The services related to payroll in Japan include managing all of the aspects related to the compensation of a company’s employees. They are calculating the wages, according to the salary scale, delivering the payment to the employees, calculating bonuses and any other due amounts to the company’s staff.
Our payroll Japan experts assist companies needing professional services in this area. Many businesses choose to work with a third-party when handling payroll and this is because this choice allows them to access professional-grade services at the same or lower costs compared to having an internal payroll and human resources department. For small and medium companies, handling payroll internally may not even be possible, this is why outsourcing is a convenient solution.
Our team of company formation experts in Japan assists investors who wish to open a company and those who need specialized services once their business has started its activities.
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What services do you provide for payroll in Japan?
Our payroll services are tailored according to the size of the business and its number of employees. We can help you with:
- Calculating wages, bonuses and premiums when applicable;
- Calculating the social security contributions as these are withheld at source in Japan;
- Maintaining the electronic payroll and social security contribution records;
- Sensing the pay slips to employees;
- Calculating employee attendance, if needed;
- Providing the employees with documents and certificates, as needed.
| Quick Facts | |
|---|---|
| Dedicated payroll tax in Japan (YES/NO) | NO |
|
Our payroll services |
– calculating wages, – calculating social security contributions, – maintaining payroll records, – processing bonuses & premiums, etc. |
|
Social security contributions |
16.62% – 26.74% paid by employer, approximately 15% paid by employee |
| Contributions paid by employer |
– pension, – health insurance, – unemployment insurance, – work injury insurance, – nursing care insurance & family allowance (in certain cases) |
| Contributions paid by employee |
– pension, – health insurance, – unemployment insurance, – nursing care insurance (in certain cases) |
| Personal income tax |
Progressive, based on earned income. Might be different for employees without Japanese residency. |
| Overtime compensation |
25% – 60% of the employee’s regular pay rate |
| Payroll cycle in Japan |
Generally monthly |
| Severance pay |
No statutory requirements for severance pay |
| Employees bonuses |
– 13th salary, – summer/winter bonus, etc. |
| Annual paid time off |
10-20 days (depending on employment duration) |
| Sick leaves |
No statutory sick leave requirements, depends on the employer. |
| Standard working hours in Japan |
40 hours/week |
| Personalized payroll services (YES/NO) |
YES |
| Assistance |
We can help with payroll if you just opened a company in Japan or if managing an existing one. |
Our payroll Japan experts can also give you information on whether or not certain tax incentives can apply in your case.
When investors open a company in Japan, they will need to consider their human capital, an important resource that will have a significant impact on the evolution of their business. This means now only looking for suitable candidates for the open job positions, it also means properly managing all employee-related matters.
In Japan, the Labor Standards Bureau is the one tasked with supervising companies in terms of lawful working conditions. The Bureau is part of the Ministry of Health, Labor and Welfare.
What are the benefits of a payroll Japan outsourced service?
We list the following:
- A streamlined process: the steps and activities needed to monitor the payment of employees is easier when working with a team that uses tools and software for this purpose;
- Time benefits: you save the time needed to calculate the wages, any bonuses and for filing the employee social security contributions; you can direct the saved time towards other activities that will benefit the business;
- Correct tax submissions: when working wit a team of payroll and accounting specialists, such as our own, you will rest assured that the tax submissions are filed according to the conditions and the terms in force;
- Good employee management: you will know that the worked hours are correctly monitored and that the employees are paid correctly, on time.
You can reach out to us for more information about our payroll service packages.
Employment rules in Japan
There are various employment rules and regulations in Japan that employers must adhere to. These rules are outlined in the Labor Standards Act (LSA). Our payroll specialists in Japan are fully compliant with these regulations, ensuring accurate and lawful compensation for your employees. These regulations apply to both individuals with residency in Japan and to legal foreign workers.
Some of the key employment rules in Japan include:
- Minimum wage and currency: Japan’s national minimum wage varies by prefecture, with different rates in major cities like Tokyo, Osaka, and Kyoto. Employees are paid in Japanese yen.
