Velocity Global’s Japan PEO (Professional Employer Organization) enables a quick, seamless expansion solution without first setting up an entity. This agile global expansion method expedites employee hiring and onboarding, delivering a faster and more affordable expansion solution than traditional entity establishment.
With International PEO, Velocity Global becomes your Employer of Record, which means that we hire and onboard your Japanese team members on your behalf while you remain focused on your business. As your Employer of Record, we can hire as few or as many employees as needed to compliantly establish your presence in Japan.
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Japan Fast Facts
Currency: Japanese yen (JPY, ¥)
Population: 126.3 million
Economy: $5.08 trillion
Top Sectors: Manufacturing, electronics, transport, construction, and services
- New Year’s Day
- Coming of Age Day
- National Foundation Day
- The Emperor’s Birthday
- Vernal Equinox Day
- Golden Week (Shōwa Day, Constitution Memorial Day, Greenery Day, Children’s Day)
- Marine Day
- Mountain Day
- Respect for the Aged Day
- Autumnal Equinox Day
- Sports Day
- Culture Day
- Labor Thanksgiving Day
Hiring Considerations in Japan
Benefits of hiring in Japan:
- Home to the world’s third-largest economy, Japan’s diverse and innovative economy offers businesses across many sectors a stable market for growth. Tech firms, especially, find Japan an attractive market.
- The Japanese government invests heavily in R & D and continues to rank among the top three countries in R & D spending as a percentage of GDP. This dedication extends into the private sector, with more patent applications per one million residents than any other country.
- Japan’s geography makes it a strategic location for continued activities in the Asia-Pacific region. With 18 free trade and economic partnership agreements, Japan offers significant export opportunities to neighboring markets.
Challenges when expanding into Japan:
- Although Japan presents many growth opportunities, it ranks 29th in terms of ease of doing business. Businesses must anticipate regulatory and bureaucratic factors that may not exist in their home country.
- Companies must plan for the lengthy tax-paying process in Japan. At 129 hours per year to complete the required 19 payments, paying taxes in Japan is likely quite different from its domestic location.
- Despite its close relationship with many Western markets, Japan’s business culture departs from some Western norms. Most Japanese businesses operate under a relatively formal, hierarchical structure, which may present communication and deal-making challenges for foreign companies.
Cultural nuances and must-knows for doing business in Japan:
- Bow during introductions, though most Japanese understand that Westerners may not immediately adhere to this cultural norm. Accordingly, handshakes are increasingly common. However, remember to bow, as it is a sign of respect.
- Greet the most senior meeting members first. Doing so shows respect for both age and position.
- Utilize a few Japanese phrases when appropriate. It is reasonable to expect at least one English-speaking participant, but using a few Japanese phrases goes a long way.
- Avoid placing your hands in your pockets during conversation, and do not look at your phone.
Employment Contracts in Japan
Minimum wages and salaries:
- Japan’s national minimum wage is ¥901 per hour, or $8.45.
- The country’s Labor Ministry announced in August 2020 that the minimum wage will increase to ¥902 on October 1, 2020, or later.
- Minimum wages vary between regions and industries. If an employee is subject to two different minimums, they are entitled to the greater amount.
- Probation periods are common in Japan, and typically last around three months, though employers may extend them.
- Employers typically pay bonuses twice per year, often in the summer and winter. The amount varies, but management and labor negotiations determine the amounts and conditions.
- Company performance plays a substantial factor in the amount paid. However, companies must pay bonuses once management and labor reach an agreement.
Termination and severance considerations:
- Employers must give employees at least 30 days’ notice for dismissal. If the employer dismisses an employee without notice, they must pay that employee 30 days’ wages at the point of dismissal, known as a notice allowance.
- In some rare cases, employers may dismiss an employee without notice and without notice allowance.
Paid Time Off & Benefits
- Expectant mothers receive six weeks’ paid leave before birth, and eight weeks’ paid leave after giving birth. Mothers receive 100% of their salary during this time.
- Both mothers and fathers may take childcare leave. Mothers’ leave periods may begin the day after their maternity period ends. Fathers may begin their leave period at any point between the child’s birth and their third birthday. Both parents may take up to three child leave periods.
- Mothers and fathers each receive 67% of their gross monthly salaries during childcare leave, including allowances but excluding honorariums for the first 180 days once the maternity leave period ends.
Vacation and annual leave:
- Employers must grant employees a minimum of 10 days’ paid leave, though paid leave varies based on years of service.
Years of Service
Paid Leave Days
- There are no mandatory sick leave provisions in Japan.
Average workweek hours:
- The average workweek in Japan is 40 hours at eight hours per day.
- Employers must submit a Notification of Agreement on Overtime and Work on Days off to the chief of the relevant labor standards inspection office should they request an employee perform overtime work.
- The additional amount paid varies depending on a number of criteria. Employers must familiarize themselves with these provisions. Otherwise, they invite penalties.
Choose Velocity Global
Establishing your presence in Japan is a huge leap for your business—but it can be a challenge without the right preparation and expert assistance. Partnering with Velocity Global gives you the support and guidance needed to streamline and accelerate your expansion into Japan.
Our International PEO (Professional Employer Organization) solution ensures a compliant expansion into Japan 90% faster and up to 60% more cost-effectively compared to entity set up—regardless of whether you need to hire a single employee or an entire team.
As your dedicated expansion partner, we handle all payroll, risk mitigation, and compliance considerations, so you remain focused on the most important thing: growing your business at home and abroad.
Ready to establish your business as a major player in the Japanese market? Let’s make it happen.