Employer of Record in Japan: 2026 Cost and Compliance Guide

Japan is the world's fourth-largest economy and a major market for technology, manufacturing, finance and consumer brands, with deep engineering and sales talent in Tokyo, Osaka and Fukuoka. Employer costs are moderate: social insurance (pension, health, employment and accident insurance) adds roughly 15–16% of pay up to the contribution ceilings.

The Japan-specific question is legal structure. When a company supplies its employees to work under another company's direction, Japanese law usually treats it as worker dispatch (haken), which needs a licence from the Minister of Health, Labour and Welfare and is limited to 3 years per worker in the same unit. An Employer of Record (EOR) in Japan should explain clearly how its arrangement complies.

This guide covers costs, the dispatch rules, the Labor Standards Act, provider comparison and when to set up your own company. Figures link to official sources. We do not test or use the providers listed; see our methodology.

An Employer of Record in Japan is a company with a Japanese entity that employs staff on behalf of foreign businesses. It signs the employment contract, enrols the employee in social insurance (health, pension, employment and workers' accident insurance), runs payroll and withholding tax, and handles leave and termination under Japanese law.

Because your company directs the employee's daily work, the arrangement generally falls under the Worker Dispatching Act. A provider dispatching workers needs a licence (Article 5), and a client that uses an unlicensed provider, or exceeds the time limits, can be deemed to have offered the worker a direct employment contract (Article 40-6).

Ask each provider whether its Japanese entity holds a worker dispatch licence, how it applies the 3-year limits, and whether it can sponsor a residence status for a foreign hire.

Japan's Worker Dispatching Act (Act No. 88 of 1985) regulates arrangements where one company's employees work under another's direction, which is how most EOR services operate. Anyone running a worker dispatch business needs a licence from the Minister of Health, Labour and Welfare (Article 5).

There are two 3-year limits. A client can't use dispatched workers for the same work at a place of business for more than 3 years, unless it extends that period after consulting the majority union or employee representative (Article 40-2). Separately, the same worker can't be dispatched to the same organisational unit for more than 3 years (Articles 35-3 and 40-3).

The limits don't apply where the dispatched worker is on an open-ended (indefinite) contract with the provider, among other exceptions (Article 40-2(1)). If a client breaks the limits or uses an unlicensed provider, it is deemed to have offered the worker a direct labour contract on the same terms (Article 40-6).

1. Start

   The provider's licence and the dispatch contract must be in place; the client should check the licence.

2. 1 year

   If the client then recruits for the same work, it must tell the dispatched worker about the vacancy (Article 40-5).

3. 3 years

   Limit for the same worker in the same organisational unit, unless the worker is on an open-ended contract with the provider.

Your options before 3 years

Japanese employment cost has three layers: gross salary (monthly pay plus any bonuses), employer social insurance and the EOR fee.

Health insurance and pension are calculated on a standard monthly remuneration band and capped: pension at ¥650,000 a month and health insurance at ¥1,390,000 a month. Rates below use Kyokai Kenpo's Tokyo rates for FY2026; health insurance rates vary slightly by prefecture.

Annual cost at example salaries

What these figures include and exclude

• Rates are for an employee under 40 in Tokyo. Add 0.81% for long-term care insurance if the employee is 40 to 64.
• Pension and the child contribution stop rising above ¥650,000 a month of pay, and health insurance above ¥1,390,000, so the effective rate falls at higher salaries.
• Employee social insurance contributions, income tax and resident tax are deducted from pay and are not employer costs.
• Japan has no statutory severance pay. Retirement allowances and severance are set by company rules or contract, and dismissals are difficult (see below).
• Foreign employees are generally covered by Japanese social insurance; a social security agreement between Japan and their home country can exempt some seconded staff from pension contributions.

Estimate your own cost

Enter a salary to see the estimated annual cost, including mandatory employer contributions and an EOR fee. Change the fee to match the quotes you receive. For worked examples at four salary levels, see cost to hire an employee in Japan.

Japanese employment law combines the Labor Standards Act (minimum conditions), the Labor Contract Act (contracts and dismissal) and the Worker Dispatching Act. Key rules below.

Written working conditions

When hiring, the employer must make wages, working hours and other conditions explicit, with the main particulars in the form prescribed by MHLW ordinance. If the actual conditions differ, the worker can cancel the contract immediately.[6]

Labor Standards Act, Article 15.

