EOR Japan: Employer of Record Services to Hire Without a Local Entity
EOR Japan (Employer of Record Japan) is a locally licensed Japanese company that legally employs your staff on your behalf, so you can hire employees in Japan without setting up your own entity. AYP becomes the legal employer of record for your hires: we issue the Japanese employment contract, run monthly payroll, enrol employees in Japan’s four social insurance schemes, withhold national income tax and local inhabitant tax for the National Tax Agency, sponsor work visas through the Immigration Services Agency, and keep you compliant with the Labour Standards Act and Labour Contract Act. You direct the work; we carry the employment. You hire in days instead of the three to six months it takes to incorporate a Kabushiki Kaisha (KK).
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Introduction
An Employer of Record in Japan is a locally licensed Japanese company that legally employs workers on your behalf. You choose who to hire, set the salary, and manage the team day to day. The EOR takes on everything that legally has to sit with a Japanese employer: the employment contract, monthly payroll, enrolment in Employees’ Pension Insurance and Health Insurance, Employment Insurance and Workers’ Accident Compensation Insurance, withholding of national income tax and local inhabitant tax, year-end tax adjustment, work visa sponsorship through the Immigration Services Agency, and compliance with the Labour Standards Act, the Labour Contract Act and related law administered by the Ministry of Health, Labour and Welfare.
The result: you build a Japan team in days, not the three to six months it takes to incorporate a Kabushiki Kaisha (KK) and complete pension, health insurance and tax registrations. EOR Japan suits companies hiring their first 1–20 employees, businesses testing the market before committing to an entity, and companies that cannot yet meet the paid-up capital and “business substance” tests that visa sponsorship through an own entity now demands.
What’s New for EOR Japan in 2026
Japan tightened the screws on entity-based market entry and loosened nothing on compliance. The Immigration Services Agency has raised its scrutiny of visa applications, often expecting around ¥30 million in paid-up capital or firm proof of business substance before it will approve a sponsoring entity — a bar an EOR clears on your behalf. The April 2025 amendments to the Childcare and Family Care Leave Act are now in force, expanding leave flexibility and employer obligations. From October 2026, Employment Insurance eligibility widens to workers logging more than 10 hours a week, pulling many part-time staff into coverage. The national weighted-average minimum wage continues its climb toward the government’s ¥1,500/hour target. An Employer of Record applies each of these automatically.
Quick Facts: Hiring in Japan (2026)
Employer of Record (EOR) Japan 2026
Who Uses an EOR in Japan?
Companies that hire through an Employer of Record in Japan usually fall into three groups. The first is overseas firms — US, UK, EU and APAC companies — placing their first sales lead, country manager or engineering team in Tokyo or Osaka. The second is companies that want to hire in Japan but cannot yet meet the paid-up capital and business-substance tests required to sponsor visas through their own entity. The third is businesses testing the Japanese market for 12–24 months before committing to a Kabushiki Kaisha. Japan’s deep talent pool in technology, semiconductors and advanced manufacturing — combined with a shrinking working-age population — makes speed of hiring a real advantage, and EOR delivers it from day one.
EOR Japan vs. Setting Up a Local Entity
If you are hiring fewer than around twenty people, testing the market, or you cannot yet meet the capital and substance tests for visa sponsorship, EOR Japan is the route. If you are committing to Japan as a customer-facing entity with local invoicing and long-term scale, a KK is the right move. Many AYP clients run EOR Japan for the first 12–24 months, then incorporate once headcount and revenue justify it. For companies that already have a Japanese entity and only need HR and payroll run for them, see our Professional Employer Organisation (PEO) services.
Industries Hiring Through EOR Japan in 2026
Technology and SaaS. Overseas software firms hiring engineers, product staff, sales and customer-success teams in Tokyo and Fukuoka.
Semiconductors and electronics. A standout 2026 theme — Japan is directing major government investment into semiconductors and AI, drawing in foreign chip, equipment and materials companies hiring engineering and operations talent.
Automotive and advanced manufacturing. Global suppliers and EV firms hiring around the Nagoya and Kanto manufacturing belts.
Financial services. Banks, asset managers and fintech firms hiring relationship, risk and compliance staff in Tokyo’s Marunouchi and Otemachi districts.
Pharma, medtech and consumer. Global healthcare and consumer brands hiring regulatory, commercial and clinical staff for the Japanese market.
Employment Landscape
Market Overview (2026)
Japan is the world’s fourth-largest economy and one of the most stable, high-skill talent markets in Asia. The 2026 themes are a major government push into semiconductors and AI, a weak yen that makes Japanese hiring cost-competitive for foreign employers, and a shrinking working-age population that intensifies competition for talent. GDP sits at roughly USD 4.2 trillion, with real growth around 0.8–0.9%. The yen trades at roughly JPY 148–152 per USD, and core inflation runs near 2%. For foreign employers, the combination of a deep talent pool and a tight labour market means speed of hiring is a genuine competitive edge.
