Recruiting Top Talent in Japan

Japan Top Talent

Finding, recruiting, and onboarding top talent in any overseas territory creates many issues for companies planning international expansion. Japan’s geographical location and unique work culture pose more questions than most. This certainly applies to Japan where the Labor Standards Law (LSL) stipulates statutory employment guarantees that you will have to consider when recruiting staff.

This underlines why Bradford Jacobs’ global experience in recruiting the best candidates for your company is indispensable for taking the smartest route into the Japanese market. Our expertise in international recruitment is indispensable for expansion into Japan’s economy – the third largest in the world.

Bradford Jacobs’ benchmark platforms as a Professional Employer Organization (PEO) have worldwide reach and include a total understanding of the challenging complexities of the Japanese economy and employment market. You can trust Bradford Jacobs to put the brightest talent in place for your company.

The Recruitment Process in Japan

The first stage of making your company operational in Japan is recruiting the staff. It is vital to know where to locate the best talent who will be a perfect fit for your company’s plans.

Referrals play a major role in corporate recruitment in Japan, alongside the traditional route of sourcing top level university graduates for specific roles. Selection criteria to find the right people for the role is critical as Japanese employment laws are heavily weighted toward employees, making termination a prolonged and potentially hazardous process.

Japan has an ageing population, so a steadily growing economy and increased job opportunities must be balanced against a numerically static workforce. Competition is fierce to source the highest-level candidates.

Company loyalty figures strongly among Japanese and it is still not unusual for an employee to expect lifelong employment with one organization. Migrating expats into Japan offers one route around these cultural hurdles, but that leads to the complexities of work permits and visas.

You will have a lot of questions, and the answers do not come easily. Once the right employees are found, employers must follow strict registration procedures for their new staff. These include:

• Registering with the National Tax Agency (Kokuzei-cho, NTA) and the relevant social insurance systems (Shakai Hoken) to remit withheld taxes
• Registering employees with the Labor Standards Inspection Office
• Remitting withheld taxes to the National Tax Agency (Kokuzei-cho, NTA)
• Remitting social insurance deductions to the relevant social insurance systems (Shakai Hoken)
• Filing returns for the tax year, which runs from January 1 till December 31
• Local employers withhold national income tax on a monthly basis. Provisional payments may be necessary in July and November if the previous year’s tax liability exceeded JPY 150,000 (US$1,360). If tax is not withheld, registered tax residents must pay instalments in June, August, October, and January of the following year
• Providing employees with an annual certificate of deductions (Gensen) in December each year
• Reconciling national and local taxes to assess for refunds or extra payments
• Applying for employees’ special expatriation status (if applicable)
• Calculating employees’ monthly salary and sending their pay slips
• Researching for any available tax incentives
• Submitting employees’ or employers’ wage tax returns and social insurance forms
• Creating and submitting your company’s annual accounts and year-end statements
• Creating payment schedules for wage tax, national insurance, and net wages
• Ensuring accurate personal income tax returns are filed for you and your employees

The recruitment process is time-consuming and requires dedication – a difficult task when faced with a host of other complicated issues involved in international expansion. By engaging Bradford Jacobs as your Employer of Record (EOR) we will provide all the answers. We will convert your expansion blueprint for Japan into an action planwith a few simple steps, including:

• Bradford Jacobs locates the ideal employees for your company, then steps in as EOR to ensure they comply with Japanese employment contracts law, payroll, HR, visa requirements and permits (if required)
• We manage all work-related registration formalities and on-going employment issues while you have daily control of your employees

The employees complete their time sheets, and any expenses claims, and we invoice you, the client. Once paid, we deduct all contributions to the relevant Japan authorities and transfer the balance into the employees’ accounts

Legal Checks on Employees in Japan

There is no codified law governing checks on prospective employees, but individual legislation does apply limits, such as in the Act on the Protection of Personal Information (APPI) and the Labor Standards Law (LSL). The depth of checks depends on the role, and employers may use an agency to conduct searches.

Criminal Record Checks: These are neither prohibited nor encouraged by the labor regulations as such information is not publicly available. There must be an irrefutable need to obtain such information for certain occupations and this can be obtained only with the applicant’s permission.

Discrimination:  The LSL prohibits discrimination during recruitment, employment or as grounds for termination based on age, nationality, or ethnicity, religious or political beliefs, age, disability, or social status.

Privacy:  Protection of employee’s data and personal information is governed by the Act on the Protection of Personal Information (APPI). Employers are expected to have privacy protocols in place. Contravening the guidelines risks up to six months’ jail or fines of JPY 300,000 (US$2,720), while misusing information dishonestly or for criminal purposes carries the threat of one year’s imprisonment and up to JPY 500,000 (US$4,540).

Permitted checks include:

• Verify the legal status of a candidate to work in Japan
• Enquire about medical history where it is relevant to the position and with the applicant’s permission
• Verify accuracy of CVs and educational qualifications with the candidate’s permission

Basic Facts on Hiring in Japan

• Employer’s pre-hire interview questions must come within the guidelines of the Act on the Protection of Personal Information (APPI) and the Labor Standards Law (LSL), at the risk of fines for contravention.
• Terms and conditions of employment come under the LSL, which governs the employer-employee relationship with foreign staff as well as Japanese employees.
• Employer-employee relationships in Japan are legally bound by the LSL and its Enforcement Ordinance, the Labor Standards Inspection Office (LSIO) with guidelines from the Ministry of Health, Labor and Welfare (MHLW). Employment practices have also been established by case law.
• The Employment Contracts Law does not stipulate that a contract must be drawn up in Japanese, but in the case of legal dispute only a Japanese version may be valid.
• Under LSL regulations an employer does not have to provide a formal written contract but must create a written agreement detailing such as salary and payment schedule, working hours and vacation entitlement, termination and disciplinary procedures, grounds for dismissal.
• Where a company employs more than 10, workplace rules must be filed with the LSIO.
• Both employer and employee must be registered with the National Tax Agency (Kokuzei-cho, NTA) and the relevant social insurance systems (Shakai Hoken), covering health insurance, employee pensions, unemployment insurance and accident compensation.

Beyond this, employers must comply with the minimum requirements laid down by the LSL, guaranteeing employees’ rights and entitlements in such as:

• Employers must comply with minimum wage laws. Japan’s monthly national minimum wage in 2021 is JPY 156,173 (US$1,427) although the minimum rate can vary between the country’s 47 prefectures and tends to be higher in urban areas compared with rural regions.
• Working hours are eight hours per day for a 40-hour week, but most Japanese work longer, which partly led to new laws on overtime from April 2020.
• The Basic Overtime rule stipulates overtime cannot exceed 45 hours monthly or 360 hours annually. Under special circumstances, the Extended Limit Rule states that hours must not exceed 100 per month and average 80 hours over six months.
• Mandatory minimum paid vacations for full-time employees vary between 10 and 20 days depending on length of service. Employees are entitled to 10 days in their first year, provided they have worked at least six months and a minimum of 30 hours per week with at least 80% attendance.
• The allowance for maternity leave is six weeks pre-natal (98 days or 14 weeks for multiple births) and eight weeks post-natal. Social insurance covers maternity allowance at 66% of salary, with provision for an extra week in case of late delivery
• Under the Employment Contracts Law there is generally a minimum 30 days’ notice of termination or pay in lieu. Dismissal for serious misconduct does not require notice but needs prior consent from the Labor Standards Inspection Office.
• There is no statutory entitlement to severance pay which is generally a contractual agreement.