Employer of Record (EOR) in Japan

Last reviewed: April 2026 · Based on Japan Pension Service guidance, Labor Standards Act, shakai hoken rate tables, and cross-provider analysis

Japan EOR at a glance

Pricing and coverage reviewed April 2026

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EOR Providers in Japan: The Master List

Japan is among the most demanding EOR markets globally, and provider selection matters more here than in simpler jurisdictions.

Remote: best for owned-entity compliance and IP protection
Remote operates its own Japanese entity rather than routing through a local partner.

That gives you a direct compliance chain for shakai hoken enrollment, payroll processing, and the year-end adjustment (nenmatsu chosei).

Their IP Guard product handles the tripartite IP assignment that Japan’s employment-creates-IP rules make critical.

Pricing is $599/month per employee. Remote handles the full monthly payroll cycle including national income tax withholding, resident tax coordination, and social insurance deductions across all six components.

If you need certainty that your IP is properly assigned and your shakai hoken filings are handled by the same entity on your employee’s contract, Remote is the strongest owned-entity option in Japan.

Named limitation: supplementary benefits. Confirm Remote can administer housing allowances, commuter passes, or supplementary retirement plans before committing.

These are common expectations in Japanese white-collar roles and not all EOR platforms administer them beyond the statutory minimum.

Deel: best for multi-market Asia-Pacific hiring from a single platform
Deel has strong Japan coverage with fast onboarding: typically 1-2 weeks from signed agreement to the employee’s first day.

• If you are hiring across multiple Asian markets simultaneously and want a single dashboard for Japan
• Singapore
• South Korea
• and Australia
• Deel’s scale makes that straightforward

Pricing is $599/month per employee. Deel handles the labor contract, shakai hoken registration, monthly payroll including the reconstruction surtax, and overtime tracking against the 36 Agreement caps.

Named limitation: depth of Japan-specific termination advisory. The negotiated voluntary resignation process that is the practical path for separations in Japan requires local employment law expertise, standard offboarding workflow.

If you need to separate from an employee, push your account manager explicitly for access to Japan-qualified legal counsel before initiating any separation process.

Rippling: best for US-headquartered teams integrating Japan into an existing HR platform
Rippling is the strongest choice if you already use their platform for US payroll and HR.

Adding Japan EOR through the same system gives you unified reporting across domestic and international employees, with a single dashboard showing both your San Francisco team and your Tokyo hire.

Pricing is $599/month per employee. Rippling handles the full Japanese employment lifecycle including shakai hoken enrollment, income tax withholding, and year-end adjustment.

Named limitation: Japan-specific advisory depth. Rippling’s core strength is platform integration, not local employment law counsel.

If you face a complex termination, a Worker Dispatching Act query from the labor bureau, or a visa sponsorship request for a non-national employee, plan to source external Japanese employment law counsel alongside the platform.

Multiplier: best for cost-conscious first Japan hires where budget is the primary constraint
Multiplier prices Japan at $400-$450/month per employee, saving you $150-200/month versus the premium tier.

For a five-person team, that is a saving of roughly $9,000-12,000/year.

Japan is a high-complexity market, so evaluate carefully whether the provider’s local compliance team can handle shakai hoken rate changes, 36 Agreement filing, and the year-end adjustment at the level your hire needs.

Ask specifically how they handle the nenmatsu chosei and whether they can administer the nursing care insurance trigger when an employee turns 40.

Named limitation: local advisory depth at the budget price point. The risk is thinner support when you encounter a termination, a Worker Dispatching Act query from the labor bureau, or a visa sponsorship request.

Before committing, ask Multiplier directly how many Japan employee separations they have managed in the past 12 months and what their process looks like.

Oyster: best for Japan hires where supplementary benefits are part of the offer
Oyster HR is the strongest option if supplementary benefits matter for your Japan hire. Housing allowances, commuter passes, and private health insurance top-ups are common expectations in the Japanese labor market.

Oyster can administer these beyond the statutory shakai hoken minimum, which many competitors cannot.

Pricing is in the standard $500-600/month range. Oyster’s HR advisory team can walk you through what benefits are typical for your employee’s role and seniority level in the Japanese market.

Named limitation: Asia-Pacific scale. If you plan to hire across Japan, Singapore, and the Philippines simultaneously, Oyster’s Asia coverage is thinner than Deel or Remote.

