Common Misconceptions Foreign Business Owners Have About Hiring in Japan

Many foreign business owners running companies in Japan tend to approach the act of “hiring people” based on the same mindset they had in their home countries.

Of course, this is only natural.

Everyone tends to view things through the lens of the country where they grew up or the work environments they’ve experienced.

However, Japan has its own unique employment rules and workplace culture.

Proceeding with hiring without understanding these differences can lead to problems with employees or guidance from government authorities later on.

In this article, we will explain common misconceptions foreign business owners often have when hiring employees in Japan.

Misconception #1: “We’re a small company, so the rules don’t apply to us”

In newly established or family-run companies,

“We only have one employee”
“Our revenue is still low”
“We’re just having an acquaintance help out”

and may assume that labor laws do not apply to them.

However, in Japan, there are numerous rules that apply regardless of a company’s size.

For example,

• Minimum wage
• Working hours
• Overtime pay
• Disclosure of working conditions

and other regulations generally apply even if there is only one employee.

The mindset that “it’s okay because we’re a small company” is dangerous.

Misconception #2: “We’re friends, so we don’t need a contract”

Within the foreign community,

there are cases where people do not draw up a formal employment contract because:
“We’re friends, so I trust them”
“We’re from the same country, so there won’t be any problems”

However, personal relationships and employment relationships are two separate matters.

Even if the relationship starts off well,

differences in understanding may arise regarding:

• Salary
• Working hours
• Days off

and other matters.

If there is no contract at that point, it is easy for disputes to arise over “he said, she said.”

In fact, precisely because they are friends, it is important to clarify the rules from the start.

Misconception 3: “I can fire them freely during the probationary period”

Many companies in Japan have probationary periods.

As a result,

some foreign business owners believe that

“I can fire them at any time during the probationary period.”

However,

However, even during a probationary period in Japan, a reasonable cause is required for dismissal.

Simply citing reasons such as:

• We just don’t seem to click
• They aren’t as capable as expected
• I don’t like their personality

is likely to lead to trouble.

The probationary period is not a “free-for-all” period.

Misconception 4: “If the salary is fixed, overtime pay isn’t required”

This is a very common misconception.

This misconception is not limited to foreign business owners; even Japanese business owners sometimes fall into this trap.

For example,

there are cases where employers assume,

“Since the contract specifies a monthly salary of 300,000 yen, overtime pay is included in that amount.”

However, in Japan, unless certain conditions are met, overtime pay must be paid separately.

Paying a fixed salary and the obligation to pay overtime pay are two separate issues.

Misconception 5: “Part-time workers don’t need insurance”

When hiring part-time or temporary workers,

people sometimes assume,

“Since the hours are short, no paperwork is needed.”

However, depending on working hours and contract terms,

• Employment Insurance
• Social Insurance

may apply.

Especially as a business begins to grow, the number of part-time workers increases.

It is important not to assume that “it doesn’t apply because they’re part-time” and to verify the eligibility criteria.

Misconception 6: “Different Rules Apply to Foreign Employees”

When hiring foreign employees,

there are cases where employers assume

“Since they’re foreign, we can treat them differently from Japanese employees.”

However, Japanese labor laws generally do not distinguish based on nationality.

Even for foreign employees,

• Minimum wage
• Overtime pay
• Paid leave
• Workers’ compensation insurance

and other protections.

You should not assume that special rules apply simply because they are foreign nationals; fundamentally, the same rules apply as for Japanese employees.

Misconception 7: “It’s okay because other companies do it too”

Within communities of foreign business owners,

you may hear comments like:
“My friend’s company does it that way too”
“Other stores do the same thing”

.

However, that does not necessarily mean it is legally correct.

In reality,

• Companies operating without social insurance
• Companies operating without employment contracts
• Companies failing to pay overtime wages

and other such situations do exist.

The fact that a company has not faced problems so far does not mean it is operating legally.

As a business owner, what is important is not “what other companies are doing,” but verifying “what the law actually says.”

Hiring in Japan Is Also About “Building Trust”

For foreign business owners, Japan’s employment rules may seem complex.

However, these rules are not merely regulations.

They are also mechanisms designed to protect employees and enhance trust in the company.

Establishing employment contracts and implementing proper labor management lead to:

• Employee retention
• Corporate credibility
• Prevention of disputes

.

To sustain a long-term business in Japan, “hiring people appropriately” is just as important as “increasing sales.”

In the next installment, we will explain the basic preparations required when actually hiring employees.