Hiring in Japan

The terms set out role, salary in JPY, place of work, working time, leave, notice and the scope for future changes to duties or location. The EOR is the counterparty to the employee, which is what removes the need for your own entity. Because you direct the day-to-day work, ask whether its Japanese entity holds a worker dispatch licence.

Japanese is the standard contract language, with bilingual Japanese and English versions common for international employers.

Fixed-term contracts are permitted, but once renewals pass five years in total the employee can ask to convert to an indefinite contract, so most EORs default to indefinite terms.

Set probation from day one. An extension needs a basis in the contract or work rules and a documented reason.

Some EORs shorten probation as policy because they, not you, carry the dismissal risk. Ask before you agree a start date.

Overtime is paid at 1.25 times the hourly basic rate, rising to 1.5 times beyond 60 hours a month, and is normally capped at 45 hours a month and 360 a year.

Only genuine managers are exempt, and the courts read that narrowly, so most professional hires are owed overtime. Fixed overtime allowances are common but must be shown separately in the contract, with extra hours paid on top. Put the position in writing either way.

Employers must make sure anyone with 10 or more days takes at least 5 of them each year. Many international employers grant leave from the start date and close for several days over New Year, so check the EOR's policy when you budget.

Sick employees usually use annual leave first, then claim a sickness allowance from health insurance from the fourth day off. Maternity and childcare pay comes from social insurance rather than the employer, so confirm whether the EOR offers any top-up.

Employees can usually resign on two weeks' notice. Most employer-led exits are negotiated as a mutual separation with a package, because a contested dismissal can end in reinstatement and back pay.

The EOR runs the process as the legal employer and will want the paperwork in order, including final pay, unused leave and any agreed separation package. Redundancy dismissals are tested against four factors, so keep a documented reason.

Commuting allowances are near universal and twice-yearly bonuses are common for professional roles, even though neither is mandatory. Social insurance is charged on bonuses as well.

EORs often bundle benefits through a group scheme. Ask what is included in the fee and what is billed on top.

Employer contributions add roughly 16% on top of gross salary, slightly more for employees aged 40 to 64. Pension stops at a monthly ceiling of 650,000 yen, so the effective rate falls for senior hires. That is before the EOR fee.

Resident tax is the trap. It is charged a year in arrears, so a leaver still owes a balance that often comes out of final pay, and a foreign employee leaving Japan must settle it or appoint a tax representative first. Build that into the offboarding timeline.

Ask whether the EOR sponsors directly or refers to a partner. A partner-model EOR often cannot sponsor at all, and the immigration category that sets the paperwork and pace depends on the sponsor's size and tax record, not yours. Since April 2026, language-based roles also need evidence of B2-level proficiency in the working language.

Set start dates after approval, not before.

Get the data handling terms in the service agreement, not just the privacy notice. Sending personal data abroad generally needs the employee's informed consent or equivalent safeguards at the recipient.

Ask where payroll data is hosted, who in the partner chain can see it and how My Number records are stored, since they carry stricter rules.

Incorporating a KK or GK takes several weeks and opening a corporate bank account can take longer, but the running cost is the point: a registered office, a tax accountant, a social insurance labour consultant and payroll software set an annual floor.

Permanent establishment risk is about what people do, not where payroll sits. Revenue-generating activity can create exposure regardless of the employment route.