Working hours and breaks

No more than 40 hours a week and 8 hours a day, excluding breaks. Breaks of at least 45 minutes when working more than 6 hours and 1 hour when working more than 8. At least one day off a week (or four in four weeks).[6]

Labor Standards Act, Articles 32, 34 and 35.

Overtime ('36 agreement')

Overtime or work on days off requires a written agreement with the majority union or employee representative, filed with the labour office. The normal cap is 45 hours a month and 360 a year; even in special circumstances, under 100 hours a month and 720 a year.[6]

Labor Standards Act, Article 36.

Overtime pay

Premiums of at least 25% for overtime and work on days off (the exact rates are set by Cabinet Order between 25% and 50%), at least 50% for overtime beyond 60 hours a month, and at least 25% for night work between 10pm and 5am.[6]

Labor Standards Act, Article 37.

Annual paid leave

10 days after 6 months' continuous service with at least 80% attendance, rising to 11, 12, 14, 16, 18 and 20 days a year from 6.5 years. For employees with 10 or more days, the employer must make sure at least 5 are taken each year.[6]

Labor Standards Act, Article 39.

Maternity and childcare leave

Leave from 6 weeks before childbirth on request (14 weeks for multiple births) and a ban on work for 8 weeks after (6 weeks with a doctor's approval). Childcare leave until the child turns one, extendable to 18 months and then two years in specified cases such as no nursery place.[9]

Labor Standards Act, Article 65; Childcare Leave Act, Article 5.

Rules of employment

Employers continuously employing 10 or more workers must draw up rules of employment covering hours, leave, pay, separation and grounds for dismissal, and file them with the labour office.[6]

Labor Standards Act, Article 89.

Dismissal

A dismissal that lacks objectively reasonable grounds and is not appropriate in general societal terms is an abuse of rights and invalid. The employer must give at least 30 days' notice or 30 days' average wages in lieu (less notice if days are paid).[7]

Labor Contract Act, Article 16; Labor Standards Act, Article 20. In practice, Japanese courts set a high bar, so most exits are negotiated.

Fixed-term contracts

When fixed-term contracts with the same employer total more than five years, the worker can apply for an open-ended contract on the same terms, and the employer is deemed to accept.[7]

Labor Contract Act, Article 18.

Worker dispatch

A worker dispatch business needs a licence. A client can't use dispatched workers for the same work at a workplace for more than 3 years without extending the period after consultation, and the same worker can't be placed in the same organisational unit for more than 3 years, unless they are on an open-ended contract with the provider.[8]

Worker Dispatching Act, Articles 5, 35-3, 40-2 and 40-3. Breaches can create a deemed offer of direct employment (Article 40-6).

• Effective 1 October 2026

  Tokyo minimum wage rises to ¥1,280 an hour

  Check pay for part-time and junior roles, especially outside Tokyo where effective dates differ.

• Effective 1 April 2026

  Japan's child and childcare support levy starts, and employment insurance falls

  Roughly offsetting changes: about +0.12% and −0.05% of pay for the employer.

See every country in the employment law changes tracker.

These EOR providers publish information about employing in Japan. Prices are their own published starting rates in USD, from our pricing tracker. Quote-only providers are marked.

In Japan, ask whether the provider's entity holds a worker dispatch licence, whether your hire will be on an open-ended contract, and whether it can sponsor a residence status for foreign hires.

Compare providers for Japan

• RemoFirst vs PlayrollIn Japan: US$199 vs US$399 a month (published starting prices).
• RemoFirst vs Atlas HXMIn Japan: US$199 vs US$599 a month (published starting prices).
• Rippling vs PeblIn Japan: quote vs US$399 a month (published starting prices).
• Deel vs RemoteIn Japan: US$599 vs US$599 a month (published starting prices).

For Japan-specific selection criteria and a shortlist, see best EOR providers in Japan. For each provider's products and pricing model, see the provider directory.

The usual alternatives are a kabushiki kaisha (KK), a godo kaisha (GK) or a registered branch of your foreign company. Each is registered with the Legal Affairs Bureau and then with the tax office, the pension office and the labour office for social and labour insurance.

Running costs include accounting and tax filings, payroll and social insurance administration, a registered address and, for foreign hires, residence status sponsorship. Because a Japanese entity employs staff directly, the worker dispatch time limits don't apply.

