How to hire in Japan through an EOR

Fixed-term contracts in Japan can't exceed three years total without risking conversion to indefinite status. That's the most common trap for companies testing the waters with new hires.

Most companies use indefinite contracts for full-time roles because they attract better talent and build loyalty. Fixed-term contracts work for short-term needs, but they come with renewal limits under the Labor Contract Act.

Indefinite contracts dominate because employees value the security. They get full unemployment insurance, easier loan approvals, and better access to housing. Fixed-term contracts reduce your initial commitment, but they still require paid leave after 6 months and social insurance options.

What has to be in the contract

The law doesn't require a full written contract. You can go verbal. But you must provide written notice of key terms within 14 days of the start date.

Those terms need to cover: employment term, workplace and duties, start and end times, overtime, breaks, days off, shifts, wage calculation and payment, and resignation and dismissal rules.

Japanese is standard, but English works if both parties understand it. There's no law requiring Japanese only.

Probation typically runs 3-6 months. It's not a free pass to dismiss someone. Ending employment during probation still requires cause or 1 month's severance pay. After probation, dismissal requires objective reasons and 30-90 days notice, or pay in lieu.

Contractor vs. employee

Misclassification carries real consequences. Courts look past job titles to what's actually happening: do you control hours, provide tools, and integrate the person into your team? If the answer is yes, they're likely employees with full labor rights, including overtime pay and insurance.

Penalties include back wages, social insurance premiums (health, pension, unemployment), and fines up to 300,000 yen per violation. Employees can sue for reclassification, damages, and unpaid benefits. Tax authorities can also pursue back taxes.

Non-competes are hard to enforce in Japan. To have any chance of holding up, they need to be narrow: limited duration (under 2 years), specific geography, tied to particular trade secrets, and paired with fair compensation. Courts routinely strike down broad ones.

IP assignment is enforceable if your contract spells it out clearly. Employees own their inventions by default, but you can change that with explicit terms. If you're hiring for tech roles, always include this clause.

Default to employee status unless the arrangement is genuinely freelance with no supervision. If you don't have a local entity yet, an EOR can handle compliance from day one.

Japan requires employers to make sure workers take at least five days of annual leave each year. If you don't, you can face fines of up to 300,000 yen per employee. This rule came into effect in 2019 to push back against the cultural norm of leaving days unused.

Time off

Full-time employees earn 10 paid days after six months, provided they've worked at least 80% of their scheduled days. Leave accrues with tenure, up to a maximum of 20 days. It carries over for two years, but anything unused after that is lost.

Part-time employees get pro-rated days based on their weekly schedule. A four-day-a-week worker, for example, earns between 7 and 15 days. Since 2019, you're required to ensure employees actually take at least five of those days each year.

Japan has around 16 national holidays. Some fall on fixed dates, while others land on a specific Monday in the month. Golden Week, in late April through early May, clusters several holidays together and is widely observed.

All leave types

Annual leave is paid at 100% of salary. There's no statutory requirement for paid sick leave covering non-work illnesses, though work-related injuries are covered by workers' compensation at 60% initially, rising to 100% with supplements. Job protection applies across all leave types.

Maternity leave comes with full job protection. Childcare leave for parents of children under 3 (or school age in some cases) pays 67% for the first six months, then 50% after that, both via employment insurance. There are no statutory paternity days as a standalone entitlement, but paternity is included within the childcare leave framework.

Mandatory benefits

You're required to enroll employees in four social insurance systems: health insurance, pension, unemployment, and workers' compensation. Combined contributions run around 30% of salary, split roughly 15% employer and 15% employee. Things like meal vouchers or transport allowances aren't legally required.

These contributions cover medical care, retirement, job loss, and workplace injuries. All deductions come from gross pay.

What people actually expect

Meeting the legal minimums is unlikely to be enough if you want to attract good candidates. Most employees in Japan expect to start with 15 to 20 days of leave, and larger companies often offer more. Many workers still feel pressure not to take time off, so actively encouraging it will set you apart.

