Payroll and Benefits Guide Japan

Employer

Employer Payroll Contributions

Employee

Employee Payroll Contributions

Employee

Employee Income Tax

General

The national minimum wage in Japan is based on prefecture. The minimum hourly wage for Tokyo is 1,072 JPY, Osaka is 931 JPY increasing to 961 JPY in April 2023, and Kyoto is 882 JPY.

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.

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

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.

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.

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 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

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.

General

The standard rate of VAT in Japan is 10.00%.

For details regarding hiring in Japan without a local registered entity see our Japan PEO service