For a Japan-only or Japan-plus-Europe hiring plan, Oyster is well positioned.

Papaya Global: best for enterprise teams hiring 10+ in Japan with multi-country reporting requirements
Papaya Global sits at the enterprise tier, pricing Japan at $770-$1,300/month per employee.

The premium buys you managed compliance, an analytics dashboard, and dedicated support for complex payroll requirements.

If you are hiring 10+ employees in Japan and need centralised reporting across multiple countries, Papaya’s enterprise tooling justifies the cost.

They handle the full shakai hoken administration with audit-ready documentation.

Named limitation: unit economics at smaller headcount.

For 1-3 employees, the cost is hard to justify internally. At $1,300/month for one employee earning JPY 6,000,000/year, the platform fee alone represents roughly 26% of monthly salary.

Your Finance team will flag this immediately: have a clear per-employee productivity case ready before presenting Papaya to the shortlist.

Pebl (formerly Velocity Global): best for mid-market companies prioritising compliance-first Japan deployment
Pebl operates in Japan with a focus on mid-market companies expanding into Asia-Pacific.

Their model emphasises compliance-first deployment, handling the full employment lifecycle from labor contract through to separation.

Pricing is typically in the $500-700/month range.

Pebl’s strength in Japan is their experience with the Worker Dispatching Act distinction: they structure the employment relationship to avoid triggering haken obligations, which is a genuine differentiator in a market where most providers gloss over this risk.

Named limitation: platform self-service capability. Pebl’s self-service tools are less developed than Deel or Rippling, so expect more manual interaction with your account team for routine tasks like contract amendments or payslip queries.

That is acceptable for companies who prioritise compliance depth over platform polish, but frustrating if your team expects the same UI experience as a modern HR platform.

What Is an Employer of Record in Japan?

An employer of record is a third-party company that legally employs workers on your behalf in a country where you do not have your own entity.
In Japan, the EOR maintains a Kabushiki Kaisha (KK) or Godo Kaisha (GK) that becomes the formal employer under the Labor Contract Act.

Your company retains day-to-day management of the employee’s work.

The EOR signs a compliant labor contract (roudou keiyaku), registers your employee with the Japan Pension Service for pension insurance, enrolls them in health insurance through Kyokai Kenpo or a union-managed scheme, and files employment insurance with Hello Work.

The EOR also performs the year-end tax adjustment (nenmatsu chosei) that reconciles the annual tax liability.

For a deeper explanation of the EOR model, see our employer of record guide.

What the EOR does not handle: work visa sponsorship (varies by provider, so confirm before signing), intellectual property assignment (requires a separate tripartite agreement), equity compensation, and supplementary benefits beyond the statutory minimum.

You remain the functional manager.

How Does an EOR Work in Japan Under the Labor Contract Act?
The MHLW classification gap is the least-discussed compliance risk in the Japan EOR market, and the one most likely to surface if your arrangement is ever scrutinised.

The MHLW Classification Gap: Haken vs Direct Employment

Here is something most EOR providers will not tell you upfront.
Japan’s Ministry of Health, Labour and Welfare (MHLW) has issued no explicit classification of the EOR model as either haken (worker dispatch) or direct employment.

But if the operational reality, particularly the degree of control your company exerts over the worker’s daily schedule, location, and methods, resembles a dispatch relationship, the arrangement could be reclassified regardless of what the contract says.

A properly structured EOR keeps legal employment with the provider while you retain operational direction over outputs; directing the granular how/when/where starts to look like dispatch.

If the arrangement is reclassified as dispatch, it triggers licensing requirements for the EOR, equal-pay obligations, and a three-year assignment limit after which you must offer direct employment.

Why a Worker Dispatching Licence Matters in Japan

Any EOR provider operating in Japan should hold, or be structured to avoid the need for, a Worker Dispatching Licence.
If the labor bureau determines that your arrangement constitutes worker dispatch, the provider must be licensed.

Operating without a licence is a criminal offence carrying fines and potential imprisonment.

You can verify a provider’s licence status yourself through the MHLW’s official public database of licensed worker dispatch companies (roudousha haken jigyou kyoka ninka daichou).
Most EOR providers do not volunteer their licence number or even discuss the topic.

If a provider claims they do not need a licence, ask them to explain exactly how their structure avoids triggering the Worker Dispatching Act. Use a provider that either holds the licence or can demonstrate clearly how their employment structure stays outside the dispatch framework.

