PEO Japan

Professional Employer Organization (PEO)

Employer of Record (EOR) | Remote Work

peo japan

World Bank Ease of Doing Business Ranking

ease of doing business in japan
  • DB Rank – 29
  • DB Score – 78.0

Rankings on Doing Business topics – Japan

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Topic Scores

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Global PEO in Japan

Japan, a captivating fusion of tradition and technology, stands out as a compelling option for professional employment outsourcing (PEO). With its advanced infrastructure, highly skilled workforce, and strong emphasis on precision and quality, Japan offers a dynamic environment for businesses seeking to optimize their global operations. The nation’s innovative prowess is renowned across industries, from automotive and electronics to robotics and pharmaceuticals, making it a prime destination for companies aiming to outsource specialized tasks. Japan’s unique blend of ancient culture and modern development adds a distinct charm to its PEO landscape, allowing clients to tap into a rich talent pool while benefiting from the country’s dedication to excellence. As a PEO destination, Japan not only provides access to cutting-edge expertise but also offers a glimpse into a society that seamlessly blends old-world charm with new-world innovation.

What Is a PEO?

A PEO, or Professional Employer Organization, is a company that provides a range of HR and payroll services to small and medium-sized businesses. These services can include employee benefits, payroll, compliance with labor laws, and recruiting and training.

PEOs work by entering into a co-employment agreement with the businesses they serve. In this arrangement, the PEO becomes the employer of record for the business’s employees, taking on responsibilities such as payroll, tax withholding, and employee benefits. The business, however, retains control over its day-to-day operations and the supervision of its employees.

PEOs can help businesses streamline their HR and payroll processes, reduce costs, and free up time and resources to focus on their core business activities. They can also provide access to a range of benefits and resources that small businesses may not be able to afford or manage on their own.

PEOs are also understood as employer of record / EOR at times.

Japan – Country Overview

Japan is located in the Northern Hemisphere, west of the Pacific Ocean, and has a diverse geography and cultural heritage. Japan is a commercial center with several high-tech and specialized hubs, such as the electronic and automotive industries. The electric bullet trains that connect the islands represent technological advancement and progress.

Capital City



Japanese Yen (¥)

Principal Language



Parliamentary Constitutional Monarchy

Employment Contracts in Japan

In Japan, a labor contract can either be in writing or verbal. Written employment contracts are not mandatory in Japan, however, the Labor Contracts Act advises employers to enter into written agreements whenever possible. 

Some of the details typically mentioned in the written contract include: 

  • Employment rules 
  • Other working conditions 
  • and more 

The different types of employment relationships are: 

  • Permanent Employment – Per Japan’s Labor Contracts Law, employment contracts concluded indefinitely are considered permanent.
  • Fixed-Term Contracts – Fixed-term contracts in Japan cannot be longer than three years unless the employee has the expert knowledge, advanced skills, or experience, or is 60 years of age or older. The contract may be valid for up to 5 years in such cases.
  • Temporary Employment – The Worker Dispatching Act governs temporary employment in Japan. Temporary employment contracts with the same employer in the same job can be valid for a maximum of 36 months. Employers can hire temporary workers through temporary staffing agencies, which set their wages. 

Probationary Period 

In Japan, a probationary period lasts up to 3 months. 

Working Hours in Japan

Employers cannot allow employees to work more than 8 hours per day (or 40 hours per week), except for rest periods. These hours, however, may be extended in exceptional circumstances, up to a maximum of 10 hours per day. In such cases, the employer must first obtain permission from the appropriate government agency. 

Employee Leave in Japan

Employees in Japan are entitled to the following leaves: 

  • Annual leave in Japan – Employees in Japan are entitled to at least ten days of paid annual leave if employed for a minimum of six months. Employees who have been with the same company for at least a year after the 6-month completion date are entitled to an additional day of statutory annual leave. 
  • Maternity leave in Japan – Maternity leave in Japan is 14 weeks long, with six weeks of prenatal leave and eight weeks of postnatal leave.
  • Sick leave in Japan – Employees in Japan are only entitled to sick leave if they are ill or injured at work, and the employer is required to cover the costs of medical treatment.

