In recent years, the acceleration of remote work arrangements has made it more possible than ever for organizations to seek in-demand talent beyond the borders of their local regions. Global expansion is especially attractive in areas like Japan. Despite being a geographically small nation, Japan boasts the third-largest economy in the world. It also has an enormous labor force of approximately 69 million people.
Hiring in Japan could facilitate successful foreign market penetration and allow you to tap into local talent. For example, there are many skilled technology experts in Japan, whose knowledge and experience could help in your company’s software and development efforts, IT department, or other technical functions.
Yet, hiring across borders is complex. As with most countries, hiring in Japan isn’t straightforward, and there are many intricacies involved. Setting up an entity is complicated and costly, so many businesses consider using an employer of record (EOR). Japan is an excellent destination for this solution—here’s why.
EORs in Japan
An EOR is an organization that acts as a legal employer and fulfills tax obligations, enabling your company to hire overseas talent. EORs perform various functions, from human resources to serving as a legal entity and overseeing taxes, compliance, payroll, and benefits. These third-party organizations are responsible for the formal aspects of employment so that you can efficiently hire workers in remote locations.
In Japan, an employer of record partnership allows businesses to enjoy all the benefits of hiring remote talent without the legal and administrative burden. An EOR can make hiring simple by handling all the aspects of employment on your behalf, such as:
- Payroll and benefits
- Onboarding
- Time off management
- Compliance with local laws
- Offboarding
A few things to know about hiring in Japan
Hiring in Japan involves unique complexities for organizations headquartered elsewhere. Employment is strictly regulated and there are detailed labor laws to protect employees, so working with an EOR can reduce complications while ensuring that your business remains compliant. Similar to some European nations, such as Spain, contractual agreements are recommended and are highly regulated in Japan. Japan also has a standard workweek similar to that of the U.K. and many other nations.
Here are a few of the most important factors to bear in mind when hiring in Japan.
Working hours
The typical workweek is Monday through Friday, with eight-hour days that total a 40-hour workweek. When hours exceed these thresholds, full-time employees are eligible for overtime rates, which vary based on when the hours are worked and how much total overtime is completed in a month.
Employee contracts
The rules and conditions of employment, including salary, working hours, and work location, must be provided in writing when a new hire is onboarded. This law is in effect for businesses with more than 10 employees. The work rules must be drafted and submitted to the appropriate Local Standards Inspection Office.
Minimum wage
Unlike in countries like the U.S., there is no single minimum wage throughout Japan. Minimum pay rates vary by location and industry. This is another compelling reason to work with an EOR: Japan’s pay rates can be challenging to navigate, but having expert guidance will allow you to create attractive compensation packages that target in-demand talent while still being economical for your business.
Paid time off
Employees in Japan are entitled to receive paid time off (PTO) after being with a company for six months. After that, they automatically receive ten days of leave annually. After six months, each additional year of employment with the same organization adds an extra day of PTO. This minimum requirement is capped at 20 days, awarded at six-and-a-half years of employment.
Unused annual leave can be carried over to the next year, but any leave exceeding a two-year limit will be forfeited.
Of course, it’s certainly possible to offer more PTO than what’s legally mandated. For example, while there are 16 national holidays in Japan, pay on these days isn’t legally required, but it could be an attractive addition to your benefits package.
Termination
There are strict regulations in place to protect employees against wrongful termination. Under certain circumstances, dismissals could be considered a form of abuse based on employment laws. Employers must prove justified termination, which can be challenging. However, there are several exceptions to these laws, including certain crimes committed by employees.
Companies traditionally use probationary periods of three to six months for employees who are considered to be performing under expectation. If there’s no improvement, the employer must give the worker at least 30 days’ notice before their official termination. The number of days of advance notice may be reduced if the employer pays the average wage for each day by which the period is reduced.
Hiring in Japan made easy
If you’re interested in hiring in Japan, take a look at Oyster’s global employment platform. Oyster handles all of the aspects of global employment on your behalf. Learn more about how our platform can help you streamline hiring in Japan.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
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