Japan Shakai Hoken Social Insurance Requirements

Japan’s social insurance system, collectively called shakai hoken, is the single largest employer cost after salary.

Every employer must enroll eligible employees in health insurance (kenko hoken), employees’ pension insurance (kosei nenkin), employment insurance (koyo hoken), and workers’ accident compensation insurance (rosai hoken).

The child allowance premium and nursing care insurance (for employees aged 40-64) add further obligations.

Your EOR registers the employee with the Japan Pension Service and the relevant health insurance association, calculates monthly contributions based on standard monthly remuneration, and files all required declarations.

Total employer social insurance runs approximately 15.5-16.5% of gross salary for a typical office worker.
That breaks down to: health insurance at 4.7-5.4%, pension at 9.15%, employment insurance at 0.90%, workers’ accident insurance at approximately 0.3%, and the child allowance premium at 0.36%.

For employees aged 40-64, nursing care insurance adds another 0.795%.

Japan’s Working Time Limits and 36 Agreement

Japan’s standard working week is 40 hours with a maximum of 8 hours per day. Any overtime requires a 36 Agreement (saburoku kyoutei) between the employer and employee representative.
Without this agreement, overtime is illegal.

The monthly overtime cap is 45 hours and the annual cap is 360 hours. Special provisions allow up to 100 hours in a single month and 720 hours per year, but these require additional conditions.

Overtime premiums are 125% for standard hours, 150% for overtime exceeding 60 hours/month, 135% for rest-day work, and an additional 25% for late-night work between 10 PM and 5 AM.

Violations carry criminal penalties: fines up to JPY 300,000 or 6 months imprisonment.
The MHLW does not publish real-time enforcement data on how many criminal penalties have been imposed under the overtime cap, so you cannot gauge current crackdown intensity from public statistics alone.

EOR vs Setting Up a KK (Kabushiki Kaisha) in Japan

Japan’s ongoing compliance burden makes EOR cost-effective at higher headcounts than most other markets.

Setting up a KK costs JPY 150,000+ in registration tax plus JPY 500,000-1,500,000 in legal and administrative fees, and takes 4-8 weeks. You need at least one Japan-resident director.

A GK is faster (1-4 weeks) and cheaper (JPY 60,000 registration tax) but carries identical employment obligations once you start hiring.

An EOR lets you start hiring in 1-2 weeks at $400-$699/month per employee, with zero entity setup. For 1-4 employees, EOR is clearly more efficient. At 5-7 employees, start comparing total costs.

At 8-12 employees paying $599/month each, your annual platform fees reach $57,500-86,300, well above entity setup costs.

But the break-even in Japan must account for ongoing compliance. Shakai hoken administration, year-end tax adjustment, and overtime tracking require specialist knowledge that most foreign companies cannot handle internally, so the EOR arrangement often runs longer than in simpler markets.

What Does It Cost to Hire in Japan Through an EOR?
Total employer cost in Japan routinely surprises buyers who benchmark only against European markets. The combination of social insurance, platform fees, and separation risk runs materially higher.

Employer Social Security Contributions in Japan

For a typical office employee, your employer social insurance burden runs approximately 15.5-16.5% of gross salary.

The breakdown: health insurance employer share at 4.7-5.4% (varies by prefecture and insurer; Tokyo Kyokai Kenpo is 4.955%), employees’ pension at 9.15% (fixed since 2017), employment insurance at 0.90%, workers’

Accident insurance at approximately 0.3% for office roles, and the child allowance premium at 0.36%.

For employees aged 40-64, add nursing care insurance at 0.795% employer share. If your hire is 39 and turns 40 mid-year, the rate kicks in at that point.

The child allowance premium is expected to increase from April 2026 with the new Child Rearing premium.

All contributions are calculated on standard monthly remuneration, which is based on April-June earnings and may differ from actual monthly salary if bonuses or variable pay are involved.

Japan EOR Fees and What They Usually Include

Japan typically commands a premium among EOR markets.

Most providers charge $499-$699/month per employee, with some quoting higher specifically for Japan due to the complexity of shakai hoken administration and the strict overtime tracking requirements.

Your platform fee should cover: labor contract drafting and execution, shakai hoken registration and monthly contributions, income tax withholding and resident tax coordination, the year-end adjustment (nenmatsu chosei), leave tracking including mandatory 5-day annual leave enforcement, overtime monitoring against 36 Agreement caps, and basic offboarding support.

