Labor regulations in Japan

Local hiring: securing employees in Japan

In order to hire an employee in Japan, one must enter into an employment contract. When concluding an employment contract, you must deliver in writing the working conditions such as wages and working hours (Article 15 of the Labor Standards Act, Article 5 of the Ordinance for

Enforcement of the Act). There is also a method of securing the workforce in the form of outsourcing, in which case an outsourcing contract would be drawn up instead of an employment contract.  

Regarding the employer

If there is a Japanese corporation or branch in Japan, the employer usually becomes the Japanese corporation or branch. However, a foreign corporation may become an employer and enter into an employment contract, and then work at a Japanese corporation or branch in Japan. In this case, a direct employment relationship will be concluded between the worker working in Japan and the foreign corporation. Only in the case of a representative office, the representative office cannot be the employer, so the foreign parent company becomes the employer (a direct employment contract is concluded with the foreign parent company).  

Employment period

There are two types of employment contracts: (1) employment contracts with a fixed period (indefinite employment) and (2) employment contracts with a fixed period (fixed term employment). In the case of fixed-term employment, it is not possible to conclude a contract for a period of more than 3 years (Article 14 of the Labor Standards Act), except in certain cases, such as for people with specialized occupations such as doctors. If the contract period for fixed-term employment exceeds five years in total, the employee can apply for permanent employment, and the employer must employ it as permanent employment (endless conversion. Contract Law Article 18). Furthermore, in the case of fixed-term employment, the employee cannot be dismissed until there is “unavoidable reason” until the contract period expires.  

Company work rules

Employers who employ 10 or more workers at all times must prepare work rules (company rules) and notify the Labor Standards Inspection Office (Labor Standards Law, Article 89). In addition, when creating or changing work rules, you must listen to the opinions of the labor union of the business establishment (office), or (if there is no labor union) the person who represents the majority of the workers. The created employment rules must be made known to workers by posting, installing, or issuing a document in a place that is easy to see at each business establishment (office) (Labor Standards Law, Article 106).  

The individual who represents the majority of workers

 Those who represent the majority of workers must be democratically elected by voting, raising hands, etc. In addition, general managers, factory managers, etc. who are in an integrated position with the management regarding determination of working conditions and labor management are not covered. In many companies, the representative of the majority of workers may not be properly selected, for example, the representative may specify his or her preferred employee.

Matters to be specified within employment regulations

The items that must be set in the employment rules are as follows.

(1) Start and end times, breaks, holidays, vacations, and in the case of shifts, matters related to work shifts
(2) Matters concerning wage determination, calculation and payment methods, wage deadlines and payment times, and raises
(3) Retirement matters (including reasons for dismissal)

If the following items are to be specified at the business establishment (office), the following items must also be specified in the employment regulations.

① Matters concerning retirement allowance
② Temporary wages (bonuses) and minimum wages
③Matters related to food expenses, work supplies, etc.
④ Health and safety matters
⑤ Matters concerning vocational training
⑥Matters concerning disaster compensation and injury/illness assistance outside of work
⑦ Awards and sanctions
⑧ Other matters that apply to all workers

Working hours and breaks

In principle, employers cannot allow workers to work more than 8 hours a day and 40 hours a week (Labor Standards Law, Article 32). In addition, if the working hours exceed 6 hours, a minimum 45 minute break must be provided, and if the working hours exceed 8 hours, a minimum 1 hour break must be provided (Article 34 of the Labor Standards Act).  

Regarding holidays

As a general rule, the employer must give at least one day each week or four weeks or more and four or more days off (Article 35 of the Labor Standards Act).  

Regarding overtime and holiday work

When an employer causes overtime work or holiday work, a written agreement (so-called 36 agreement) is concluded with a labor union or a person representing a majority of workers (if there is no labor union). This must be submitted to the Standards Inspection Office (Labor Standards Law, Article 36). However, even if we conclude the 36 agreement, in principle, overtime work can only be done up to 45 hours a month and 360 hours a year.  

Regarding extra wages for overtime, holidays and late night work

If an employer causes a worker to work overtime, work on holidays, or work at midnight, he/she must pay a premium wage at the rate specified below.　

