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Minimum wage in Japan
Japan payroll
Japan's social security
Employee benefits in Japan
Compliant, seamless payroll and benefits in Japan and beyond
Payroll in Japan
Managing payroll in Japan has its own challenges, particularly the complex regulations around taxation and statutory benefits. As an employer, you need to understand and follow these rules to avoid costly payroll mistakes and potential risks for your business.
In this guide, you’ll learn everything you need to know about compensation and benefits in Japan, including the minimum wage, statutory benefits, payroll cycle, and more.
Payroll outsourcing in Japan
If you’re unfamiliar with the Japanese market, outsourcing payroll to a reliable provider, such as CXC, can offer numerous strategic advantages. Japan’s payroll, tax, and employment regulations can be complex, and specialised payroll providers have the expertise to handle them. This can help streamline your business processes and ensure you fully comply with local labour laws and regulations.
Outsourcing payroll not only reduces the risk of legal issues but also lets your team focus on important business strategies and growth opportunities instead of getting bogged down with payroll administration.
In addition, a reputable payroll provider offers greater accuracy and timely execution of payroll tasks. This includes correctly calculating employee withholdings, social insurance contributions, and year-end tax adjustments. When your employees are paid accurately and on time, it boosts morale and productivity.
Investing in payroll outsourcing can also provide scalability, which is crucial as your company grows. A flexible payroll solution can easily adapt to an increasing number of employees and the associated complexities, ensuring your expansion is supported by a strong administrative foundation.
Minimum wage in Japan
In Japan, the national minimum wage varies by prefecture. For example, the minimum hourly wage is 1,113 JPY in Tokyo, 1,064 JPY in Osaka, and 1,009 JPY in Kyoto.
Many international companies looking to attract local talent often pay more than the minimum wage, particularly in areas where specialised skills are in high demand. Offering a competitive salary package can draw in skilled workers who might otherwise be hard to find.
Minimum wage for foreigners in Japan
The minimum wage set at the prefectural level applies equally to both local and foreign workers. This means that foreigners working in Japan must follow the same minimum wage regulations as Japanese nationals. Everyone, regardless of nationality, is entitled to earn at least the minimum wage for their work.
Japan payroll
Payroll cycle in Japan
Most companies operate on a monthly pay cycle, meaning employees are paid once a month for the work performed during the month.
During the payroll process, various deductions are made from employees’ salaries, including income tax, social insurance premiums, and other mandatory contributions.
Payroll tax and deductions in Japan
There are several mandatory payroll deductions that employers must withhold from employees’ salaries. These deductions include:
- Employee income tax: Employees in Japan are subject to income tax, which is calculated as a percentage of their salary. Employers are responsible for withholding this tax and paying it to the tax authorities on behalf of their employees. The tax rate depends on the employee’s income level.
- Resident tax: This local tax is also withheld by the employer and varies by the employee’s place of residence.
- Social insurance: This includes contributions to Japan’s health insurance and pension system. The rates can vary depending on the specific plan, but employers are required to enrol their employees in these programs and withhold the appropriate contributions from their wages.
- Employment insurance: A portion of employees’ salaries goes towards unemployment insurance. This provides support if an employee loses their job.
- Labor insurance: In some cases, employers will also contribute to labour insurance which includes workers’ accident compensation insurance and employment-related Insurance.
13th salary in Japan
It’s customary to receive a 13th-month salary, which is often given as a summer bonus in June, and a 14th-month salary as a winter bonus in December.
Japan's social security
Social security contributions in Japan
Japan’s social security system provides a wide range of protections for employees, including pension contributions and healthcare coverage. Employees aged 20 to 59 are required to participate in the national pension system, which offers benefits for old age, disability, and survivors. Starting in April 2024, the monthly contribution for this system will be 16,980 JPY.
In addition to pensions, the social security system—managed by the Ministry of Health, Labour, and Welfare—requires both employers and employees to contribute. These contributions help fund various benefits, such as healthcare, disability support, and unemployment insurance. Essentially, everyone living in Japan is required to be covered by public health and pension insurance systems.
Social security benefits in Japan
Here’s the list of benefits provided under Japan’s social security system for employees:
• Pension benefits: The system includes a pension plan that ensures financial stability for individuals upon reaching retirement age. This includes provisions for an old-age pension, a disability pension for those unable to work due to illness or injury, and survivor’s benefits for the families of deceased employees.
- Healthcare benefits: Employees contribute to a health insurance system that covers a wide range of medical treatments and services. This includes hospital visits, prescription medication, and certain preventative care services.
- Employment insurance: This offers protection against unemployment, providing financial assistance to employees who lose their job until they can find new employment. It also includes benefits tied to job searching, retraining programs, and support for workplace injury or illness.