Hidden Japan EOR Costs to Ask About

Visa sponsorship: some EOR providers can sponsor work visas in Japan; others require the employee to already hold valid work authorization. Visa processing takes 1-3 months and may carry additional fees.

Confirm before selecting your provider if your hire is not a Japanese national or permanent resident.

Separation costs: there is no statutory severance in Japan, but the practical cost of ending an employment relationship is substantial.

There is no official government average for dismissal settlements; the amount is negotiated case by case based on tenure, salary, strength of cause, and legal representation on both sides.

Based on legal and HR consulting precedents, the common range is 3 to 12 months of salary through negotiated voluntary resignation.

Budget for this from hire date.

Unilateral dismissal is nearly impossible in Japan, so every hire carries a contingent liability. Present Finance with a month-six exit scenario: the separation process alone adds 3-6 months of salary to the effective cost.

Confirm your chosen EOR has qualified Japan employment law counsel on retainer, not just a payroll agent. A payroll agent cannot manage a negotiated separation.

Supplementary benefits: housing allowances, commuter passes, and retirement plans are common expectations in the Japanese labor market.
Most EORs handle mandatory shakai hoken but vary widely on supplementary benefit administration.

If your offer includes these, confirm your provider can deliver them.

Japan Employment Law Every EOR Buyer Should Understand
Dismissal rules and the 36 Agreement overtime framework are the two areas where buyers most frequently underestimate their exposure before the first hire is made.

Employment Contracts and Probation in Japan

Japanese labor law requires a written labor contract (roudou keiyaku) specifying all material terms: working hours, overtime rules, leave entitlements, pay calculation methods, probation period, and termination conditions.

Your EOR drafts and executes this contract through its Japanese entity.

Probation periods in Japan are typically 3-6 months. During probation, dismissal is somewhat easier than post-probation, but still far harder than in most countries.

After 14 days of employment, even a probationary employee is entitled to 30 days’ notice or payment in lieu.

The probation period must be specified in the contract; it cannot be imposed retroactively.

Once your employee has 10 or more colleagues at the same EOR entity, the employer must create and file a Work Rules document (shugyo kisoku) with the local Labor Standards Inspection Office.

Paid Leave and Public Holidays in Japan

Employees earn 10 days of annual paid leave after 6 months of continuous employment with 80% attendance.
This increases progressively: 11 days at 1.5 years, 12 at 2.5, 14 at 3.5, 16 at 4.5, 18 at 5.5, and the maximum of 20 days at 6.5 years.

Unused days carry over for 2 years.

Your EOR is legally required to ensure each employee takes at least 5 days per year. This is not a suggestion; failure carries a fine of JPY 300,000 per employee.

Japan has 16 national public holidays per year, and employers must grant these as paid days off.

Part-time workers receive prorated leave based on scheduled working days.

Sick Pay and Parental Leave in Japan

Japan has no statutory paid sick leave. Employees typically use their annual paid leave for illness, or the employer provides sick leave as a company benefit.

If the illness extends beyond a few days, health insurance provides injury and sickness benefits (shoubyou teatekin) at approximately 67% of standard monthly remuneration for up to 18 months.

Maternity leave covers 6 weeks pre-birth and 8 weeks post-birth. Childcare leave is available until the child turns 1, extendable to age 2 if nursery placement is unavailable.

Benefits pay 67% of salary for the first 180 days, then 50%.

The April 2025 reform introduced a Post-Childbirth Leave Support Benefit that adds 13% when both parents take 14+ days, bringing the effective rate to approximately 80%.
Paternity leave (papa leave) provides 4 weeks within 8 weeks of birth.

The government has set a target of 85% male uptake by 2030, a signal that enforcement of paternity leave rights will only increase.

Termination Rules and Notice Periods in Japan

Statutory notice is 30 days. But in Japan, the notice period is almost irrelevant because you are unlikely to be able to dismiss the employee in the first place.

Article 16 of the Labor Contract Act requires dismissal to be based on objectively reasonable grounds and be socially appropriate. Courts interpret this with extreme rigor.

A dismissal for poor performance, without extensive documentation of warnings, training opportunities, and reassignment attempts, is almost always overturned.

The default remedy is reinstatement with full back pay, damages.

