Employment contracts Japan

Looking to hire new employees in Japan or manage your employment contracts? Native Teams offers a complete guide on the best practices and legal requirements for establishing and maintaining employment contracts in Japan, ensuring full compliance with local regulations!

What should an employment contract in Japan include?

The following should be included in any Japanese employment contract:

• Employer and employee full names and contact details.
• Employee’s salary or hourly rate, bonuses, and any additional compensation or allowances.
• Type of employment and the duration of the contract, if applicable.
• Place of employment and job description
• Start and finish time, overtime work, rest period, days off, leave, and changes in shifts.
• Resignation and exit policies and procedures, including grounds for dismissal.

Both the employer and employee should fully understand all terms and conditions before signing the employment agreement.

What types of employment contracts exist in Japan?

There are three types of employment contracts in Japan:

1. Permanent contract (Seishain)

Seishain are full-time employees with a 40-hour, Monday-to-Friday workweek and typically enjoy long-term job security. These employees often receive bonuses, annual raises, and opportunities for promotion, as seniority is highly valued in Japanese companies. However, the role may require significant overtime and participation in after-hours company events, with termination being difficult due to the strong employee rights associated with permanent positions.

2. Contract (Keiyaku shain)

Keiyaku shain contracts usually last one month to a year, with the possibility of automatic renewal, though they lack some of the benefits of permanent positions. These employees are covered by health and social insurance, paid holidays, and can’t be fired without cause, but they often don’t receive bonuses or additional benefits. Contract employees may be offered a permanent position after a certain time, but they face the risk of non-renewal as it’s easier for companies to terminate these contracts.

3. Temporary contract (Haken shain)

Dispatch employees are hired by a staffing agency and sent to work at companies, typically on contracts of three to six months, with the possibility of renewal. Although dispatch workers may eventually be offered a full-time role, they have limited career advancement and fewer benefits. These positions are costly for companies, as dispatch employees are paid at a higher rate, with part of the cost going to the staffing agency.

How to hire employees in Japan? 

To employ employees in Japan, it’s essential first to establish a legally recognised business entity. This involves registering your business with the Japanese authorities and obtaining the necessary registration code. Alternatively, you can opt to partner with an international employer service provider which specialises in handling complex HR tasks. 

Native Teams offers comprehensive Employer of Record (EOR) services, taking care of critical functions such as payroll processing, employee benefits management, tax compliance, and more. We provide the expertise needed to navigate legal and regulatory obligations across multiple countries, ensuring your business remains compliant while you focus on growth.