Public Holidays 

The following are the statutory national holidays observed in Japan: 

  • January 1 – New Year’s Day 
  • January 11 – Coming of Age Day 
  • February 11 – National Foundation Day 
  • February 23 – Emperor’s Birthday 
  • March 20 – Spring Equinox 
  • April 29 – Shōwa Day 
  • May 3 – Constitution Memorial Day 
  • May 4 – Greenery Day 
  • May 5 – Children’s Day 
  • July 22 – Sea Day 
  • July 23 – Sports Day 
  • August 8 – Mountain Day 
  • August 9 – Day off for Mountain Day 
  • September 20 – Respect for the Aged Day 
  • September 23 – Autumn Equinox 
  • November 3 – Culture Day 
  • November 23 – Labor Thanksgiving Day

Other Paid Leave

Japan has 16 public holidays. Employees who have been with a company for more than 6 months are entitled to 10 days of paid time off. The amount increases gradually to 20 days of paid time for 6.5 years of employment. 

Maternity leave is 14 weeks of paid time off. 6 weeks are taken before the birth and 8 weeks after. Paternity leave is up to a year of time off and is taken in two installments. The first can start within 8 weeks of the birth of the child. 

There is not a set law around sick leave in Japan. Employees get 5 paid days off for condolence or bereavement leave. 


Employer taxes are between 14.35% and 15.69%. Employee taxes are between 14.685% and 16.63%. 

Japan income tax for employees: 

  • 5% for income under 1,950,000 JPY 
  • 10% for income over 1,950,000 JPY but under 3,300,000 JPY 
  • 20% for income over 3,300,000 JPY but under 6,950,000 JPY 
  • 23% for income over 6,950,000 JPY but under 9,000,000 JPY 
  • 33% for income over 9,000,000 JPY but under 18,000,000 JPY 
  • 40% for income over 18,000,000 JPY but under 40,000,000 JPY 
  • 45% for income over 40,000,000 JPY

Employee Termination in Japan

Employers must offer at least 30 days’ notice prior to terminating an employee, or offer a severance payment in lieu of notice, regardless of the length of the employee’s service. Employees on probation who have worked for less than 14 days are exempt from the requirement of a notice period in Japan.

Global Mobility in Japan

There are typically the following categories of visas in Japan:

  • Working visas
  • Non-working visa
  • Family-related visas
  • Tourist visa

In Japan, there are usually four types of work permits in Japan:

  • Highly skilled professional visa
  • General work visa
  • Working holiday visa
  • Specified skills work visa

Employee Benefits in Japan

The National Pension Law governs Japan’s national retirement system. The National Pension Scheme is available to all residents of Japan, including foreigners, and is divided into the following three categories: 

  • Category I consists of Japanese citizens aged 20 to 59 
  • Category II consists of people covered by Employees’ Pension Insurance or Mutual Aid Pensions 
  • Category III consists of dependent spouses of Category II insured people 

Social insurance, often known as social welfare, is a government-mandated insurance program that provides financial help to the elderly, disabled, injured, and unemployed. 

Some examples of social insurance programs in Japan are: 

  • Dependents’/Survivors Benefit – If a person insured under the National Pension System dies, the surviving spouse who takes care of the deceased’s dependent children, as well as the dependent children themselves, are eligible for a survivor’s pension. To be eligible, children must be 18 years old or younger, or up to 20 years old if they have a disability. 
  • Life and Disability Insurance/Benefit – A person who suffers a work-related illness or injury and remains disabled after treatment and recovery receive compensation under the Labor Standards Act. 
  • Unemployment Insurance – In Japan, anyone who has been unable to find work may be eligible for unemployment benefits, including job applicant benefits (basic allowance, skill acquisition allowance, lodging allowance, injury, and disease allowance). 

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