Japan’s minimum wage standard is quite complex. The minimum hourly wage depends on the region where the worker is located, ranging from 951 yen to 1,163 yen. The minimum hourly wage will increase to 1,225 yen starting from October 4th.
Note: Tokyo 1,163 yen/hour (updated on October 1st, Reiwa 6); Kanagawa 1,162 yen/hour (updated on October 1st, Reiwa 6); Chiba 1,076 yen/hour (updated on October 1st, Reiwa 6); Saitama 1,078 yen/hour (updated on October 1st, Reiwa 6)
Overtime Pay and Maximum Working Hours
The standard working hours are 8 hours a day and 40 hours a week. The standard working week is from Monday to Friday.
In principle, the upper limit of working overtime beyond the legal hours is 45 hours per month and 360 hours per year. Even in case of temporary special circumstances, it shall not exceed 720 hours per year.
The overtime pay rate for overtime work beyond the legal hours and night shift work (from 10 p.m. to 5 a.m.) is more than 25%. The overtime pay rate for working on rest days is more than 35%. In addition, according to the Labor Standards Act, if an employer asks a worker to work more than 60 hours of overtime beyond the legal working hours in a month, the overtime pay rate shall be more than 50%.
Personal Income Tax
The personal income tax rate ranges from 5% to 45%. Income tax is calculated on a progressive tax rate. Various other factors such as family status and the number of children may affect the tax rate and amount.
Personal Inhabitant Tax
The personal inhabitant tax rate is 10% of the income (4% for prefectural tax and 6% for municipal tax), which is calculated based on the income from January 1st to December 31st of the previous year and will be levied starting from June of the following year.
Various other factors such as family status and the number of children may affect the tax rate and amount.
Statutory Holidays
Employers must grant 10 days (either consecutively or in installments) of paid leave to workers who have worked continuously for more than 6 months and have an attendance rate of more than 80% since the date of employment.
For part – time workers with fewer working days, they must also be granted corresponding annual paid leave according to the number of days they have worked. Even if the employment contract is for 1 month or 3 months, as long as they have worked continuously for more than 6 months after renewing the contract, they are eligible.
Annual leave is not accumulated monthly but increases according to the length of service of the employee in the same company. The right to paid leave is valid for two years from the date of obtaining this right.
National Holidays
Japan celebrates 16 national holidays, including New Year’s Day, Coming – of – Age Day, National Foundation Day, The 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, and Labor Thanksgiving Day.
For female workers with a confirmed due date, employers must grant 6 weeks of prenatal leave (14 weeks for multiple pregnancies) and 8 weeks of postnatal leave.
In addition, female workers who need to take care of children under 1 year old can take two breaks a day to take care of their children, each break being at least half an hour, in addition to the legal rest time. The way of taking leave can be starting work half an hour later, leaving work half an hour earlier, or taking a one – hour leave at a time.
Employers can decide whether it is paid leave or not. In addition, during the prenatal and postnatal leave periods, female workers can also receive maternity allowances paid by health insurance, which is equivalent to two – thirds of the salary before taking maternity leave (with an upper limit).
Paternity Leave
Currently, there is no legal provision for paternity leave.
Employees can use parental leave instead.
Parental Leave
Workers (regardless of gender) who need to take care of children under 1 year old can take leave to take care of their children. When both parents of the child take parental leave, they can take up to 1 year of parental leave before the child is 1 year and 2 months old.
Moreover, if there is no one to take care of the child, such as being unable to send the child to a nursery, parental leave can be extended until the child is 1 year and 6 months old. In addition, if the child still cannot enter a nursery after the parental leave is extended to 1 year and 6 months, the parental leave can be further extended for 6 months (until the child is 2 years old).
Workers with fixed – term employment contracts who have worked continuously for more than 1 year and whose employment contracts do not expire before the child is 1 year and 6 months old can take parental leave.
During the parental leave period, when certain conditions are met, workers will be paid 67% of their salary at the start of the leave (50% after more than 6 months of leave).
Social insurance premiums during the prenatal and postnatal leave periods and parental leave periods can be exempted if an application is made during each leave period.
Employers are obliged to set up a short – time work system for workers who take care of children under 3 years old if they wish to use it.
When workers who take care of children under 3 years old request, employers shall not let them work beyond the specified hours, except in cases where it will interfere with the normal operation of the business.
Workers who take care of preschool – age children can take care – giving leave when the child is injured or sick. For workers who take care of one preschool – age child, they can get 5 days of care – giving leave per year. For those who take care of two or more children, they can get 10 days of care – giving leave per year. Leave can be applied for in units of 1 day or half a day. Whether the salary is paid or deducted depends on the agreement between the worker and the employer.
Sick Leave
There is no legal requirement for sick leave, and it is unpaid leave.
Employment Contract
The contract must be in Japanese and can also have a second language. The contract must be in written form and signed and sealed by both parties.