Redundancy dismissals must pass a four-part test: genuine business necessity, reasonable efforts to avoid dismissal (transfers, reduced hours, voluntary retirement solicitation), fair selection criteria, and adequate consultation with affected employees.

Failing any single element invalidates the dismissal.

Japan’s Near-Impossible Dismissal Standard and Settlement Costs

Nearly all Japan employment terminations happen through negotiated voluntary resignation (taikoku kankou).

The employer offers a severance package and the employee agrees to resign.

There is no statutory severance requirement. The amount depends on tenure, salary, strength of cause, and industry norms.

Based on legal and HR consulting precedents, the common range for a mid-career, non-executive employee is 3 to 12 months of salary. C-suite executives typically command more.

This is a voluntary settlement to secure resignation and avoid a lengthy legal battle, not a statutory payment.

Ask your EOR before hiring: what is their process for managing a Japan separation, and how many have they handled in the past 12 months?

Whichapp viewSeveral EOR providers describe Japan probation periods as offering meaningfully easier dismissal. That framing understates the legal risk.

The kaiko-ken no ranyo doctrine (abusive dismissal) applies a four-factor test even during probation: business necessity, genuine effort to avoid dismissal including reassignment, fair selection criteria, and procedural adequacy.

Courts have overturned probationary dismissals that failed any single element.The practical consequence is that most Japan exits require documented performance coaching, a genuine reassignment exploration, and a negotiated separation agreement (goi taishoku).

This process routinely takes 3 to 6 months and costs 3 to 6 months’ salary in settlement.

Before your first Japan hire, Finance needs to model this cost, not as a worst case, but as a baseline.On social insurance, the Tokyo Kyokai Kenpo health insurance rate (4.955% employer share as of 2026) sits above the national average.

Providers quoting a flat national average are underestimating employer cost for Tokyo-based hires. Verify the prefecture-specific rate for every hire location before finalising your budget model.

Japan’s Freelance Protection Act and Contractor Conversion

The Freelance Protection Act (officially the Act on the Optimization of Transactions for Specified Consigned Business Operators) took effect in November 2024.
It requires written contracts for all freelancer engagements, 60-day payment terms, and 30-day termination notice for ongoing contracts.

Fines reach JPY 500,000.

For EOR buyers, the practical impact is this: the Act raises the compliance burden of engaging contractors in Japan, which may push more companies toward converting contractors to EOR-employed workers.

If you currently engage contractors in Japan and are considering conversion to EOR employment, the Freelance Protection Act is one more reason to act sooner.

How to Choose an EOR Provider for Japan

Most buyers underweight the separation management question and overweight the headline platform fee when shortlisting Japan EOR providers.

Start with three questions that separate good Japan providers from generic global platforms. First: do they operate their own Japanese entity, or use a local partner?

An owned entities gives you a direct compliance chain for shakai hoken and payroll.

Second: can they handle the year-end adjustment (nenmatsu chosei) correctly, including employees with prior-year income from different employers?

Third: what is their process for managing employee separations, given that unilateral dismissal is effectively impossible?

Beyond those three questions, evaluate visa sponsorship, supplementary benefits (housing allowances and commuter passes are standard), and 36 Agreement hour monitoring with proactive alerts.

Which EOR in Japan Is Best for Your Business?
Your hiring scale and your need for Japan-specific advisory depth are the two variables that most clearly separate the right provider from a platform that will underserve you.

Best EOR in Japan for Startups

If you are making your first 1-3 hires in Japan, you want fast onboarding and manageable costs. Multiplier at $400-$450/month keeps your fixed costs low while you validate the Japanese market.

Deel is equally viable at $599/month if you value faster onboarding and a more developed self-service platform.

Best EOR in Japan for Enterprise

For 10+ employees with complex reporting needs, Papaya Global provides the enterprise tooling and managed compliance that larger Japan teams require.

At this headcount, also evaluate whether entity formation makes sense, but factor in the ongoing compliance cost of running a KK before assuming entity is cheaper.

Best EOR in Japan for Asia-First Hiring

• If Japan is part of a broader Asia-Pacific hiring strategy covering Singapore
• South Korea
• and Australia
• Deel and Remote give you the widest coverage from a single platform

Best EOR in Japan for Payroll-Led Teams

If payroll accuracy is your primary concern (especially with Japan’s six-component social insurance system, the year-end tax adjustment, and overtime premium calculations), Remote gives you the most direct compliance chain through its owned Japanese entity.