 

Regarding paid leave

Employers must provide employees who have continued to work for 6 months from the date of employment (the minimum number of paid days below), with 80% or more of all working days. Standard Law Article 39). You can also give paid leave on an hourly basis. Note thatit is a requirement for workers to take the paid leave of 5 days.. Under Japanese law, there is no paid leave purchase system, so it is not possible to buy paid leave and prevent employees from taking paid leave.

Length of service	6 months	1 year 6 months	2 years 6 months	3 years 6 months	4 years 6 months	5 years 6 months	More than 6 years 6 months
Allowed days	10 days	11 days	12 days	14 days	16 days	18 days	20 days

Regarding salary and bonus

In Japan, salary is generally composed of basic salary plus various allowances (such as benefits by position, years of service, family allowance, housing allowance, etc.). It is up to the employer to decide whether to pay the allowance and what kind of allowance to pay. The employer will also determine the payment of bonuses. However, if various stipends and bonuses are stipulated in the employment contract or work rules, it is obligatory to pay them in accordance with the employment contract and work rules. The minimum wage law stipulates the minimum wage for each prefecture, so you must pay more than the minimum wage.  

Retirement allowance

It is up to the employer to decide whether to pay the retirement allowance. However, if there are company rules regarding retirement payments, such as the retirement allowance regulations, or if it is considered that it is normal to provide retirement payments for many years, it is the obligation of the company to pay retirement benefits.  

Regarding injury and sickness allowance

If an employee has not been able to work for more than 4 days, including 3 consecutive days, he/she will be entitled to an injury/sick allowance from his/her health insurance. However, if they receive a salary while they are not working, such as by using paid leave, they will be unable to  receive the injury and sickness allowance. In addition, sickness and sickness allowances are not provided for those who are on work or commuting accidents (covered by industrial accident insurance) or not considered ill (such as cosmetic surgery). At a representative office, employees may not be able to enroll in health insurance.  

Regarding allowances on paid leave

If the employee has to put on leave due to the circumstances of the employer (reasons attributable to the employer’s responsibility), the employee must pay an allowance (leave allowance) of 60% or more of the average wage during the leave period (Article 26 of the Labor Standards Act). On the other hand, the employer does not have to pay the employee a leave allowance if the employee has to leave due to force majeure. A force majeure, for example, applies to a major earthquake, but (1) the cause is an accident that occurred outside the business, and (2) even if the business owner exercises the utmost care as an ordinary manager, it would be impossible to avoid it. It is understood that it must meet these two requirements in order to be defined as an impossible situation.  

Regarding dismissal

 An employer may dismiss an employee only if there is an objective and rational reason for dismissal and if the dismissal is considered to be socially appropriate (Article 16 of the Labor Contract Law). In addition, as a general rule, when dismissing, you must give a notice of dismissal at least 30 days before dismissal (Article 20 of the Labor Standards Act). If you do not give a 30-day advance notice, the company must pay the worker an average wage short of 30 days (for example, if you give a 15-day advance notice, you will have to pay an average wage of 15 days or more).

Employment Agreement

At our office, we will write in Japanese and English, the Employment Agreement, Work Rules, Payment Regulations, Non-disclosure Agreement (NDA), and Employee Pledge. We also provide advice to foreign corporations and their subsidiaries, overseas embassies and consulates in Japan, etc. regarding employment issues such as dismissal of foreign workers.  

Lawyer compensation in the labor division

Our office deals with consulting work related to labor and preparation of employment contracts, as well as employment rules for foreign companies or their subsidiaries that have entered into an advisory contract. Consultation services will be conducted in Japanese and English. Employment contracts, employment rules, and other company-related rules will be written in Japanese and English. The standard legal counsel fees (excluding consumption tax) are as follows:

Consulting work limited to the labor division	100,000 yen per month
Consultation in the labor division and general meeting of shareholders/consultation of board directors	200,000 yen per month
General company advice including contracts, corporate and labor	300,000 yen per month

 

Lawyer’s compensation for the creation of various rules (excluding consumption tax)

Our office prepares various documents such as work rules, employment contracts, wage rules, etc. with fixed compensation. The amount of remuneration may vary depending on the size and industry of the company, so please contact us for an accurate quote.

English employment rules	400-600,000 yen
English employment contract preparation	100-200,000 yen
Preparation of English salary regulations	100-200,000 yen
Preparation of English company rules	Please contact us individually