Common extras include private health insurance (which covers things like dental), housing and transport allowances, and flexible working hours. Remote work stipends have become more standard, typically around 5,000 to 10,000 yen per month. Meal subsidies and wellness budgets are also fairly common.

If you only offer the statutory minimums, you'll likely see higher turnover. Candidates who have options tend to look for 20 or more days of leave, company health plans, and genuine work-life support. Offering those things puts you in a stronger position when hiring.

Firing someone in Japan is genuinely difficult. Courts require objectively reasonable grounds and social appropriateness for any dismissal, which makes Japan one of the harder places in the world to terminate employment legally.

Worker protections here are strong. If you skip steps like documenting poor performance or giving the employee a real chance to improve, you're likely looking at a court challenge. Multinationals often come unstuck by assuming the rules work like they do at home.

Valid grounds include serious misconduct, such as breaching duties or fraud. Poor performance can justify dismissal, but only after you've documented everything and given the person a genuine opportunity to turn things around. Redundancies are treated as a last resort: you'll need to prove business necessity, explore alternatives like voluntary retirement or transfers, select employees fairly, and consult throughout.

Protected categories are broad. They cover pregnancy, maternity leave, one year post-birth, treatment for a work-related injury, and 30 days after that treatment ends. Fixed-term contracts require unavoidable reasons to terminate early, and courts hold those to a stricter standard than open-ended contracts.

Probation doesn't give you much extra flexibility. After 14 days, the full rules apply, including 30 days' notice or pay in lieu.

Notice periods

Both sides need to give at least 30 days' notice. Contracts or internal work rules can extend this, particularly for senior staff. If there's serious misconduct or the business genuinely can't continue, you may be able to skip notice on your side.

Severance

There's no statutory severance requirement in Japan. That said, courts expect some form of payment in redundancy situations as a sign of good faith. In practice, most terminations end in a negotiated settlement with a payout, because it's usually the cleaner path for everyone.

The common formula is one month's salary per year of service. There's no legal cap, so negotiations drive the final number. In economic dismissal cases, you should offer severance voluntarily, but only after you've genuinely exhausted other options. Early termination of fixed-term contracts doesn't typically include a severance payment unless it's written into the agreement.

Base the calculation on average wages over recent months, and put the offer in writing.

Work permits and visas

You can hire foreign nationals through an EOR. The EOR acts as the legal employer and sponsors the visa, handling the Certificate of Eligibility (COE) application through immigration on your behalf.

The most common visa categories for office roles are Engineer/Specialist in Humanities/International Services, Skilled Labor, Professor, and Business Manager. Each category ties to the specific job type and typically requires a bachelor's degree or 10 years of relevant experience. Dependent visas with work rights are available for spouses.

On timelines: the COE process takes 1-3 months, and visa issuance at the embassy adds around a week. EORs can speed things up by preparing documentation properly from the start. You'll need a job offer letter, resume, diplomas, and proof of funds. There's no digital nomad visa in Japan yet.

Visas renew every 1-5 years. Your EOR handles ongoing compliance, including status reporting requirements.

Other risks to watch

If you have 10 or more staff, you're required to post your work rules publicly. Any dismissal grounds not listed in those rules can be voided by a court, so it's worth getting this right from the start.

Data protection is governed by the Act on Protection of Personal Information (APPI). You'll need employee consent to process personal data, and breaches need to be reported quickly. A good EOR will manage this for you.

Trade unions exist in Japan, but collective bargaining is uncommon outside larger companies. You don't need union consent for dismissal unless a union agreement specifically requires it.

From 2026, disability hiring rules get tighter. Companies with 100 or more employees will face a levy of JPY 50,000 per month for each person they fall short of the required quota. If you miss the July 15 reporting deadline, fines can reach JPY 300,000. It's worth building inclusive hiring practices into your plans now rather than scrambling later.

The pattern that keeps companies out of trouble in Japan is consistent: document everything, consult before acting, and settle where it makes sense. Your EOR's local knowledge is genuinely useful here. Get it wrong and you're looking at reinstatement orders or significant payouts.