Rippling is the strongest option if you need Japan payroll integrated with your existing US HR platform.

Check providers that match this market4 providers · links may include affiliate referralsRemoteSee current pricing, plans, and how setup works. View details →DeelSee current pricing, plans, and how setup works. View details →RipplingSee current pricing, plans, and how setup works.

View details →MultiplierSee current pricing, plans, and how setup works. View details →

FAQs About Employer of Record in Japan

Is EOR legal in Japan?Yes, but with an important caveat.

Japan does not have EOR-specific legislation, and the MHLW has not formally classified the EOR model as either direct employment or worker dispatch.The arrangement is legal when structured as standard employment through the EOR’s Japanese entity.

The EOR hires the worker onto its own payroll and acts as the legal employer under the Labor Contract Act.However, if the operational reality resembles worker dispatch (haken), it falls under the Worker Dispatching Act, which imposes licensing requirements and a three-year assignment limit.

How long can you use an EOR in Japan?There is no statutory time limit on EOR employment in Japan when the arrangement is structured as standard employment rather than dispatch.

If reclassified as dispatch, a three-year assignment limit applies after which you must offer direct employment.Many companies maintain EOR arrangements in Japan longer than in simpler markets because the compliance burden of running your own KK is substantial.

The practical trigger for entity formation is usually 8-12 employees with a confirmed long-term Japan presence; below that, EOR is almost always cheaper.

How much does an EOR cost in Japan?Platform fees range from $400/month (budget providers) to $1,300/month (enterprise tier). The market standard is $499 to $699/month per employee.

Japan typically commands a premium over simpler EOR markets because of the complexity of shakai hoken administration and the year-end tax adjustment.On top of the platform fee, budget for 15.5 to 16.5% of gross salary in employer social insurance contributions.

For Tokyo-based hires, the Kyokai Kenpo health insurance rate is 4.955% employer share, which is above the national average: providers quoting a flat national figure are underestimating your cost.Total employer cost typically runs 33 to 34% above gross salary when you include the platform fee.

For an employee on JPY 6,000,000/year, that means your total annual employer cost is approximately JPY 8,020,000.Also model a separation contingency from day one. The practical cost of ending employment in Japan through a negotiated resignation is 3 to 12 months’ salary.

That is not a statutory payment, but it is the market reality and should sit in your business case. Do you need a Kabushiki Kaisha to hire employees in Japan?No. An EOR hire employees in Japan without forming your own KK or GK.

The EOR’s Japanese entity acts as the legal employer under the Labor Contract Act, and all employment obligations, including shakai hoken and tax withholding, run through the EOR’s entity.

KK: JPY 150,000+ registration tax, JPY 500,000-1,500,000 legal fees, 4-8 weeks, requires a Japan-resident director. GK: JPY 60,000 but identical obligations.

For 1-7 employees, EOR is faster and cheaper. Break-even is 8-12 employees, accounting for ongoing compliance management.If you are scaling toward entity formation, flag this to your EOR provider early.

Most can support a transition, but the timeline and process vary significantly between providers.

What is the difference between EOR and PEO in Japan?An EOR is the sole legal employer of your worker in Japan. A PEO co-employs the worker alongside your own entity, which means you need a registered Japanese legal entity to use a PEO model.

If you do not have a Japanese entity, you need an EOR. The EOR takes on full employer liability. PEO only becomes relevant once you have your own KK or GK and want to outsource payroll and HR administration.In practice, many providers market both models.

Can you fire an employee in Japan?In theory yes, with 30 days’ notice and objectively reasonable grounds that are socially appropriate under Article 16 of the Labor Contract Act.

In practice, unilateral dismissal is almost never a viable path for foreign companies.Courts apply the kaiko-ken no ranyo (abusive dismissal) doctrine, which requires documented performance coaching, genuine reassignment attempts, fair selection criteria, and adequate procedural steps.

A dismissal that misses any single element is typically overturned.

The default remedy is reinstatement with full back pay, not compensation.The practical path is negotiated voluntary resignation (goi taishoku). The employer offers a separation package and the employee agrees to resign.

This process routinely takes 3 to 6 months and costs 3 to 12 months’ salary depending on tenure, seniority, and the strength of your documented performance case.Your EOR must manage this process through Japan-qualified employment law counsel, standard offboarding workflow.