- Child benefits: Contributions to a social welfare system provide child benefit, supporting families with the costs associated with raising children.
- Long-term care insurance: For those who require care due to old age or disability, Japan’s social security system includes long-term care insurance, which helps cover the costs of services like in-home care, adult daycare, and other support services necessary for daily living.
Japan social security for foreigners
Foreign nationals living and working in Japan must contribute to the social security system, just like Japanese nationals. This means they need to pay into pension, health insurance, and employment insurance schemes. The social security system is set up so that everyone who contributes can benefit from services like healthcare, pensions, and unemployment support.
In addition, Japan has social security agreements with certain countries to prevent double payments. This means foreign workers won’t have to pay social security contributions in both their home country and Japan.
Employee benefits in Japan
Full-time employee benefits in Japan
In Japan, full-time employees are entitled to several statutory benefits to ensure they have access to necessary support for financial, health, stability, and work-life balance. These benefits include:
- Health insurance
Employees are covered by the national health insurance system or a company health insurance plan, which helps cover medical expenses. Under these systems, employees can access a wide range of healthcare services, including doctor visits, hospital stays, and prescription medications. Typically, employees contribute a portion of their salary toward the insurance premiums, while employers also contribute, ensuring that both parties share the responsibility of healthcare costs. - Pension
Employees must contribute to the National Pension System, which provides benefits for old age, disability, and survivors. The amount received upon retirement depends on the total contributions made throughout one’s working life, making it essential for employees to understand how the system works and to plan accordingly for their retirement. - Employment insurance
This provides financial support during periods of unemployment, as well as benefits for maternity leave and childcare. - Paid leave
Full-time employees are entitled to annual paid leave, which starts at a minimum of 10 days per year and increases with length of service. This allows employees to take the necessary time off for rest and personal matters. - Maternity leave
Female employees are entitled to maternity leave, usually for 14 weeks, with some benefits available during this period. - Childcare leave
Employees can take time off to care for young children, with benefits available during this time. - Sick leave
While there’s no statutory sick leave in Japan, many employers offer it as part of their benefits package. Companies that provide sick leave typically have specific policies in place, including the number of days allowed and the process for requesting leave. - Workers’ compensation
Employees are covered for work-related injuries and illnesses under the Workers’ Accident Compensation Insurance.
Non-statutory employee benefits in Japan
While not mandated by law, many companies in Japan offer non-statutory benefits to attract talent and enhance their employees’ overall well-being and job satisfaction. Here are some common non-statutory benefits provided to employees in Japan:
- Bonuses: Many companies provide performance-based bonuses, often paid as summer and winter bonuses, which can significantly boost total compensation. The amount of these bonuses can vary based on individual performance, company performance, and overall economic conditions
- Flexible working hours: Some employers offer flexible work schedules that allow employees to manage their work hours according to personal needs. This flexibility can be particularly valuable for individuals who have family responsibilities, educational pursuits, or other commitments outside of work.
- Transportation allowance: Employers may cover commuting costs or provide a transportation allowance to help employees get to and from work. This may cover reimbursement for train or bus fares, parking fees, or even fuel costs for those who drive to work.
- Remote work options: Some companies are also allowing employees to work from home or have a hybrid work model. This benefit can help companies attract highly skilled professionals from anywhere, even outside of Japan.
- Training and development: Investing in employee training and development is a priority for many companies in Japan. Organisations often offer a variety of training programs, workshops, and seminars to help enhance employees’ skills and knowledge. These initiatives may include technical training, leadership development, and language courses.
- Health and wellness programs: Many organisations offer programs focused on employee health, including gym memberships, wellness workshops, and mental health support.
- Childcare support: Some employers provide childcare services or subsidies, which can come in the form of onsite childcare facilities, subsidies for childcare costs, or partnerships with local daycare centres.
- Housing assistance: Certain companies in Japan provide housing assistance, particularly for employees relocating for work or those in high cost living areas. This support can include housing allowances, assistance in finding suitable accommodations, or even temporary housing options.
- Retirement benefits: In addition to the mandatory pension system, some companies offer supplementary retirement plans or savings programs to help employees prepare for their future. These plans may include company-sponsored retirement accounts, matching contributions, or financial planning resources.
Compliant, seamless payroll and benefits in Japan and beyond
Getting payroll and benefits right is not just a legal issue. Every country also has its own customs, norms and expectations about employee compensation. And if your operations aren’t in line with your workers’ expectations, they may not stick around for long.
Thankfully, we know what we’re doing. When you work with CXC to engage workers in Japan, we’ll handle everything from tax withholding to employee bonuses on your behalf.
Compliantly hire workers anywhere with CXC
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
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