🇯🇵 Hiring in Japan

💡 Everything you need to know to hire and manage employees in Japan through Toku. Toku handles payroll processing, tax withholding, social contributions, and statutory compliance. This guide covers what you need to plan costs and manage your team.

At a Glance

Onboarding a New Hire

Plan for 10-15 business days between submitting a new hire and their start date. Japanese registrations span multiple agencies, which is why the lead time is longer than in most countries: the employee provides their My Number and personal details, and Toku completes the social insurance and pension registrations before their start date.

Submit your new hire through the Toku platform and we take it from there: local employment agreement, statutory registrations, and payroll setup. See Onboard Contributors as a Client Admin in Toku for the step-by-step process, and the Country Readiness Live Tracker for lead times across all countries.

Employer Costs

On top of gross salary, you pay the following employer contributions in Japan:

As a rule of thumb, total cost of employment is roughly 115-117% of gross salary for a typical office-based hire.

Employees pay their own share of health insurance (~5.0%), pension (9.15%), employment insurance (0.5%), and long-term care insurance if aged 40-64, plus national income tax (progressive rates from 5% to 45%, with a 2.1% surtax) and roughly 10% local inhabitant tax. These are withheld from gross salary, not charged on top. Toku calculates and remits all of the above.

Compensation & Payroll

Payroll in Japan is monthly. Toku runs one payroll per month, and employees receive an itemized payslip each cycle. Salaries are paid in JPY by bank transfer.

Minimum wages are set per prefecture and reviewed each October. Following the October 2025 revisions, the national weighted average is JPY 1,121 per hour, with Tokyo at JPY 1,226 per hour. There is no statutory 13th month salary; semi-annual bonuses in June and December are a deep-rooted market practice, and where they are written into the employment contract they become binding.

Employment Contracts & Probation

• Toku issues a compliant local employment agreement for every hire, including the written statement of working conditions Japanese law requires at hiring.
• Indefinite-term employment (seishain) is the standard and carries strong dismissal protections. Fixed-term contracts are allowed for up to 3 years (5 years for highly specialized roles), and employees on successive fixed-term contracts for 5 or more years can request conversion to indefinite status.
• Probation is 6 months, with possibility of extension, per Toku's employment agreement. Note that once an employee has worked 14 days, normal dismissal protections broadly apply even during probation.

Working Hours

The standard working week is 40 hours (8 hours per day, 5 days). Employees get a 45-minute break when working 6-8 hours and 60 minutes beyond 8 hours. Overtime is only lawful under a filed labor-management agreement (a "36 Agreement"), which Toku puts in place, and is capped at 45 hours per month and 720 hours per year. Overtime pays 125% of base wage (150% beyond 60 hours in a month), holiday work pays 135%, and late-night work between 10 PM and 5 AM carries an additional 25% premium.

Leave Entitlements

Employees with 10 or more annual leave days must take at least 5 per year, and unused leave carries over for up to 2 years. Parental leave benefits are government-funded: since April 2025, a top-up raises benefits to 80% of pre-leave wages (roughly full net pay) for up to 28 days when both parents take at least 14 days of leave within 8 weeks of the birth.

Public Holidays (2026)

Japan has 16 fixed national holidays, and substitute and bridge day rules bring 2026 to 18 days off. Notable clusters are Golden Week (April 29 to May 6) and Silver Week (September 21-23).

Benefits: Required vs. Common Extras

Statutory (included in employer costs above): health insurance (covering roughly 70% of medical costs), employees' pension insurance, employment insurance, workers' accident compensation, and long-term care insurance for employees aged 40-64. Employers must also provide required annual health checkups.

Toku's Japan Benefits Overview walks through the mandatory insurances and pensions, the required annual health checkups, and the optional supplemental cover available to your team.

Other common extras in Japan include commuting allowances (near-universal, tax-exempt up to JPY 150,000 per month for public transit), housing or family allowances, meal subsidies, and defined contribution retirement plans. Toku can advise on how each of these affects your total cost.

Ending Employment

Japan is one of the most employee-protective countries in the world for dismissals: a termination is invalid unless it has objectively reasonable grounds and is socially appropriate, and courts apply that test strictly. Involve Toku early, before any termination conversation, so we can guide you to the lowest-risk route. For the process, see How to Terminate an Employee or Contractor.

There is no statutory severance pay in Japan, but negotiated separation packages of 3-12 months' salary are common for involuntary separations, particularly where the parties agree terms to avoid litigation. Employees on work-injury leave or maternity leave (and for 30 days after returning) cannot be dismissed.

Hiring Someone from Overseas?

Foreign nationals need a status of residence that permits work; the Engineer/Specialist in Humanities/International Services category is the standard route for most tech and business roles, and Toku can sponsor eligible hires. Expect 1-3 months for the Certificate of Eligibility plus 1-2 weeks for visa issuance, while permanent residents and spouses of Japanese nationals already have unrestricted work rights. Talk to Toku before extending an offer to a candidate who needs sponsorship.

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Last verified July 2026. This guide is for general information and doesn't constitute legal or tax advice. Your Toku account manager can confirm specifics for your situation.