EOR Japan: Complete 2026 Guide for Global Companies
Unlock a highly skilled, highly regulated talent market with confidence with EOR in Japan.
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Introduction
Japan offers international companies access to a highly skilled workforce with depth in engineering, manufacturing, technology, and research. With GDP growth forecast at 0.8–0.9% for 2026 and domestic consumption strengthening, it remains a long-term priority for companies building a serious regional presence.
Hiring here requires local grounding. Minimum wages are set independently across 47 prefectures. Social insurance spans five programmes with distinct rates and ceilings by location. Dismissal without objectively reasonable grounds is invalid under the Labour Contract Act, and courts apply strict scrutiny. An Employer of Record provides the registered entity and expertise to manage these obligations from day one.
Employment landscape
Market Overview (2026 Projections)
Market overview (2026 projections)
Laws & compliance
Prefectural Minimum Wages (FY2025)
Japan’s minimum wage system operates on a prefectural basis, with rates set annually by Regional Minimum Wage Councils. FY2025 (effective October 2025 through March 2026) marked a historic milestone as all 47 prefectures exceeded ¥1,000/hour for the first time.
Note: Regional variation spans ¥203/hour between Tokyo and lowest-wage prefectures. Rates are reviewed annually with increases effective each October. Employers must comply with the higher of national or prefectural minimums.
Social Insurance Contributions
Japan’s social insurance system comprises multiple programmes with contributions shared between employers and employees. Total employer cost typically ranges 15–20% above gross salary.
Maximum Contributions: Employees’ Pension max contribution is ¥59,475 each (employer/employee) at the ¥650,000 monthly ceiling. Health Insurance in Tokyo caps at approximately ¥68,800 each at the ¥1,390,000 ceiling.
Payroll & tax
National Income Tax Brackets
Japan employs a progressive national income tax system with rates ranging from 5% to 45%, plus a 2.1% reconstruction surtax on all brackets (through 2037) and local inhabitant taxes.
Local Inhabitant Tax: A flat 10% local inhabitant tax applies (4–6% prefectural + approximately 6% municipal) plus ¥5,000 per capita levy. This is based on prior year income and collected through payroll deduction. Non-residents pay a flat 20.42% on gross employment income (including 2.1% reconstruction surtax).
Working hours & Leave entitlements
Working Hours Regulations
Annual Paid Leave
Employees are entitled to paid annual leave after completing six months of continuous service with at least 80% attendance. Leave days increase with length of service.
Critical Compliance: Since 2019, employers MUST ensure employees take at least 5 days annually. Violation carries ¥300,000 fine per employee. Unused leave carries forward for 2 years.
Other Leave Types
National Holidays (16 days)
- New Year’s Day
- Coming of Age Day
- National Foundation Day
- Emperor’s Birthday
- Vernal Equinox Day
- Showa 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
- Labour Thanksgiving Day
Note: If a holiday falls on Sunday, the following Monday becomes a substitute holiday. Golden Week (late April–early May) and Silver Week (September, varies) are peak holiday periods.
Work permits & Visas
Japan offers various visa categories for foreign workers, with the Highly Skilled Professional (HSP) visa providing significant benefits including fast-track permanent residency. A Certificate of Eligibility (COE) is typically required before visa application, with processing times of 1–3 months.
Primary Visa Categories
2025–2026 Updates: Visa fees increased in 2025 with further hikes planned for 2026 (status change ¥30,000–40,000; PR application ¥100,000). The points-based HSP system awards points for academic background, professional experience, age, salary, and Japanese language ability.
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Termination & Employee exit
Japan is NOT an at-will employment jurisdiction. Dismissal requires ‘objectively reasonable grounds’ and must be ‘appropriate in light of social convention’ under Article 16 of the Labour Contract Act. Courts apply extremely strict scrutiny to employer dismissals.
Notice Requirements
Severance Pay
Severance is NOT legally mandated but is common practice in Japan. Typical range is 3–18 months base salary depending on reason for separation, tenure, age, and performance. Companies establish severance systems in their work rules (shuugyou kisoku). Due to the difficulty of dismissal, employers frequently negotiate voluntary resignation with enhanced severance packages to avoid legal challenges.
Note: Wrongful dismissal is deemed invalid, with the employee entitled to reinstatement and back pay with interest.
Why AYP
AYP Group holds a direct licensed entity in Japan — your employees are hired and managed by us, not routed through an aggregator network. We handle payroll, social insurance, prefectural minimum wage compliance, and mandatory leave obligations, and manage the full work visa process from Certificate of Eligibility through to residence permit. Where separations are required, we guide you through the notice, negotiation, and documentation standards Japan’s courts expect.
Across every engagement: clear costs, no hidden fees, and compliance you can rely on.
Speak to Our Japan Team
Ready to hire in Japan? Contact AYP Group and one of our specialists will be in touch.
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 are subject to change. © 2026 AYP Group. All rights reserved.
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Questions?
We're here to help
AYP’s pricing covers the end-to-end employment lifecycle for your employees in each country.
This includes payroll processing, statutory filings, compliance monitoring, local employment administration, and ongoing HR support. Our goal is to ensure your workforce is managed compliantly and smoothly, without you having to coordinate multiple vendors.
Before you start, we provide a clear breakdown of what is covered, so you know exactly what to expect.
We believe regional workforce management should be predictable, not full of surprises.
That’s why we walk you through a detailed cost breakdown before onboarding begins. This includes employer costs, statutory contributions, and service fees. If any scope changes arise, they are discussed with you in advance, so you stay in control of your budget.
In some countries, a security deposit is required as part of responsible employment and payroll risk management.
This deposit is typically aligned with local notice period obligations and helps ensure that final salary, statutory payments, and any end of employment costs are properly covered. The deposit remains in your company’s funds and is returned according to the agreed terms when employment ends.
Your AYP advisor will explain clearly if this applies in your chosen countries.
AYP charges a fixed monthly service fee per employee, rather than a percentage of salary.
This makes your costs more predictable and easier to plan across countries. Pricing is structured based on country requirements, workforce size, and the level of support needed. There is no long term lock in. We work with you based on your current workforce needs.
AYP combines in-country expertise with structured support across Asia.
Instead of routing requests through a general support system, you work with teams who understand local regulations and your workforce setup. We focus not only on payroll processing, but also on proactive compliance updates and practical HR advisory, so you can make informed decisions with confidence.
More questions?
We're here to help. Whether it's pricing details, country-specific compliance, or how we compare to other EORs, let's talk.