Where You’ll Be Hiring
Tokyo. The economic centre — finance, technology, corporate headquarters and professional services. Most foreign companies place their first Japan hires here.
Osaka and the Kansai region. Commerce, manufacturing, pharma and life sciences, with a lower cost base than Tokyo.
Nagoya and the Chubu region. The heart of Japan’s automotive and advanced-manufacturing industry.
Yokohama. Adjacent to Tokyo, strong in technology, R&D and manufacturing.
Fukuoka. A fast-growing startup and technology hub in Kyushu, supported by city-level initiatives to attract founders and talent.
Why Companies Use EOR Japan as an Entry Point
Japan rewards a presence on the ground — but incorporating to get there is slow and capital-heavy. Foreign companies use EOR Japan to place senior commercial and engineering hires immediately, prove the market, and only then decide whether to incorporate. The EOR holds the employment relationship, runs Japanese-language payroll and social insurance, and sponsors visas — work the parent company cannot legally do from overseas. Many companies pair EOR Japan with EOR Singapore, EOR South Korea or EOR Australia under one AYP contract to cover the wider region.
Laws & Compliance
Japanese employment is governed primarily by the Labour Standards Act (working hours, leave, wages, termination minimums), the Labour Contract Act (the rules on contracts and dismissal), and the Industrial Safety and Health Act, all administered by the Ministry of Health, Labour and Welfare (MHLW) and enforced through local Labour Standards Inspection Offices. Minimum wages are set per prefecture by Regional Minimum Wage Councils. Social insurance is administered by the Japan Pension Service and the Japan Health Insurance Association. Tax runs through the National Tax Agency. Immigration and work visas are handled by the Immigration Services Agency.
Critical Compliance Framework (2026)
Common Mistakes Foreign Employers Make in Japan
Assuming Japan is at-will. It is not. Dismissal requires objectively reasonable grounds that are appropriate in light of social convention. A dismissal that fails this test is void, and the employee can be reinstated with back pay.
Underestimating social insurance. Employer contributions add roughly 16–17% on top of gross salary. Employers that budget only on base salary understate true cost.
Ignoring the 5-day leave rule. Since 2019, employers must ensure each employee actually takes at least 5 days of paid leave a year. Failure carries a fine of ¥300,000 per employee.
Missing the Article 36 agreement. Overtime is only lawful where the employer has filed a Saburoku (36) agreement with the Labour Standards Inspection Office. No agreement means no lawful overtime.
Permanent Establishment risk. A foreign parent that runs too much operational activity through staff in Japan can create a Permanent Establishment, triggering corporate tax exposure. Using an EOR keeps the employment relationship cleanly in Japan.
What an EOR Japan Partner Is Legally Responsible For
When AYP is the Employer of Record in Japan, AYP carries direct responsibility for: the Japanese employment contract; monthly payroll; enrolment and contributions for Employees’ Pension Insurance, Health Insurance, Employment Insurance and Workers’ Accident Compensation Insurance; withholding of national income tax and local inhabitant tax; the year-end tax adjustment; the Article 36 overtime agreement; statutory leave administration including the 5-day rule; work visa sponsorship and Certificate of Eligibility applications; compliant Japanese-language payslips; record retention; response to any Labour Standards Inspection Office review; and conduct of any termination in line with the Labour Contract Act. Your company directs the work and pays AYP a monthly fee.
Payroll & tax
Japanese payroll runs through social insurance, national income tax and local inhabitant tax. Social insurance has four components — Employees’ Pension Insurance and Health Insurance (jointly “shakai hoken”), Employment Insurance and Workers’ Accident Compensation Insurance — administered by the Japan Pension Service and the Japan Health Insurance Association. National income tax is withheld monthly and squared up through a year-end adjustment for the National Tax Agency. Local inhabitant tax is charged on the prior year’s income and collected through payroll. An Employer of Record registers your workforce with every relevant body. If you already have a Japanese entity and only need payroll run for you, see our Asia Payroll service.
Employer Statutory Contributions (2026)
Social Insurance Explained
Employees’ Pension Insurance and Health Insurance. Together these are “shakai hoken”. The combined rate is split equally between employer and employee, and contributions are calculated on a “standard monthly remuneration” grade rather than exact salary. Pension contributions are capped at a standard monthly remuneration of ¥650,000.
Long-Term Care Insurance. An add-on to Health Insurance that applies only to employees aged 40 to 64. It funds Japan’s elderly-care system.
Employment Insurance. Funds unemployment benefit and training support. The employer pays the larger share. From October 2026, eligibility widens to workers logging more than 10 hours a week, bringing many part-time staff into coverage.
