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Payroll and Benefits Guide Japan

Last updated: May 09, 2023

Currency
Yen (JPY)
Employer Taxes
16.62-26.74
Payroll Frequency
Monthly
Employee Costs
14.67%
Capital
Tokyo
Date Format
yyyy/mm/dd
Fiscal Year
1 April - 31 March
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Contributions

Employer

Employer Payroll Contributions

9.15%

Pension (applied on salary up to 650,000 JPY per month)

5% – 6.57%

Health Insurance (applied on salary up to 1,390,000 JPY per month). Each region has its own health insurance rate, and rates are slightly higher for individuals between the ages of 40 and 65 (generally 1.57%).

0.91%

Nursing Care Insurance (applied on salary up to 1,390,000 JPY per month)

0.95%

Unemployment Insurance

0.25% – 8.8%

Work Injury

0.36%

Family Allowance (applied on salary up to 650,000 JPY per month)

16.62% – 26.74%

Total Employment Cost

 

Employee

Employee Payroll Contributions

9.15%

Pension

5.00%

Health Insurance (applied on salary up to 1,390,000 JPY per month). Each region has its own health insurance rate, and rates are slightly higher for individuals between the ages of 40 and 65.

0.60%

Unemployment Insurance

0.91%

Nursing Care Insurance (applied on salary up to 1,390,000 JPY per month)

14.67%

Total Employee Cost

Employee

Employee Income Tax

5.00%

Up to 1.95M JPY

10.00%

1.95M – 3.3M JPY

20.00%

3.3M – 6.95M JPY

23.00%

6.95M – 9M JPY

33.00%

9M – 18M JPY

40.00%

18M – 40M JPY

45.00%

Over 40M JPY

10.00%

Local Income Tax (calculated based on prior year income)

20.42% (flat rate)

Non-residents are subject to a national income tax on gross compensation with no deductions available. A non-resident taxpayer may be subject to the local inhabitant’s tax at a rate of 10% if they are registered as a resident as of January 1st of the current year.

Employer taxes

Highest
Lowest

Employee taxes

Highest
Lowest

Minimum Wage

General

The national minimum wage in Japan is based on prefecture. The minimum hourly wage for Tokyo is 1,113 JPY, Osaka is 1064 JPY, and Kyoto is 1009 JPY.

MINIMUM WAGE (PER MONTH)

Highest
Lowest

Payroll

Payroll Cycle

The payroll cycle in Japan is generally monthly.

13th Salary

In Japan, it is customary to pay a “13th month,” or even “14th month” salary as a summer bonus paid in June and as a winter bonus paid in December. However, more international companies today are adopting a straightforward 12 month pay period setup.

Authority Payments

Authority Payment  Dates Methods

Tokyo Tax Office

Monthly; 10th of next month

Pay-easy

Local Ward Office

Monthly; 10th of next month

E-banking (local payment)

Pension Office

Monthly; last day of next month

Pay-easy (local payment)

Tokyo Labor Bureau

Annually; 31st August (once a year).

Normally the payment deadline is on July 10th

Pay-easy (local payment)

Working Hours

General

The standard working hours in Japan are 8 hours per day, 40 hours per week.

Overtime

All work above the standard weekly working hours is paid as overtime and regulated by employment contract/collective agreements. In general, if an employee is expected to work overtime regularly, a written agreement must be filed with the Labour Inspection Office. When an employee is requested to work overtime or work on holidays, the maximums are 5 hours per day, 45 hours per month, and 365 hours per year.

Overtime work of up to 60 hours per month must be at least 25% of the normal hourly wage and overtime work that exceeds 60 hours per month must be at least 50% of the normal. Employees in managerial and supervisory positions as defined under the Labour Standards Act are exempt from the aforementioned, however, the late-night work allowance is still applicable.

Overtime payment is calculated as an additional payment to the hourly base salary as follows:

  • Overtime (typically over 8 hours a day): additional 25.00%
  • Nights (22:00 – 05:00): additional 25.00%
  • Weekends and Holidays: an additional 35.00%
  • Nights (continuing from overtime): additional 50.00%
  • Holidays (continuing from night-time): additional 60.00%

Working Week

Monday-Friday

Leave

Paid Time Off

Paid leave in Japan is set in the employment contract as dependent upon the years of employment. This paid leave is in addition to any public holidays.

