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Global Payroll Team
Written by Global Payroll Team
Last updated May 7, 2026
Expert Reviewed
Payroll in Japan
Tax in Japan
Immigration in Japan

Japan map

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Mercans offers complete payroll, PEO and HR services in Japan

Presenting a highly developed business environment and stable infrastructure, Japan remains one of the world’s largest economies and a major destination for foreign investment. Its primary industries include automobiles, machinery, electronics, semiconductors, chemicals, and advanced manufacturing. Japan also continues to focus on digital transformation, sustainability, and improving the business environment for foreign companies.

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Doing Business in Japan

There are many good reasons to do business in one of the world’s largest economies by nominal GDP. Japan remains a global leader in research and development, advanced manufacturing, and industrial innovation. Many foreign-affiliated companies have entered the Japanese market with support from JETRO (Japan External Trade Organization).

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Japan is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.

Banking

Banking Hours: 9:00 am to 3:00 pm

Working Week

The statutory standard working week is 40 hours, generally worked over Monday to Friday, although actual office hours vary by employer.

Labor Law

Japan has a range of laws in place to ensure fair working conditions and these laws apply equally irrespective of nationality. Key laws include the Labor Standards Act, the Labor Contract Act, the Industrial Safety and Health Act, and the Minimum Wage Act. These laws regulate matters such as working conditions, contract terms, overtime, leave, and dismissal.

Main Industries

Automobiles, machinery, electronics, semiconductors, chemicals, iron and steel

GDP Growth

0.1%

Dates & Numbers

yyyy/mm/dd

Official State Name

Japan

Population

123.8 million

Capital

Tokyo

Major Languages

Japanese

Currency

Japanese Yen (JPY)

Internet Domain

.jp

International Dialing Code

+81

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Japan
Tokyo, JP
11:44 pm, May 15, 2026
17°C
few clouds
85 %
Wind Gust: 0 mph
Clouds: 20%
Sunrise: 4:36 am
Sunset: 6:38 pm

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Payroll

All wages must be paid in currency and directly to workers in full, at least once a month and on a definite date. Payment of wages via bank transfer is also permitted subject to employee consent. There are two types of minimum wage: regional minimum wage, prescribed separately for each prefecture and applying to most workers, and specified minimum wage, prescribed for certain industries. Where both apply, the higher minimum wage must be observed.

It is acceptable to provide employees with online payslips

Payslip

Payroll reports must generally be kept for 5 years

Reports

Employees with 1.5 years of service are entitled to 11 days of paid annual leave, subject to attendance requirements

Annual Leave

There is no general statutory entitlement to employer-paid sick leave in Japan

Sick Leave

14 weeks of maternity leave, and childcare leave is available to eligible parents. Paternity childcare leave after childbirth may be taken for up to 4 weeks within 8 weeks after birth

Maternity & Paternity Leave

30 days

Employee Termination

A 13th month salary is not required by law, although bonuses are common in practice

13th month salary

Minimum wage rates vary by prefecture and industry

Minimum Wage

Statutory overtime premiums are generally at least 25%, with higher rates applying in certain cases such as overtime above 60 hours per month or work on statutory days off

Overtime

Severance pay is not mandatory by law, although many employers provide it under company rules

Severance Pay

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Tax and Social Security

Tax is managed by the National Tax Agency and most wage earners are not required to file a final tax return because the calculation and payment of income taxes are generally completed through the year-end adjustment by the person paying the salary. Japan’s social security system covers health insurance, pension, long-term care insurance, employment insurance, and workers’ accident compensation insurance, with contributions generally shared between employers and employees depending on the scheme.

Tax

Resident taxpayers are generally taxed on worldwide income, while non-resident taxpayers are generally taxed only on Japan-sourced income. In addition to national income tax, local inhabitant taxes also apply. A 2.1% special reconstruction surtax is levied on national income tax.

23.2%

Corporate Income Tax

55.945%

Personal Income Tax

10%

Sales Tax

10%

VAT

Social Security

There is a two-fold system in place, that is, employee insurance for salaried workers and national insurance programs for self-employed persons and others not covered by employee insurance. Contribution rates vary depending on the type of insurance, prefecture, and employer classification.

