Hiring Employees in Japan: Legal Requirements, Risks, and Best Practices
Oct 02, 2025UP!
In Japan, hiring employees comes with many legal restrictions. Practical issues also matter. Dismissal rules and wage disputes bring serious risk. Saying “I didn’t know” is no excuse. These risks may block company growth.
This article explains hiring in Japan. We cover contracts, recruitment, and labor law. It also reviews remote work issues. By applying these steps, you can avoid risk. Strong hiring helps secure the right people.
① Contract Type｜Direct Employment as Last Choice
The first question is simple. Do you really need an employment contract? In Japan, firing staff is very hard. To reduce risk, consider options in this order:
- Executive service contract
- Outsourcing (work contract or mandate)
- Temporary staffing
- Employment contract (final option)
Indefinite Conversion Rule
Fixed-term contracts require care. If renewed for more than five years, staff can demand indefinite status. This is the “Indefinite Conversion Rule.” Employers cannot refuse. (Reference: 無期転換の概要 契約社員、アルバイトなどの方 | 有期契約労働者の無期転換サイト”)
Balancing Risk and Attraction
Japan’s aging society makes hiring difficult. Thus, stable jobs attract candidates. Employers must balance risk and appeal.
② Defining Job and Pay
Before hiring, define duties clearly. Show how the role links to profit. Profit funds employee wages.
Pay Basics
- Pay must meet the 【Minimum Wage Act】.
- Too low wages mean no applicants.
- “8 hours at market pay” is not attractive.
Example: Sales Hiring
For example, check sales pay levels. If wages are high, split the role. Create “Web Marketing” or “Inside Sales.” Match pay to each specialty.
Incentives
Staff compare effort with pay. Thus, incentives must be clear. For new hires, fairness is vital. Without it, discontent spreads fast.
③ Testing Candidates
After defining duties and pay, test skills. Check if candidates can meet results. Confirm their fit for the role.
Soft Skills
Skills alone are not enough. Employers must check personality. Can the person work well with others? Teamwork is key.
Avoiding Risks
Stress interviews are dangerous. They may be seen as harassment. Even if testing resilience, avoid them.
④ Outsourcing Risks
Outsourcing offers flexibility. But if control exists, it may count as employment. Labor law will then apply.
Japan’s 【Freelance Protection Act】 adds duties. For trusted partners, formal employment may be safer.
⑤ Remote Work Issues
Remote work is popular. But it brings risks. Data leaks, poor time tracking, and weak communication are common.
Key Rules
- Protect confidential data
- Track hours and health
- Set clear rules for equipment
- Handle resignations with care
For example, unclear goals lower productivity. Employers must set targets and fair evaluation rules.
⑥ Labor Laws
Employers must follow labor law. Examples include the 【Labor Standards Act】 and the 【Equal Opportunity Act】. Below are common mistakes.
Frequent Errors
- Title-only managers – No authority means overtime pay is due.
- Flex-time misuse – Long hours damage health. Employers must act.
- Discretionary work misuse – Conditions are strict. Filing is needed.
- Improper firing – Needs real reasons and fairness.
- Probation misuse – Trial periods still need legal care.
Lawyer’s Advice
[Example: Wrongful dismissal often triggers disputes. Always ask a lawyer and follow proper steps.]
⑦ Onboarding
No hire delivers full value on day one. Onboarding helps staff adapt and grow faster.
Best Practice
For example, explain company culture. Show workflows step by step. Also, explain teamwork rules. Share benefits fairly with all staff.
⑧ Finding Candidates
Define the target persona first. Then pick the right channel.
- Headhunting
- Agencies
- Referrals
- Direct platforms
If the channel is wrong, good talent will not apply. Hiring then becomes slow and costly.
⑨ Time Management
Hiring consumes time. Too many interviews weaken judgment. Standards may slip.
Thus, set rules early. Choose channels in advance. Write clear criteria. Simple rules improve hiring success.
By knowing laws and risks, companies can hire safely and effectively in Japan.
You are welcome to contact us via the Contact Form to discuss and for more information.