  • Employees with up to six months of service are entitled to 10 days of paid leave
  • Employees with up to one and a half years of service are entitled to 11 days of paid leave
  • Employees with up to two and a half years of services are entitled to 12 days of paid leave
  • Employees with up to three and a half years of services are entitled to 14 days of paid leave
  • Employees with up to four and a half years of services are entitled to 16 days of paid leave
  • Employees with up to five and a half years of services are entitled to 18 days of paid leave
  • Employees with up to six and a half years of services are entitled to 20 days of paid leave

Unused days expire after two years.

Vacation Days
Public Holidays
Highest
Lowest

Public Holidays

They are 16 public holidays in Japan. While there are no legal requirements to pay for public holidays, it is common to grant those days as paid days off.
If a national holiday falls on a Sunday, the next working day will become a public holiday. In addition, companies are usually closed from December 29th to January 3rd.

Sick Days

Sick leave is not mandatory. Some companies may introduce their own sick leave policies, and employees often use their holiday to cover sick leave or claim social insurance.

Maternity Leave

All female employees are eligible for maternity benefits consisting of 14 weeks paid leave, six weeks before the due date, and eight weeks after.
The maternity payment is made by the Social Insurance based on the National Health Insurance rates, which are currently 420,000 JPY per child.

However, if the employee is enrolled in the employees’ health insurance, they may receive a maternity allowance of 2/3 of the regular salary rate from 42 days before birth until 56 days after delivery.

PAID MATERNITY LEAVE (DAYS)

Highest
Lowest

Paternity Leave

The father is entitled to paid paternity leave for up to one year after the birth as childcare leave. Paternity leave is referred to as ‘childcare leave’ in Japan, and new father employees are entitled to this benefit. However, the employee does not receive a salary while on leave unless stated in the employment contract. They are entitled to a partial allowance from social security.

Effective October 1, 2022, male employees are entitled to four weeks’ leave, in one or two installments, within eight weeks after birth (Childcare at Birth Leave). Benefits will be payable by social security at the same rate as maternity leave (67% of covered pay). This new Childcare at Birth Leave is in addition to the existing government-paid childcare leave entitlements for both parents, which may also now be taken in one or two separate installments (previously only one).

Parental Leave

Childcare leave can be taken by the mother or the father and starts from the day after the maternity leave ends. Labor insurance covers childcare leave, and an employee can take childcare leave until the child is one year old. If both parents take childcare leave, the leave is then extended to when the child is one year and two months old.

Companies with 1,000 or more employees are required to publicly disclose annually the rate at which their staff take childcare leave.

Other Leave

In Japan, in the event of the death of an immediate family member, an employee is entitled to bereavement leave. For the death of a father, mother, spouse, or child, an employee is entitled to five days of leave and three days of leave for the death of a grandparent, grandchild, sibling, child’s spouse, or spouse’s parent.

In addition, when the employee is the person in charge of funeral arrangements, they can request an additional two days’ leave. Employees can also take family care leave, which is an unpaid leave to care for a spouse, child, parent, or grandparent for up to 3 months.

Termination

Termination Process

The termination process varies according to the employment agreement and collective agreement in place. It is based on the type of contract, the job role, the region, and the reason for termination. Due to the complexity of termination in Japan, dismissal is almost always done via a mutual agreement and with additional compensation.

Notice Period

The notice period in Japan is usually 30 days, and if notice isn’t given, the employer can provide payment in lieu.

Severance Pay

There are no statutory requirements for severance payments in Japan. Given the severe limitations on the employer’s right to terminate an employee, most employees are offered a severance payment in exchange for a waiver and voluntary resignation.

Probation Period

The probation period in Japan for permanent employees is generally between 3 and 6 months.

VISA

VISA

Before arriving in Japan, foreign nationals who want to work in Japan need a work visa from their local Japanese embassy or consulate. There are many different statutes for residence visas allowing the holder to only work in the specified industry.

It is expected that a university degree or extensive professional experience in the specialist field is needed to qualify for a working visa, which usually requires an employer to sponsor.
All foreign workers need an ‘Individual Number’ for administrative procedures for social security, taxation, and disaster response.

VAT

General

The standard rate of VAT in Japan is 10.00%.

Stay up to date on payroll & employment law changes

Version History

October 2, 2022
The standard rate of VAT in Japan is now 10.00%.
July 26, 2022
Payroll contributions and personal income tax rates have been updated.
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Questions & Answers

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Gregory G.
Gregory G.
3 years ago

What are the rules regarding unpaid wages after an employee has left the job?

Erez Greenberg
Erez Greenberg
3 years ago
Reply to  Gregory G.