The contract must include:
The term of the employment contract
Matters regarding the standards for renewing fixed – term employment contracts
The work location and job content
Whether there is work beyond the legal working hours
Working hours, rest time during work, holidays, and leave
The determination, calculation, and payment method of the salary, the calculation cut – off date, and the payment date
Matters regarding resignation (including reasons for dismissal)
Note: In principle, employment contracts in Japan are renewed annually. If there is a salary adjustment, a new employment contract needs to be signed.
Special attention: A fixed – term employment contract means a commitment to employ until the end of the contract. Therefore, if the employment contract needs to be terminated early, in principle, the maximum severance pay is the unpaid employer cost for the remaining period of the employment contract.
Probationary Period
The probationary period is not mandatory. The law does not specify the minimum and maximum duration of the probationary period. However, the probationary period is generally 3 to 6 months.
After the probationary period ends, it can be extended to 6 months at the employer’s discretion.
Employer Costs
Employer costs are generally estimated to be 16.58% of the employee’s salary.
Long – term care insurance* (only for those over 40 years old) – 0.80% (employees bear 0.80%)
Workers’ compensation insurance – 0.30%
Childcare expenses* – 0.36%
Asbestos contribution – 0.002%
Annual expenses: Annual medical examination – 45,000 yen
*Health insurance, pension insurance, long – term care insurance, and childcare expenses are calculated based on the standard monthly amount determined by social insurance and the employee’s salary. Please note that social insurance also determines the maximum salary for these expenses, so the percentages may vary.
Starting from March 2025 (payment in April), the adjustment will be as follows:
Long – term care insurance* (only for those over 40 years old) – 0.795% (employees bear 0.795%)
Childcare expenses remain unchanged
Termination of Employment (Legal Requirements and Best Practices)
Notice Period
The notice period is 30 days.
Voluntary Resignation
Employees are allowed to resign at any time according to the employment agreement.
Termination during Probationary Period
Employers or employees are allowed to terminate the employment relationship during the probationary period.
Reasons: Poor performance, bad behavior, frequent lateness or absenteeism.
Compliance requirements: For employees terminated due to poor performance, the same process must be followed (i.e., repeated warnings, performance improvement plans, retraining, rotation, continuous efforts to keep the employee employed, etc.), which may also take several years to build a case.
Negotiated Termination
Employers and employees are allowed to mutually agree to terminate the employment relationship at any time.
Reasons: Business reasons (such as layoffs, restructuring, downsizing), there may be disputes or lawsuits involving the employee, employees shall not be terminated without just cause, the employee has negotiated with the customer to terminate the employment contract.
Termination for Cause
Employers are allowed to immediately terminate the employment of an employee due to serious misconduct without prior notice.
Reasons: Serious performance problems, attendance problems, theft of company money or property, misconduct (any form of serious violation of the employment agreement, policies, or applicable laws), forgery of records, harassment, violence.
Compliance requirements: Employers must send a written notice of reasons to the employee, set up an expert group to investigate the matter, and provide the employee with an opportunity to explain. After that, if the expert group is satisfied with the reasons for termination, the termination can be carried out. The company manual must emphasize the proof of reasons. Employers must thoroughly investigate the reasons for termination and obtain legal advice on the possibility of termination.
The subsidy is under the responsibility of the Ministry of Health, Labour and Welfare, aiming to improve employment and the working environment.
Projects include: Subsidy for human resource development support, subsidy for career development, subsidy for trial employment, subsidy for business improvement, subsidy for promoting work – method reform, etc.
Note: Foreign and local investors are equally eligible to enjoy the incentives provided by the Japanese central and local governments. These incentives usually come in the form of tax breaks, grants, and loan assistance. Industry – oriented
Assistance
The assistance is under the responsibility of the Small and Medium Enterprise Agency of the Ministry of Economy, Trade and Industry, aiming to support emerging enterprises, regional revitalization, and promote enterprises beneficial to the public.
Projects include: Assistance for business establishment, assistance for labor – saving investment, assistance for manufacturing, assistance for IT introduction, assistance for the sustainability of small – scale enterprises, etc.
For more information, please refer to the official information of the Small and Medium Enterprise Agency of the Ministry of Economy, Trade and Industry: https://mirasapo-plus.go.jp/subsidy/
Industry – Oriented Incentives
The Japan Development Bank provides preferential long – term loans at low interest rates and loan guarantees for various enterprises. This includes initiatives related to pollution – prevention technology, maritime transportation, natural resources, and energy, as well as energy – saving equipment, technology development, and urban renewal. The terms of these loans vary according to the nature of the project.
Geographical – Oriented Incentives
Japan provides various regional incentives, mainly targeting investments outside the major metropolitan areas. Some of these incentives are linked to regional economic development projects, with the goal of balancing development between the national economic center and local areas. The Japan Development Bank (DBJ) provides preferential loans for rural development. In addition, local governments also provide tax breaks, subsidies, and low – interest financing. Almost all 47 prefectures and many major cities in Japan offer tax incentives and subsidies to attract investment.
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