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Guide to Hire in Japan as a US Company

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When it comes to hiring internationally, Borderless keeps you compliant while ensuring that you are abiding by local laws and policies in the country you are expanding into.

Japan is a country with various thriving sectors of industry, and on top of that, the rate of exchange in Japan is ideal for US businesses looking to expand their workforce while managing expenses. Once exchange rates have been applied, the average minimum wage in Japan sits at a little under $7.00 USD. 

Additionally, for US entities looking to diversify into new industries like electronics, robotics, engineering and IT, Japan is a go-to location for innovation in these fields. 

However, when it comes to comprehending business ethics and local regulations of a new country, it can be a bit overwhelming. It is necessary to ensure you are abiding by local laws and remaining compliant as you grow your company and onboard foreign employees.

Need help? That's where an Employer of record comes in.

Ideally, if you are looking to hire local talent in Japan, it would be most practical to partner with a global employer, such as an Employer of Record,  to handle the intricate details of the hiring process, payroll, onboarding, local laws and legal compliance. 

In this report, we will detail business practices in Japan, regulations that you should keep an eye out for and how an Employer of Record is the best way to ensure harmony between your US-based business and potential employees in Japan.

Things to Know: Labor Laws in Japan 

Understanding Japanese labor law is crucial to successful hiring in Japan. As an employer operating outside of the framework of Japanese labor laws, your first step should be to prioritize how the country's local laws apply to your workers and how they can impact you and your business. 

Get to know the laws and regulations that apply to your workers, as they can be significantly different from the laws that apply to your US-based staff. If you want a good place to start, do some research into Japanese employment laws, which regulate the employer/employee relationship. 

Employers of Record like Borderless help you manage the intricate nature of foreign labor laws, however, it is still crucial that you have a basic understanding of these regulations if you are looking to hire in Japan. 

Here are a few key aspects of Japanese labor laws.

  • Statutory Working Hours: The standard work week in Japan is 40 hours, usually spread over 5 days. When it comes to overtime hours, work is limited to 45 hours per month and 360 hours per year — with a pay increase that ranges from 125% to 150% of the regular hourly wage. Additionally, there are requirements for flexible working hours, which permit employees to choose their start and finish times within certain boundaries.
  • Minimum Wage: Regarding minimum wage, rates will differ depending on each prefecture (district/province) in Japan, as each prefecture sets its own minimum wage. It’s important to keep in mind that prefectures have the option to alter their minimum wage annually. 
  • Paid Leave: Employees based in Japan are entitled to paid leave, which includes an annual paid leave (roughly 10-20 days a year). Additionally, this can include both sick leave and maternity leave. 
  • Termination and Notice Periods: Notice periods in Japan as well as any employee termination require a valid reason. Common reasons include redundancy, inadequate performance, or a violation of company rules. It is important to note that Japanese companies will supply notice periods to their employees upon hiring.
  • Equal Pay: Standardized Japanese labor laws operate based on equal pay for equal work. Employers cannot discriminate in compensation based on gender or other protected factors like race or family origin. 
  • Labor Unions: Japanese workers have the right to join labor unions, and many industries have unions representing employees. Collective bargaining is a common practice for determining employment terms and conditions.
  • Health and Safety: Employers are responsible for providing a safe and healthy work environment. They must take measures to prevent accidents and occupational illnesses.
  • Foreign Workers: Recently, there have been changes in Japanese labor laws which have made it more manageable for certain categories of foreign workers to enter Japan for employment purposes. As a result, there are certain visa categories for these corresponding worker categories. 
  • Working Time Records: Employers are required to maintain accurate records of working hours and overtime for all employees, this complies with similar bookkeeping procedures in several countries.  
  • Contracts: Documented employment contracts are standard procedure in Japan, and these contracts should clearly outline the terms and conditions of employment, whether they be a full-time employee or contractor. 
  • Union Relations: Japan has boilerplate policies regarding labour-management relations, which can relate to the registration of unions as well as the notification of collective bargaining procedures. 

Things to Know: Local Employment Laws in the US 

As a US-based organization, you must be able to compare and contrast the labor laws in your own country to those in Japan. 

While organizations like Borderless function as an in-between service that enables you to manage the differences in international regulations, there is still an onus on you as a business looking to hire internationally to understand your labor laws and social security regulations in contrast to the country you are looking to establish a relationship with. 

As mentioned earlier, Japanese labor laws operate on a standardized set of parameters that help protect workers operating within the country. The US also has similar regulations that any employer looking to hire in Japan should hold in high regard when comparing international policies. 

Here are a few key policies to keep in mind when comparing labor laws between the US and Japan. 

  • Fair Labor Standards Act (FLSA): The FLSA sets the federal minimum wage, which is currently $7.25 per hour. This regulation also specifies rules for overtime pay for employees who work more hours than are set within the standardized 40-hour work week in the US. These considerations should be factored into your budget when negotiating your employee's salary. 
  • Family and Medical Leave Act (FMLA): The FMLA provides US-based employees with up to 12 weeks of unpaid leave per year. This is usually based on family or medical reasons, including the birth of a child or serious health issues.
  • Occupational Safety and Health Act (OSHA): The OSHA maintains a standard of safety and health standards for workplaces. Employers in the US are mandated to provide a safe work environment and report serious workplace incidents.
  • Equal Employment Opportunity Commission (EEOC): The EEOC enforces federal laws that prohibit workplace discrimination based on race, sex, and national origin, these regulations mirror similar standards in Japan. 
  • National Labor Relations Act (NLRA): The NLRA safeguards the rights of US-based employees by allowing them the freedom to engage in collective bargaining, form or join labor unions, and participate in concerted activities for mutual aid or protection.
  • Workers' Compensation: Workers' compensation laws vary by state but generally require employers to provide compensation and medical benefits to injured or ill employees. This is not the same as health insurance, which employers provide separately. 
  • State and Local Labor Laws: In addition to federal labor laws, each US state has their laws that provide additional protections or regulations.