Varies

Social Security Rate

Varies

Social Security Rate for Employers

Varies

Social Security Rate for Employees

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Employment Law

Japan has in place several laws pertaining to labor and the protection of workers including the Labor Standards Act, the Industrial Safety and Health Act and the Minimum Wage Act. These laws apply in principle to enterprises in Japan regardless of whether the employee is Japanese or foreign, or whether the company is foreign or Japanese owned.

Employment Agreement

Labor contracts with a definite period generally must not exceed 3 years, although there are exceptions, including certain highly specialized workers and workers aged 60 or older, for whom contracts of up to 5 years may be permitted.

Working condition

In principle, an employer shall not have a worker work for over 40 hours per week or more than 8 hours per day. Workers must also be provided with at least 1 day off per week or 4 days off during a 4-week period. Overtime and work on days off generally require a Labor-Management Agreement, commonly referred to as a 36 Agreement.

Leaves

Where a worker has been employed continuously for 6 months and has reported to work at least 80 percent of the total working days, the employer must grant annual paid leave. When leave requested may interfere with the normal operation of the enterprise, the employer may change the dates of leave.

Employment termination

If a dismissal lacks objectively reasonable grounds and is not considered appropriate in general societal terms, it is treated as an abuse of rights and is invalid. In the case of fixed-term labor contracts, an employer may not dismiss a worker until the term has expired unless there are unavoidable circumstances.

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30 days

Minimum notice period for terminating an employee

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16

Total number of national public holidays

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40

Working hours per week

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Varies

Total number of days for Compassionate & Bereavement Leave

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Immigration

For most work-related statuses, applicants generally need a Certificate of Eligibility before applying for a visa. Where a professional is deemed highly skilled under the points-based system and gains the status of residence for highly skilled professional activities, the individual may be eligible for preferential immigration treatment.

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Residency permits

Under the residence management system for foreign nationals in Japan, a residence card is issued to mid to long-term foreign residents with a valid status of residence under the Immigration Control Act when they are granted a residence-related permit such as landing permission, permission for change of status of residence, or permission for extension of period of stay.

Work Permit validity

Varies by status of residence, commonly from 3 months up to 5 years

Required Documents

The Certificate of Eligibility, where required

Japan work visa application form, completed and signed

Valid passport and copies of the same

Passport-sized photographs meeting the required standards

Documents detailing the applicant’s position in the company, salary, and duration of work

Documents attesting to the applicant’s academic and professional history

Documents related to the receiving company, such as company registration and financial information, where applicable

Compliant, reliable, error-free and touchless payroll in Japan

Build the best team and hire top talent compliantly in Japan. Get in touch with Japan payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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    FAQs

    What is an Employer of Record (EOR) in Japan and how does it help foreign companies?

    An Employer of Record in Japan acts as the legal employer of your team in Japan. It handles employment contracts, payroll, tax and social insurance contributions, and compliance with Japanese labour law, allowing your business to engage local or foreign staff without establishing a local entity.

    Why should businesses use an EOR instead of setting up a legal entity in Japan?

    Using an EOR allows companies to enter the Japanese market quickly without the time, cost and complexity of forming a subsidiary. It reduces administrative burden, avoids entity-setup risk, and ensures local employment and tax compliance from the start.

    How does payroll outsourcing in Japan ensure compliance with labour laws and tax regulations?

    Payroll outsourcing in Japan ensures monthly wages, tax withholdings and social insurance contributions are processed correctly and in accordance with Japanese regulations. The provider handles annual tax adjustments, employment records and statutory filings, reducing compliance risk for your company.

    Can an Employer of Record in Japan hire employees and manage work visas for international companies?

    Yes. An EOR in Japan can hire employees on behalf of your company and assist with work visas or residence status for non-Japanese nationals. It manages HR administration, payroll, and immigration-related tasks to support compliant hiring and retention.

    What are the main benefits of using EOR and payroll services in Japan for global expansion?

    Key benefits include rapid onboarding of staff without entity formation, full compliance with Japanese employment and tax law, reduced administrative and legal risk, access to local HR and payroll expertise, and the flexibility to scale operations in Japan while your business focuses on growth.

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