Workers’ Accident Compensation Insurance. Covers work-related injury and illness. It is paid entirely by the employer, at a rate set by the industry’s risk profile.
Personal Income Tax (PIT) Rates
Japan’s personal income tax has two layers. The first is national income tax, which is progressive, running from 5% to 45%, with a 2.1% reconstruction surtax applied on top of each band (in place through 2037). The second is a flat local inhabitant tax of around 10%, charged on the prior year’s income and collected through payroll, plus a small per-capita levy. National income tax is withheld from each pay run and reconciled through an annual year-end adjustment. An Employer of Record calculates, withholds and remits both taxes for every employee, and runs the year-end adjustment on your behalf — so the employee’s tax is handled correctly without your company touching the Japanese tax system directly.
2026 Personal Income Tax Bands (National Income Tax)
A flat local inhabitant tax of about 10% applies on top of the national income tax, plus a small per-capita levy. Non-residents are generally taxed at a flat 20.42% on Japan-source employment income. Personal income tax is the employee’s liability — the Employer of Record withholds and remits it through payroll, so it is not an additional employer cost on top of salary and social insurance.
Working Hours & Leave Entitlements
Working hours, overtime, leave and public holidays are set by the Labour Standards Act and enforced by local Labour Standards Inspection Offices.
Working Hours and Overtime
The standard work week is 40 hours, normally 8 hours a day across 5 days. Overtime is only lawful where the employer has filed an Article 36 (“Saburoku”) agreement with the Labour Standards Inspection Office. Overtime is paid at a 25% premium, rising to 50% for overtime that is also late-night work (10pm–5am), and rest-day work carries a 35% premium. The overtime cap is 45 hours per month and 360 hours per year, with limited exceptions.
Leave Entitlements
Public Holidays 2026
Japan observes 16 national holidays in 2026, including New Year’s Day, Coming of Age Day, National Foundation Day, the Emperor’s Birthday, the Vernal and Autumnal Equinox Days, Showa Day, Constitution Memorial Day, Greenery Day, Children’s Day, Marine Day, Mountain Day, Respect for the Aged Day, Sports Day, Culture Day and Labour Thanksgiving Day. Where a holiday falls on a Sunday, the following Monday becomes a substitute holiday. Golden Week in late April to early May is the main peak holiday period.
Work Permits & Visas
To hire a foreign national in Japan, the employer first secures a Certificate of Eligibility (COE) from the Immigration Services Agency, which the worker then uses to obtain the visa at a Japanese embassy abroad. COE processing typically takes one to three months. When you use an Employer of Record in Japan, the EOR is the sponsoring employer — your overseas company does not apply directly. For visa support in markets where AYP is not your EOR, see our Asia Mobility service.
How EOR Japan Handles Visa Sponsorship
AYP, as the licensed Japanese employer, prepares and files the Certificate of Eligibility application, supports the visa application at the embassy, manages the residence-card process on arrival, and handles renewals and any change of status. For the points-based Highly Skilled Professional route, AYP advises on the scoring and the accelerated permanent-residency timeline.
Main Visa Categories
Visa fees rose in 2025 with further increases planned for 2026. Confirm current fees and requirements with the Immigration Services Agency before any application.
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Termination & Employee Exit
Japan is not an at-will employment jurisdiction. Under Article 16 of the Labour Contract Act, a dismissal must have objectively reasonable grounds and be appropriate in light of social convention. Japanese courts scrutinise dismissals strictly — a dismissal that fails the test is void, and the employee is entitled to reinstatement with back pay. An Employer of Record absorbs this exposure on your behalf and structures any exit to the standard the courts expect.
Notice Requirements
Severance Pay
Severance is not legally mandated in Japan, but it is common practice and is usually set out in a company’s work rules. Where it is paid, the amount typically ranges from a few months’ to well over a year’s base salary depending on tenure, age and the reason for the separation. Because dismissal is legally difficult, employers frequently negotiate a voluntary resignation with an enhanced severance package rather than risk a dismissal being struck down.
Legitimate Grounds for Termination
Japanese law recognises dismissal for serious misconduct, sustained underperformance after documented support, and genuine redundancy — but each is held to a high evidential standard, and redundancy in particular must satisfy a four-factor test the courts apply. An Employer of Record manages the documentation, the consultation process, the settlement calculation and the social insurance and tax deregistration end to end.
Why AYP
AYP Group is the Employer of Record partner of choice for companies hiring across Asia-Pacific. Three things define the EOR Japan experience.
- A direct, licensed Japanese entity. Your employees are hired and managed by AYP’s own entity in Japan — not routed through a third-party aggregator. That means one contract chain, one point of accountability, and no partner mark-up.
- Transparent, predictable pricing. EOR Japan runs on a clear monthly fee per employee, with no hidden setup fees and no surprise compliance charges. You see the full cost — salary, social insurance and fee — before you sign. Details are on our pricing page.