Legal Employer of Record in Japan 

Now that you have familiarized yourself with the basic building blocks of both US and Japanese labor regulations, you should look into how a professional employer organization like Borderless can facilitate these policies when functioning as your go-to Employer of Record (EOR). 

Employers of Record are an ideal in-between service that can manage the spaces in between the similarities between national labor laws. 

Here are just a few examples of how Borderless can help your US-based organization manage Japanese-based employees. 

  • Legal Compliance: Operating as your EOR of choice, we function as a registered legal entity that can hire employees on your behalf. We handle all aspects of employment as well as maintain compliance with Japanese labor laws. Additional legal includes issues like work visas, employment contracts, payroll processing, and tax withholding.
  • Market Entry: Using Borderless as an EOR allows you to enter the Japanese market quickly without the time and complexity of setting up a local business, as we operate as your legal entity within the country.
  • Mitigation of Risk: Utilizing an EOR means we assume certain legal and compliance responsibilities as the employer of record, reducing your exposure to legal and regulatory issues that may come with bringing on a new batch of full-time employees based in Japan. This includes handling employment termination practices by Japanese labor policies and making sure your company is equipped with a proper labor contract. 
  • Payroll and Benefits: As your Employer of Record, Borderless would manage the entire payroll process, including salary calculations, deductions, and tax reporting. Ensuring that any potential Japanese hires would be covered in 
  • Onboarding: Borderless would also assist US-based strategies in recruitment, helping you find suitable candidates for your job openings. We can also handle the onboarding process and work with your company to distribute training materials. 
  • Cost-Efficiency: Engaging an EOR like Borderless can be cost-effective, as it eliminates the need to establish and maintain a legal entity in Japan, which involves significant administrative and operational expenses.
  • Flexibility: Setting up an EOR arrangement offers flexibility, allowing you to scale your workforce up or down in response to changing business needs without the complexities of hiring or layoffs.

Things to Consider Before Hiring Japan-based Talent

Before you start looking into attaining top-tier Japanese talent for your business, it is best to understand the time required to facilitate that kind of growth. Before you begin your search, familiarize yourself with the costs associated with hiring from Japan and what types of industries are thriving locally in the country. 

Understanding these variables will enable you to set up your recruitment efforts for success and ensure you get the talent you need efficiently and under budget.

For any US-based organization looking into working alongside a team of Japanese experts, we have put together a short list of some of Japan’s largest areas of industry and innovation. 

  • Automotive Industry: Japan is home to some of the world's largest and most renowned automotive companies, including Toyota, Honda, Nissan, and Subaru. These companies continue to grow their workforce by implementing new green strategies for their continued development. 
  • Electronics and Technology: Japan is a global leader in electronics and technology, with companies like Sony, Panasonic, and Toshiba playing significant roles. Japan is at the forefront of advancements in semiconductors, robotics, and consumer electronics.
  • Pharmaceuticals and Healthcare: The healthcare and pharmaceutical industry in Japan is robust and Japanese medical experts are global players in drug development and research. 
  • Finance and Banking: Tokyo is a major financial hub in Asia, and Japan has a strong banking and financial sector. 
  • Retail and Consumer Goods: Japan has a vibrant retail sector with well-known companies like Fast Retailing (Uniqlo), Seven Eleven Holdings (7-Eleven), and Aeon. These companies have expanded globally and are key players in the retail industry.
  • Food and Beverage: Japan's food and beverage industry is diverse and innovative. It includes traditional Japanese cuisine, global fast-food chains, and a growing interest in health-focused foods and beverages.
  • Renewable Energy: With a focus on sustainability, Japan has been investing in renewable energy sources like solar and wind power. The government offers incentives to promote the adoption of clean energy technologies, and as a result, generate a large pool of experts to bring on as potential hires.
  • Entertainment and Content Creation: Japan is renowned for its anime, manga, video games, and entertainment content. Companies like Nintendo, Sony Interactive Entertainment, and Studio Ghibli have global followings.
  • Environmental Technologies: Japan places importance on environmental sustainability. Industries related to clean technology, green building, and environmental conservation are thriving.
  • Artificial Intelligence and Robotics: Japan is a leader in the development of robotics and artificial intelligence (AI).
  • Biotechnology: The biotechnology sector in Japan is growing, with companies focusing on healthcare, pharmaceuticals, and bioinformatics.
  • E-commerce: Online shopping and e-commerce platforms have seen rapid growth in Japan, with companies like Rakuten and Amazon Japan serving a large customer base.
  • Smart Manufacturing: Japan has embraced Industry 4.0 concepts, promoting smart manufacturing and the integration of IoT and AI technologies into production processes.

Let Borderless Help You

In summary, Japan shares more DNA with the US than one might assume when it comes to labor laws, compliance and thriving sectors of industry. While keeping track of every detail may seem like a lot to manage for a US-based employer looking to hire from Japan’s talent pool, the good news is expert EOR platform like Borderless is here to help you facilitate the process. 

If you are not convinced, book a demo with us today and see how we can seamlessly integrate your business ambitions with a new potential workforce. 

Disclaimer: Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.


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