Foreign companies scoping their first Japan hire frequently get pointed toward a 人材派遣 (haken, worker dispatch) agency, since dispatch staffing is the dominant and most familiar form of flexible labor in Japan. It is a reasonable instinct, and the wrong tool for what most market-entry hiring needs. Employer of Record (EOR) is direct, ongoing employment by a Japan-resident entity and not a temporary licensed assignment, so the Worker Dispatch Act's time limits and duty restrictions do not apply to it. The legal risk is an EOR structured so loosely that it is recharacterized as unlicensed dispatch.
What Haken Actually Is#
Haken is a licensed staffing model governed by the Worker Dispatch Act (労働者派遣法). A dispatch agency (派遣元) is the worker's legal employer, holds a specific government-issued dispatch business license, and assigns the worker to a client company (派遣先) that directs the worker's day-to-day duties for a defined period.
The model carries limits that exist because it is designed for temporary, supplementary staffing:
(a) Dispatch to the same organizational unit at a client is generally capped in time, and the client must follow a defined process to extend or convert the arrangement once the cap is reached.
(b) Certain categories of work are restricted or excluded from dispatch, including some regulated, safety-sensitive, and specialist categories.
(c) The licensing burden falls on the agency. The client company does not need its own dispatch license to receive dispatched workers, but its position rests on the agency's license and compliance posture alone, and both parties share exposure if the arrangement is found to be improperly structured.
Haken is useful for short-term, supplementary, or clearly temporary staffing needs. It is not designed, and was never intended, to be the vehicle for a foreign company's first ongoing hire in Japan: a country manager, an engineer running local operations, or a sales representative who is meant to be part of the business indefinitely. Placed through haken, an ongoing role runs into the time cap and duty restrictions above.
What EOR Actually Is#
Employer of Record addresses a different situation: a foreign company wants to engage a worker in Japan for an ongoing, indefinite role central to its own business, without first incorporating a Japan entity. Under EOR, a Japan-resident entity becomes the worker's actual, direct legal employer, running payroll, enrolling the worker in social and labor insurance, and handling tax withholding, while the foreign company directs the substance of the worker's day-to-day duties under a separate services or management agreement with the EOR provider.
EOR is not a licensed dispatch arrangement and does not operate under the Worker Dispatch Act's time limits or duty restrictions, because the legal relationship is different: the EOR entity employs the worker directly on an ongoing basis and does not assign the worker to a client for a temporary period under a dispatch license. The boundary still matters, because the surface pattern (a Japan-resident entity is the legal employer, while a different company directs the work) looks similar to dispatch from a distance. The risk lies in getting the underlying structure wrong.
Where the Line Actually Matters#
The practical distinction between a properly structured EOR arrangement and an unlicensed, disguised dispatch arrangement comes down to who genuinely holds employer authority and how the day-to-day direction of the worker is documented:
(a) A properly structured EOR retains real employer functions itself, meaning it is party to the actual employment relationship, handles disciplinary and HR authority in substance (not merely on paper), and the foreign client's direction of the worker's work operates through a documented services relationship with the EOR provider rather than a direct command-and-control structure that mirrors a dispatch client's authority over a dispatched worker.
(b) An arrangement that looks like EOR on paper but in practice functions as the foreign client directing every aspect of the worker's employment, with the "EOR" doing little beyond issuing payslips, risks being recharacterized as an unlicensed dispatch arrangement, since the Worker Dispatch Act cares about the substance of who controls the work, whatever the contract is called.
Which side of the line a given arrangement falls on is a compliance question that deserves specific legal review. Before signing with an EOR provider, and before the first hire starts, a foreign company should ask directly how the provider's structure preserves real employer authority, and should not assume the label alone settles the question.
Haken vs EOR at a Glance#
| Haken (人材派遣) | EOR | |
|---|---|---|
| Legal employer | Licensed dispatch agency (派遣元) | EOR provider entity |
| Governing framework | Worker Dispatch Act (労働者派遣法) | General labor law, structured as direct employment |
| Intended duration | Temporary, time-limited by law | Ongoing, indefinite |
| Duty restrictions | Yes, some categories excluded or restricted | No dispatch-specific restrictions |
| License required | Yes, held by the agency | No dispatch license (not a dispatch relationship) |
| Typical use case | Supplementary or short-term staffing | First hire, country manager, ongoing local team |
This article is informational only and does not constitute legal, tax, or regulatory advice. Consult a qualified advisor before acting on the content. Last updated: August 2026.