Overview

Capital
Tokyo
Currency
Yen
Date Format
yyyy-mm-dd; yyyy年m月d日; era yy年m月d日

calendar icon Public holidays calendar

Taxes

Employer
7.00% - Employment Insurance
4.98% - 5.77% - Health Insurance
8.91% - Pension Insurance
0.25% - 10.8% - Worker Accident Compensation Insurance
Employee
0.40% - Employment Insurance
4.98% - 5.77% - Health Insurance
8.91% - Pension Insurance
0.00% - Up to 1.95M
10.00% - 1.95M - 3.3M
20.00% - 3.3M - 6.95M
23.00% - 6.95M - 9M
33.00% - 9M - 18M
40.00% - 18M - 40M
45.00% - Over 40M

Minimum Wage

General

The national minimum wage changes on region, from 874 Yen up to 958 Yen in Tokyo. 

Working Hours

General

Full time working is considered to be 40 hours weekly, and 8 hours daily. 

Overtime

If an employee exceeds 40 hours a week, the employer is obligated to pay overtime.  If the employee is a manager, they are expected to work overtime and the company is not obligated to pay.

If an employee is expected to work overtime on a regular basis, there must be a written agreement and has to be filed with the Labor Inspection Office. 

When employees work overtime or work on holidays, an additional payment to the hourly base salary applies:

  • Overtime (typically over 8 hours a day): additional 25%
  • Night-time (22:00 – 05:00): additional 25%
  • Weekends and Holidays: additional 35%
  • Night-time (continuing from overtime): additional 50%
  • Holiday (continuing from night-time): additional 60%

The overtime hours must remain within the following limits in Japan:

  • 5 hours per day
  • 45 hours per month
  • 360 hours per year.

VAT

General

5% standard rate.

Mandatory Benefits

Pension Fund

When employees register for Social Insurance, they also register with the employee pension system. This system provides pension to employees who have worked in Japan for at least 25 years from the age of 60 years old. Pension benefits depend on the career, and therefor there is no standard. National Pension plan typically offers monthly payments of between 100,000 JPY and 250,000 JPY depending on the salary for people who contributed at in the system for at least 25 years. Please note that pension tax rates and benefits change regularly.

Contributions are made by the:

  • Employee

National Pension Program – 16,340 yen a month 

Employees’ Pension Insurance - 9.15% of monthly    wage class earnings, based on 31 wage classes.

  • Employer

National Pension Program – 0%

Employees’ Pension Insurance - 9.15% of monthly payroll, based on 31 wage classes.

  • Government

National Pension Program – 50% of the total benefits and administration costs.

Employees’ Pension Insurance – Contributes as an employer with total cost of administration.

 

Social Security

Social Insurance consists of: 

- Health Insurance
- Social Pension 
- Nursing Insurance (added for people between 40 to 65 years old) 
 -Children Upbringing 

Half of the Social Insurance tax is deducted from employee salary and the other half is paid by the company.  

The exception is the Children Upbringing tax which is paid only by company.  

Social insurance tax is paid the following month that they are due.  

Unemployment Insurance

Unemployment is given to employees who have at least 12 months of coverage at least 24 months prior to unemployment. The unemployed person must be willing and capable to work and report to the Public Employment Security Office once every four weeks. The insured receives 50%-80% of their daily wages in the six months before unemployment is paid; 45% to 80% if aged 60 to 64.

Contributions are given by:

  • Employee - .3% of monthly earnings, or .4% for agricultural, forestry, fishery, sake brewing industry, and construction workers.
  • Employers - .6% of payroll, .7% or agricultural, forestry, fishery, or sake brewing industry workers, and .8% for construction workers.

Government – 2.5% of the cost of unemployment benefits and 1.25% of the cost of childcare, nursing care, and employment continuation of older workers.

Payroll

Payroll Cycle

Payments are made monthly typically by the 25th

Payroll Tax

Residence tax: levied on the individual the following year based on the previous years income and deducted on a monthly basis. Thus it will begin to be levied from second calendar year in Japan and will be based on the previous years income at about 10%.

Termination

Termination Process

Under Japanese labor law termination of full-time employees is difficult. Should they not want to leave, employees may dispute and proceed with negotiations generally leading to compensation in the sum of a minimum of one-month salary per year worked. Prior to dissmissal 30 days notice is required.

Advance Notice

The employer must provide 30 days’ notice or payment in lieu of the notice period.

Severance Pay

There isn’t a statutory severance payment but due to the difficulties of terminating an employee, employers should follow socially acceptable terms.