For a step-by-step version of this calculation, see EOR vs local entity: a break-even framework.

1. 1

   Define the role and packageDay 0

   Agree annual pay, including any bonuses and commuting allowance, and check whether a foreign hire needs a residence status.

2. 2

   Check the provider's dispatch licence1–2 days

   Ask for the licence number and whether the employee will be on an open-ended contract, which affects the 3-year limits.

3. 3

   Compare itemised quotes1–3 days

   Request Japan quotes covering the fee, deposit, social insurance, bonuses and offboarding. Use the estimator to sanity-check totals.

4. 4

   Sign the service and dispatch agreements

   A worker dispatch contract must set out specified particulars; review liability for dismissal disputes, IP assignment and data protection (APPI).

5. 5

   Contract and insurance enrolment1–3 weeks

   The EOR issues the written working conditions, enrols the employee in health, pension, employment and accident insurance, and sets up payroll.

6. 6

   Ongoing administrationMonthly

   Monthly payroll and withholding, annual standard remuneration updates, year-end tax adjustment and tracking dispatch periods.

Rates and rules on this page are based on the following official sources. Numbers in brackets in the tables above link to these entries.

1. 1
   健康保険・厚生年金保険の保険料額表 (東京支部、令和8年3月分から)

   Japan Health Insurance Association (Kyokai Kenpo)

   Tokyo FY2026: health 9.85% from March 2026, long-term care 1.62% (ages 40–64), child and childcare support levy 0.23% from April 2026, pension 18.3%, each split equally; health ceiling ¥1,390,000, pension ceiling ¥650,000.

2. 2
   保険料額表（令和2年9月分～）

   Japan Pension Service

   Welfare pension 18.3% (fixed since September 2017); pension ceiling ¥650,000 (grade 32); child and childcare contribution 0.36% for FY2026 (employer only). Updated 3 April 2026.

3. 3
   令和8（2026）年度 雇用保険料率のご案内

   Ministry of Health, Labour and Welfare (Yamanashi Labour Bureau)

   1 April 2026 to 31 March 2027: unemployment-benefit rate 5/1,000 for both worker and employer; two-programme rate 3.5/1,000 employer only (general businesses: 13.5/1,000 total).

4. 4
   令和８年度の労災保険率等について（令和７年度と同率です）

   Ministry of Health, Labour and Welfare (Aomori Labour Bureau)

   FY2026 workers' accident insurance rates, unchanged from FY2025: other businesses (94) 3/1,000; finance, insurance and real estate (99) 2.5/1,000; communications and publishing (97) 2.5/1,000.

5. 5
   令和８年度地域別最低賃金全国一覧

   Ministry of Health, Labour and Welfare

   FY2026 regional minimum wages: Tokyo ¥1,280 from 1 October 2026; national weighted average ¥1,177.

6. 6
   Labor Standards Act (Act No. 49 of 1947)

   Japanese Law Translation (Ministry of Justice)

   Articles 15, 20, 32, 34–37, 39, 65 and 89. Translation of the version as amended by Act No. 71 of 2018.

7. 7
   Labor Contract Act (Act No. 128 of 2007)

   Japanese Law Translation (Ministry of Justice)

   Article 16 (dismissal as an abuse of rights) and Article 18 (conversion to an open-ended contract after five years).

8. 8
   Act on Ensuring the Proper Operation of Worker Dispatching Services and Protecting Dispatched Workers (Act No. 88 of 1985)

   Japanese Law Translation (Ministry of Justice)

   Article 5 (licence), Articles 35-3, 40-2 and 40-3 (3-year limits), Article 40-5 (vacancy information) and Article 40-6 (deemed offer). Translation of the version as amended by Act No. 58 of 2021.

9. 9
   Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members

   Japanese Law Translation (Ministry of Justice)

   Article 5: childcare leave until the child turns one, with extensions in specified cases.

Japan's employer costs are moderate: about 15–16% of pay in social insurance up to the ceilings, falling at higher salaries. Through an EOR, plan for roughly 1.15–1.4× gross salary in total, depending on salary and the provider's Japan rate.

The Japan-specific issue is structure, not cost: most EOR arrangements are worker dispatch, so check the provider's licence, whether your hire is on an open-ended contract, and how the 3-year limits will be handled.

If you expect a long-term team, compare an EOR against your own entity early with our EOR vs local entity guide. For the region, see Singapore, Australia and the Philippines.