What is the 36 Agreement and why does it matter?The 36 Agreement (saburoku kyoutei) is a written agreement between the employer and employee representative that permits overtime work above the statutory 40-hour week.

Without a valid 36 Agreement in place, any overtime is illegal regardless of employee consent or what the employment contract says.The agreement must specify maximum hours. Under standard provisions, the cap is 45 hours per month and 360 hours per year.

Special provisions allow up to 100 hours in a single month and 720 hours per year, but these require additional conditions including a documented business necessity.

Overtime premiums are 125% of base rate for standard overtime, 150% for hours exceeding 60/month, 135% for rest-day work, and an additional 25% for late-night work between 10 PM and 5 AM.

Your EOR must track hours against these thresholds in real time.Violations carry criminal penalties including fines up to JPY 300,000 or 6 months imprisonment.

Ask your provider whether they monitor hours proactively with alerts, or reactively after the fact.

The difference matters when your Tokyo engineer is running over cap during a product sprint. Does the Freelance Protection Act affect EOR hiring in Japan?Not directly for EOR-employed workers, but it significantly increases the compliance burden for companies still engaging contractors in Japan.

Since November 2024, all freelancer engagements require a written contract, 60-day payment terms, and 30 days’ notice to end ongoing contracts.

Fines reach JPY 500,000.The added compliance cost makes contractor arrangements riskier and more expensive, which pushes more companies toward formal employment via EOR.

If you currently have contractors in Japan who are performing work that looks like employment (regular hours, integrated into your team, single client), the misclassification risk was already high before the Act.

The Act adds explicit penalties for non-compliant freelancer contracts on top of the existing reclassification consequences, which could include retroactive social insurance contributions dating back to the start of the engagement.

If you are considering converting contractors to EOR employment in Japan, do not wait for the MHLW to enforce against your specific arrangement.

The combination of misclassification risk and new Act penalties makes early conversion the lower-risk path. Does the EOR own the intellectual property my employee creates?Potentially, without the right agreement in place.

Under Japanese law, inventions and creative works made within the scope of employment may belong to the legal employer.

In an EOR arrangement, the legal employer is the EOR’s Japanese entity, not your company.To transfer IP rights to your company, you need a tripartite IP assignment agreement between the employee, the EOR, and your company. This document must be signed before the employee starts work.

Any IP created before the agreement is executed may not be covered.Some EOR providers include a standard IP assignment clause in their employment contract template. Remote’s IP Guard product is specifically designed for this.

However, the adequacy of that clause for your specific IP categories, particularly software, inventions, and trade secrets, should be reviewed by your legal team before relying on it.

Final Verdict: When Does an EOR Make Sense in Japan?

Japan is a market where the EOR model earns its fee more clearly than almost anywhere else, because the alternative requires solving problems most foreign companies are not equipped to handle.

Use an EOR when you are hiring 1-7 employees in Japan and need compliant employment without the cost, delay, and ongoing compliance burden of forming a KK.

Japan’s social insurance system, near-impossible dismissal standard, overtime regulations with criminal penalties, and Worker Dispatching Act considerations make it one of the most complex EOR markets in the world.

Consider your own entity when you reach 8-12 employees and plan a permanent Japan presence.

If you are making your first Japan hire and the role is remote, start with a provider that has strong shakai hoken expertise and can handle the year-end adjustment correctly.
Remote and Deel are the safest bets for owned-entity compliance and platform scale respectively.

Is EOR the right structure for hiring in Japan?
Model the total cost of EOR versus setting up your own legal entity in Japan. Adjust headcount, salary, and entity setup costs to find your break-even point.

Model EOR break-even point →

Whichapp is an independent comparison site. We do not sell EOR, payroll, or contractor management services. We may earn a commission if you book a demo through links on this page.

Compliance information is provided for general guidance only and does not constitute legal advice. Verify requirements with a qualified adviser before making employment decisions.

Data Sources

• Official government and labour ministry publications for this country
• Provider country guides and compliance documentation (verified April 2026)
• G2 and Capterra reviews for listed providers (Jan–Apr 2026)
• Whichapp provider score composite data (see sources & data)

Research Approach

This page was researched using official government and regulatory sources for the country, combined with provider country guides, help centre documentation, and verified user feedback from G2 and Capterra. Compliance rules and costs were cross-checked against applicable labour law and official tax authority publications. No provider was engaged for a paid pilot or contract as part of this research.

Last updated April 2026.