When an employee leaves the job, they are entitled to receive unpaid wages within 7 days of request for payment, even if this is before the set payday.

Yael Cohen
Yael Cohen
1 year ago

What is the most common pension plan?

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  Yael Cohen

All employees are covered by the government pension plan (EE/ER both contribute 9.15%), and therefore most companies do not offer anything above or beyond this. Companies can choose to offer private pension plans as well as an added benefit.

Brenda
Brenda
1 year ago

How is a variable bonus for example performance bonus taxed in Japan when it is paid once a year

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  Brenda

In Japan, bonus and commission are two different distinct classifications of payments with different treatments. A bonus requires a separate calculation from normal payroll and is done using a different (higher) tax table from the monthly salary (see attached). In order to be classed as a bonus, installments should be paid only up to 3 times payments within a year (no more) as when it’s paid out 4 times or more the payments will be treated as a part of the monthly salary (the same as “commissions”) from a compliance perspective. For this reason, it’s important that from the contract stage, it’s defined if payments will be “bonus” or “commission”.
Additional social insurance calculation is required based on the amount of the bonus. Note that a one-off bonus won’t affect future health insurance monthly payments in the same way that commission payments may.
How to calculate Bonus:
(Example)
The previous month’s salary: 260,000JPY
The previous month’s social insurance: 12,000JPY
Bonus: 500,000JPY
Number of dependents: 2 people
1. 260,000 – 12,000 = 248,000
2. Look at the bonus tax table, apply between 133,000 and 269,000 which is 2.042%
3. 500,000 x 2.042 = 10,210JPY is the income tax

Will
Will
1 year ago

What payroll taxes/superannuation equivalent costs are required for an American company to hire a Japanese national?

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  Will

Employer payroll taxes in Japan range from 14.94% to 24.37%. I recommend you contact us for a more tailored answer – https://papayaglobal.com/contact-us/

Hannah Armstrong
Hannah Armstrong
1 year ago

Which benefits in Japan have legislative requirements that are dependent on employee headcount?

Erez Greenberg
Erez Greenberg
1 year ago

Hi, there are no specific benefits to the employee that are dependent on headcount.

Tom
Tom
1 year ago

Is there a way to relocate a non-Japanese employee to Japan without a Japan branch?

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  Tom

In the absence of an established entity, a company can consider EOR.

Tom
Tom
1 year ago
Reply to  Erez Greenberg

Can a EOR sponsor Working Visa for foreigner in Japan?

Parag
Parag
1 year ago

Is dependent spouse health covered by company or employee needs to pay additional heath component

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  Parag

Supplemental health plans covering dependents depend on the agreement between the employee and the employer. It is not a common practice, however, to provide coverage for dependents in Japan, some companies may provide it if they see additional supplementary health plans necessary.

Rona Oliveros
Rona Oliveros
1 year ago

I’ve been working for the same company for 7 years straight, on a yearly contract. Is there a law in Japan which protects the job security of workers like me?

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  Rona Oliveros

There are various laws regarding employee termination. I would need more info to provide further assistance.

Rona Oliveros
Rona Oliveros
1 year ago
Reply to  Erez Greenberg

Thanks for the reply. I haven’t been terminated, but my worry is that my contract is renewed yearly. There’s no assurance that it will still be renewed in the years to come.

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Payroll and Benefits Guide in Japan

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Payroll and Benefits Guide
in Japan

What’s covered in this guide:

  • Employer/employee contributions
  • Minimum wage
  • Working hours
  • Visa requirements

And more...

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All questions are answered by our in-house compliance department working in conjunction with our local in-country partner for this specific country

Public Holidays Calendar

Japan 2023
Download:
CSV
PDF
ICS
Day Date Holiday Notes
Sunday Jan-1 New Year’s Day
Monday Jan-2 New Year’s Day
Monday Jan-9 Coming of Age Day
Saturday Feb-11 National Foundation Day
Thursday Feb-23 Emperor’s Birthday
Tuesday Mar-21 Vernal Equinox Day
Saturday Apr-29 Shōwa Day
Wednesday May-3 Constitution Memorial Day
Thursday May-4 Greenery Day
Friday May-5 Children’s Day
Monday Jul-17 Marine Day
Friday Aug-11 Mountain Day
Monday Sep-18 Respect for the Aged Day
Saturday Sep-23 Autumnal Equinox Day
Monday Oct-9 Sports Day
Friday Nov-3 Culture Day
Thursday Nov-23 Labor Thanksgiving Day