Japan has some of the strongest employee protections in the developed world. There is no at-will employment. Termination is extremely difficult. Social insurance is mandatory. Understanding these rules is critical whether you hire through an EOR or your own entity.
Indefinite (正社員) or fixed-term (up to 3 years, 5 for specialized)
Workplace
Specific location(s)
Job description
Scope of duties
Working hours
Start/end times, break periods
Overtime rules
When overtime applies, premium rates
Wages
Base salary, allowances, payment date, calculation method
Termination
Conditions and procedures
Retirement
Age, retirement benefit system
⚠️ In Japanese: While bilingual contracts are common for foreign employees, the Japanese version controls in case of discrepancy. Ensure accurate translation.
≥45 min (for 6–8 hr days) · ≥60 min (for 8+ hr days)
Rest days
Min. 1 per week or 4 per 4-week period
Overtime Premium Rates
Type
Premium Rate
Standard overtime (>8 hrs/day or >40 hrs/week)
+25%
Late night work (10 PM – 5 AM)
+25%
Work on rest days
+35%
Overtime + late night
+50%
Rest day + late night
+60%
Overtime exceeding 60 hrs/month
+50% (large companies)
36 Agreement (三六協定)
To require any overtime at all, the employer must execute a 36 Agreement (Article 36 labor-management agreement) with employee representatives and file it with the Labour Standards Inspection Office.
Japanese courts apply the doctrine of abuse of dismissal rights (解雇権濫用法理, Labor Contract Act Art. 16): a dismissal is void if it lacks objectively reasonable grounds or is not considered appropriate in light of generally accepted social norms.
Four-Factor Test for Economic Dismissal (整理解雇)
Factor
Question
1️⃣ Business necessity
Is workforce reduction genuinely necessary?
2️⃣ Efforts to avoid dismissal
Were alternatives exhausted? (transfers, salary cuts, voluntary retirement)
3️⃣ Fair selection
Were dismissed employees selected by reasonable, objective criteria?
4️⃣ Adequate procedures
Was the process transparent? Were employees consulted?
All four factors must be satisfied. Failure on any one can invalidate the dismissal.
Notice Requirements
Situation
Requirement
Standard dismissal
30 days' advance notice or 30 days' pay in lieu
Probation (<14 days)
No notice required
Fixed-term contract (mid-term)
Cannot terminate without unavoidable cause (やむを得ない事由)
Fixed-term → non-renewal
Must notify 30 days before expiry (if contract was 3+ renewals or 1+ year)
Under Art. 18 of the Labor Contract Act, an employee on consecutive fixed-term contracts who has worked for the same employer for 5+ cumulative years may request conversion to an indefinite-term contract. The employer cannot refuse.
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
┌──────┐ ┌──────┐ ┌──────┐ ┌──────┐ ┌──────┐ ┌──────┐
│1-year│→│1-year│→│1-year│→│1-year│→│1-year│→│ NOW │
│fixed │ │fixed │ │fixed │ │fixed │ │fixed │ │MUST │
│term │ │term │ │term │ │term │ │term │ │OFFER │
└──────┘ └──────┘ └──────┘ └──────┘ └──────┘ │INDEF.│
└──────┘
⚠️ Worker Dispatch Risk: If your day-to-day management of EOR employees looks too much like direct employment (issuing direct orders, controlling schedules), the arrangement may be reclassified as worker dispatch (派遣) under the Worker Dispatch Act, triggering additional compliance requirements.
This article is for informational purposes only. Consult a licensed labor and social insurance attorney (社会保険労務士) or employment attorney (弁護士) for compliance matters.
