At first glance, hiring workers or contractors in Japan may seem like a daunting task. Although there are many reasons why you might want to do business in Japan, there are a number of things you need to know about the country’s payroll system.
The tax and labor laws of your own country may seem secondary to you, but does this also apply to those of Japan?
By choosing payroll services from an experienced payroll company, you can take the stress and hassle out of figuring it all out yourself and take the guesswork out of growing your business.
What should you know about Payroll Outsourcing Japan?
There are the usual details such as working hours, holidays and paid time off. Then there are the more complicated topics like benefits and employee terminations.
Here is a brief summary:
Minimum wage and currency of Japan
Japanese workers are paid in yen () and the national minimum wage varies slightly by prefecture (Japan is divided into 47 geographic jurisdictions). The minimum wage in major cities is 985 yen in Tokyo, 936 yen in Osaka and 882 yen in Kyoto.
Japanese work schedule
In Japan, eight hours a day, or an average of 40 hours a week, is considered standard working time. In Japan, a typical working day begins at 8:30 a.m. and ends at 7 p.m.
However, the opening hours could change from 9am to 5pm or 6pm. In addition, it is not uncommon for employees to work much later – sometimes until 9 or 10 p.m.
Japanese law prohibits overtime
Workers who work more than the required 40 hours per week must be paid overtime, unless they are in a managerial position. Japanese companies often require and expect their employees to work a certain amount of overtime.
However, employers in the country who wish to demand regular overtime from their employees must enter into a formal contract between management and the employee. The employer is required to report this agreement, known as “Article 36”, to the Japan Labor Inspectorate. An employee may work overtime for up to five hours a day if asked to work overtime or on holidays. This translates into 45 hours a month and 365 hours a year. The formula for calculating overtime is as follows:
Overtime: 25.00% extra
Evening: 25.00% more
Weekends and public holidays: 35.00% extra Evenings (after overtime): 50.00% extra
Holiday: 60.00% more (from the overnight stay)
Japanese Minimum Wage Standards
The minimum wage in Japan is stipulated by law, and as mentioned above, it varies by prefecture. Employers must pay minimum wage workers an annual salary of $1,334,566.84 per month.
Promotion is based on experience and aptitude, and seniority is also given in Japan.
Dismissal compensation in Japan
There are no legal requirements for retirement benefits in Japan. Therefore, while retirement payments are an attractive benefit package, most companies do not have to pay their Japanese employees. However, under Japanese Labor Standards Law, all unpaid wages must be paid by the employer within seven days of the employee’s dismissal.
Payroll Outsourcing Service Providers in Japan: How to start assembling a staff
Once you decide to hire Japanese workers, there are several ways to handle payroll. However, choosing a good payroll solution in Japan is the easiest way to ensure 100% compliance.