Terminating an employee in Japan without airtight grounds will cost you — and courts consistently rule in the employee’s favour. Japan’s Labour Standards Act sets the bar for dismissal at “objectively reasonable grounds” that are “socially acceptable,” and Japanese judges apply that standard strictly. Before you hire in Japan, budget for the possibility that exit will be slow, negotiated, and expensive. An EOR with in-country legal expertise navigates this; a generic global provider often doesn’t.

Japan Employment at a Glance

Japan’s Social Insurance System (Shakai Hoken)

Shakai Hoken (社会保険) covers health insurance and pension. Separately, employment insurance and workers’ compensation apply to all employees.

Health Insurance and Employees’ Pension Insurance

Exact health insurance rates vary slightly by prefecture and insurance association.

Employment Insurance (Koyo Hoken)

Workers’ Accident Compensation (Rodo Saigai)

Fully employer-funded. Rates vary by industry from 0.25% to 8.8% of payroll.

Your EOR registers employees with Japan’s Social Insurance Office (日本年金機構) and Hello Work, and remits all contributions monthly.

Labour Standards Act — Key Provisions

Annual Paid Leave

Paid leave accrues on a fixed schedule based on years of service:

Japan’s 2019 labour reform requires employers to ensure employees take at least 5 days of paid leave per year. Failure to ensure this carries fines. Your EOR tracks leave usage and flags shortfalls before year-end.

Overtime and the 36 Agreement

Overtime in Japan requires a written agreement between the employer and employee (or employee representative) under Article 36 of the Labour Standards Act — the “36 Agreement” (三六協定).

Without a 36 Agreement, all overtime is illegal. With one in place, overtime is capped at 45 hours/month and 360 hours/year under normal circumstances. Your EOR prepares and registers the 36 Agreement as part of standard onboarding documentation.

Termination

Dismissal must meet two criteria: objectively reasonable grounds, and social acceptability under the circumstances. Thirty days’ advance notice (or 30 days’ pay in lieu) is required. In practice, wrongful dismissal claims are common, courts side with employees frequently, and reinstatement is a possible outcome. For involuntary separations, your EOR will guide you through a compliant process — which often involves a mutual separation agreement rather than outright dismissal.

Employment Contracts Must Be in Japanese

While bilingual contracts are common, the Japanese version is legally controlling in any dispute. Your EOR provides fully localised Japanese employment contracts as standard.

How Long Does EOR Onboarding Take in Japan?

Japan has the longest onboarding timeline of the major Asian EOR markets:

• Standard employee onboarding: 5–10 business days
• Social Insurance Office registration: 3–5 days
• Hello Work registration (employment insurance): 2–3 days
• Work visa (for non-Japanese nationals): 1–3 months via Immigration Bureau

For non-Japanese nationals, the EOR provides the employment relationship for visa applications, but work visa processing runs through Japan’s Immigration Bureau. Some EOR providers partner with licensed immigration specialists for Certificate of Eligibility applications.

Top EOR Providers for Japan

1. Deel — Owned Japan entity, full Shakai Hoken coverage, 36 Agreement drafting
2. Papaya Global — Strong Japan compliance analytics, enterprise-focused
3. Remote — Good Japan coverage with transparent pricing
4. Multiplier — Available for Japan; slightly more expensive than Singapore/India pricing tiers
5. Rippling — Solid Japan coverage but longer onboarding (7–10 days)

Frequently Asked Questions About EOR in Japan

Can I terminate a Japanese employee for performance issues? Yes, but the bar is high. You need documented performance improvement plans, evidence the employee was given a fair opportunity to improve, and proof that termination is proportionate. Courts look at the totality of circumstances. Most experienced operators manage performance exits through a negotiated mutual separation rather than unilateral dismissal — it’s faster and avoids litigation risk.

What is a 36 Agreement and what happens if I don’t have one? A 36 Agreement is the written authorization required under Article 36 of the Labour Standards Act to allow employees to work overtime. Without one on file, any overtime is a statutory violation, regardless of whether the employee agreed to it. Your EOR files this as part of standard setup — if your EOR hasn’t mentioned it, ask.

Does Japan require paid leave to actually be taken? Yes. Since 2019, employers must ensure each employee takes at least 5 days of their annual paid leave per year. You cannot carry this requirement away with cash-in-lieu. If an employee refuses to take leave, you are still obligated to designate dates. Your EOR tracks this.

My engineer is not Japanese — how long does the work visa take? The Certificate of Eligibility (COE) process through the Immigration Bureau typically takes 1–3 months, and that’s before the visa stamp is issued. Plan accordingly. Some EOR providers partner with immigration lawyers who can advise on documentation and timelines.

Is Japan’s minimum wage really set by prefecture? Yes, adjusted each October. Tokyo’s ¥1,113/hour (October 2024) is consistently the highest in the country. Your EOR applies the correct prefectural minimum based on where the employee actually works — for remote employees, this means their residential prefecture.

How does Japan’s social insurance cost compare to other Asian markets? Combined health insurance and pension add roughly 14% to your payroll costs on the employer side. Add employment insurance (~1%) and workers’ compensation (varies by industry) and total employer contributions run 15–17% of payroll — comparable to Singapore, lower than China or South Korea.

AK Anchal Katyal Published January 1, 2026