees and, where applicable, labour unions.
• No statutory severance pay – Japanese law does not require employers to provide severance pay. If a dismissal is valid, employees are generally entitled only to the required notice period or payment in lieu of notice.
• Retirement allowances are common – Many employers provide a retirement lump-sum payment (taishoku-kin) for permanent employees. The amount is usually linked to salary level and length of service and is governed by company work rules.
• Mutual separation packages are widely used – Foreign employers often offer separation packages equivalent to approximately three to twelve months' salary in exchange for a mutually agreed termination. This approach can help reduce the risk of legal challenges under Article 16 of the Labour Contract Act.

The four requirements for redundancy

A redundancy dismissal (seiri kaiko) is generally only valid if all of the following conditions are met:

• Business necessity – There must be a genuine and documented need to reduce headcount.
• Efforts to avoid dismissal – The employer must demonstrate that alternative measures were considered, such as hiring freezes, redeployment, reduced overtime, or voluntary retirement programmes.
• Reasonable selection criteria – Employees selected for redundancy must be chosen using objective and non-discriminatory criteria.
• Adequate consultation – Employers should engage in meaningful discussions with affected employees and, where applicable, labour unions.
• No statutory severance pay – Japanese law does not require employers to provide severance pay. If a dismissal is valid, employees are generally entitled only to the required notice period or payment in lieu of notice.
• Retirement allowances are common – Many employers provide a retirement lump-sum payment (taishoku-kin) for permanent employees. The amount is usually linked to salary level and length of service and is governed by company work rules.
• Mutual separation packages are widely used – Foreign employers often offer separation packages equivalent to approximately three to twelve months' salary in exchange for a mutually agreed termination. This approach can help reduce the risk of legal challenges under Article 16 of the Labor Contract Act.

Failure to satisfy any one of these requirements may render the dismissal invalid.

Severance pay

Japanese law does not require employers to provide severance pay. If a dismissal is valid, employees are generally entitled only to the required notice period or payment in place of notice.

Many employers provide a retirement lump-sum payment (taishoku-kin) for permanent employees. The amount is usually linked to salary level and length of service and is governed by company work rules.

Foreign employers often offer separation packages equivalent to approximately three to twelve months' salary in exchange for a mutually agreed termination. This approach can help reduce the risk of legal challenges under Article 16 of the Labour Contract Act.

What are my options for hiring?

If you’re looking to expand your business into Japan and hire locally, Airswift is here to assist!

We ensure compliance with local government regulations, including hiring practices, labour laws, tax requirements, permits, working conditions, and more.

Our expertise helps safeguard your business from unnecessary risks, allowing you to focus on your company’s priorities, opportunities, and global growth while we handle the complexities of local employment.

Talent acquisition

Airswift can help your company attract top talent in Japan. With expertise across various industries, we specialise in finding the perfect candidates even under tight deadlines.

We are dedicated to sourcing talent that fits your needs seamlessly. Whether you're building a remote workforce or hiring on-site staff, rely on us to accelerate your hiring process and support talent retention, ensuring your business thrives.

Employer of record

If your company is looking to hire employees in Japan without establishing a local entity, Airswift can simplify the process for you!

As an Employer of Record in Japan we can help you quickly onboard contractors and employees. We handle everything from permits and employee onboarding to tax compliance, benefits administration and much more, allowing you to focus on growing your business.

*Although the information provided has been produced from sources believed to be reliable, no warranty, express or implied, is made regarding the accuracy, adequacy, completeness, legality or reliability of any information. For the latest information and specific queries regarding particular cases, please contact our team.