- Typical working hours: The standard working hours in Japan are eight hours per day, which adds up to 40 hours per week. The workday typically starts at 8:30 a.m. and ends at 7 p.m., with a one-hour lunch break. However, working hours may vary. It is essential to know these working hours even if you are just starting the process of company formation in Japan;
- Overtime: Overtime pay is required for employees who work more than 40 standard hours per week, unless they are in a management position. Japanese companies may expect and mandate overtime hours, but there must be a written agreement between the employer and employee for regular overtime work, known as “Article 36.” The maximum daily overtime limit is five hours. Our payroll services in Japan will manage and monitor the overtime hours;
- Overtime calculation: Overtime pay is calculated based on different rates, such as an additional 25% for regular overtime, 25% for nighttime work, 35% for weekends and holidays, 50% for nighttime work continuing from overtime, and 60% for holidays continuing from nighttime work;
- Severance Pay: There are no statutory severance pay regulations in Japan, meaning most companies don’t need to provide severance pay to their employees. However, some companies may offer severance pay as part of their benefits package. When an employee is terminated, the employer is required to pay any wages due within seven days of termination.
If you plan to open a company in Japan and hire employees, our payroll services simplify the complexities of managing employee compensation.
Paid-time-off in Japan
Employees’ paid-time-off is essential for payroll management because it impacts how an employee’s compensation is determined and administered. Our payroll specialists in Japan are aware of these factors and ensure accurate and compliant payroll processing. It is important to know these aspects even if you just started the procedure of company registration in Japan.
The standard amount of paid leave that employees in Japan are entitled to is based on their years of service. When employees take paid leave, they are typically paid their regular salary for those days. Our payroll services in Japan accurately reflect the paid leave taken by employees and ensure they receive the correct compensation.
While there may be no legal requirement to pay employees extra for public holidays, many employers choose to provide additional compensation or paid time off on these days.
Sick leave is also not mandatory in Japan, but some companies have their sick leave policies. Our payroll services in Japan track and account for sick leave days and ensure that employees are paid appropriately during periods.
We can help you with payroll services, as well as with company formation in Japan.
What are the main tax duties regarding employees in Japan?
The payroll Japan tax system is based on the fact that the employer withholds the national and local social security contributions at source. The following tax rates are relevant:
- 0.95% of the total annual wage paid by the employer as part of the unemployment insurance, applied only to a maximum of JPY 650,000 per month;
- 0.3% of the annual wage paid by the employer for the worker’s accident compensation insurance;
- 5% of the total annual wage paid by the employer for health insurance and nursing care insurance. This rate is applied only to a maximum of JPY 1,390,000 per month. There is also an annual cap on contributions for irregular annual total payments, which is set at JPY 5.73 million. The rates typically increase for individuals aged 40 to 65, with a general rate of approximately 1.57%. Please note this rate refers to the Tokyo region and might change depending on the prefecture;
- 9.15% payable by the employer for the employees’ pension insurance, applied only to a maximum of JPY 650,000 per month. There is a separate maximum for irregular payments per month, which is set at JPY 1.5 million;
- 0.36% payable by the employer for child benefits contribution, applied only to a maximum of JPY 650,000 per month.
The total percentage of the total annual wage payable by the employer in Japan amounts between 16.62% – 26.74%, but this percentage might vary. The employees also pay their part of the contribution. For work injuries, employers must pay between 0.25 and 8.88% to their employees.
You can reach out to our accountant in Japan for complete information about the tax requirements, tax filing dates, applicable exemptions and incentives.
When you choose to work with our agents specializing in payroll in Japan you have access to a team of dedicated professionals.
Statistics about employment in Japan
If you are thinking of opening a company in Japan and are interested in payroll services, here are some statistics regarding employment in Japan:
- In October 2023, the employment rate in Japan was 61.5%;
- The employment rate in Japan has averaged 60.21% from 1972 until 2023;
- In the year 2022, the total labor force in Japan was composed of approximately 69 million people;
- In the year 2021, the average number of working hours recorded by employees in Japan was approximately 136.1 hours per month.
Contact our Japan company formation agents to find out more about our payroll solutions, as well as other services.
We also assist branches in Japan.