- One partner, one contract, all of APAC. Hire in Japan today and in Singapore, South Korea, Australia, China or across Southeast Asia next quarter on the same contract, account team and invoice. See EOR Singapore, EOR South Korea, EOR Australia, EOR China and our full Employer of Record coverage. See About AYP for our company background.
Glossary of Japan Employment Terms
EOR (Employer of Record) — a licensed local company that legally employs staff on your behalf.
KK (Kabushiki Kaisha) — Japan’s joint-stock company, the standard corporate form.
GK (Godo Kaisha) — a simpler limited-liability company form.
Shakai hoken — social insurance: Employees’ Pension Insurance plus Health Insurance.
COE (Certificate of Eligibility) — the immigration pre-approval needed before a work visa is issued.
HSP (Highly Skilled Professional) — Japan’s points-based visa for senior talent.
Article 36 / Saburoku agreement — the labour-office filing that makes overtime lawful.
Year-end adjustment — the annual reconciliation of income tax withheld through payroll.
Local inhabitant tax — a ~10% local tax charged on the prior year’s income.
MHLW — Ministry of Health, Labour and Welfare, Japan’s labour authority.
Legal disclaimer: this guide provides general information about Japan employment regulations and EOR services. Specific legal advice should be obtained from qualified professionals. Employment laws and regulations change — verify current rules before acting.
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Questions?
We're here to help
EOR Japan stands for Employer of Record Japan — a locally licensed Japanese company that legally employs your staff on your behalf, so you can hire in Japan without setting up your own entity. The EOR holds the employment contract, runs payroll, enrols employees in pension, health, employment and accident insurance, withholds income and inhabitant tax, sponsors work visas, and ensures compliance with the Labour Standards Act and Labour Contract Act.
The split of responsibility is clean: you handle the work, AYP handles the employment. You interview and choose the hire, set the salary, and manage their day-to-day work and performance. AYP issues the Japanese employment contract, onboards the employee, enrols them in social insurance, runs monthly payroll, withholds income and inhabitant tax, completes the year-end adjustment, and files what the labour and tax authorities require. You receive one monthly invoice covering salary, social insurance and the service fee. For companies that already have a Japanese entity and only need HR and payroll run for them, see our Professional Employer Organisation (PEO) services.
Yes. EOR Japan operates through a licensed Japanese company that acts as the legal employer under standard company and labour law. There is no separate “EOR licence” in Japan — the EOR is the employer on the contract, enrolled with the pension and health insurance authorities and the tax office, while you direct the work. For the wider regional picture, see our Employer of Record APAC overview.
EOR Japan from AYP is a predictable monthly fee per employee, with no hidden setup fees and no per-filing surcharges. The fee covers the Japanese employment contract, monthly payroll, social insurance enrolment and contributions, income and inhabitant tax withholding, the year-end adjustment, work visa sponsorship for foreign hires, and ongoing compliance. See our pricing page, or contact our team for a quote based on your roles and hiring volume.
A Japanese national or an existing visa holder can usually be contracted, enrolled in social insurance and put on payroll within 5–10 working days once documents are ready. A foreign hire who needs a new work visa takes longer — the Certificate of Eligibility alone runs one to three months. By comparison, incorporating your own Kabushiki Kaisha takes three to six months before you can even register for payroll.
Japanese employers contribute to four schemes: Employees’ Pension Insurance, Health Insurance (with Long-Term Care Insurance for employees aged 40–64), Employment Insurance and Workers’ Accident Compensation Insurance. For a standard office role under age 40, the employer share comes to roughly 16–17% of gross salary. An EOR enrols each employee and remits every contribution. See our Asia Payroll service for standalone payroll if you already have a Japanese entity.
Yes. As the licensed Japanese employer, AYP sponsors the work visa — filing the Certificate of Eligibility with the Immigration Services Agency, supporting the visa application at the embassy, and managing the residence card and renewals. AYP also advises on the points-based Highly Skilled Professional route, which offers a faster path to permanent residency for senior talent.
Yes. As the licensed Japanese employer, AYP sponsors the work visa — filing the Certificate of Eligibility with the Immigration Services Agency, supporting the visa application at the embassy, and managing the residence card and renewals. AYP also advises on the points-based Highly Skilled Professional route, which offers a faster path to permanent residency for senior talent.
Japan is not an at-will jurisdiction. Under Article 16 of the Labour Contract Act, a dismissal needs objectively reasonable grounds and must be appropriate in light of social convention, and courts strike down dismissals that fall short. The statutory minimum notice is 30 days or pay in lieu. Severance is not mandated but is common practice. As the legal employer, AYP structures any exit to the standard Japanese courts expect — and where possible negotiates a voluntary, well-documented separation rather than a contested dismissal.
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