In our previous article, we explained what you need to prepare when hiring your first employee in Japan.
Among these, the most important are
preparing an employment contract and a notice of employment conditions
Some foreign business owners believe that
“a verbal explanation is sufficient”
or
“since we’ve reached an agreement with the employee, there’s no problem.”
However, in Japan, the law requires that employment conditions be clearly specified.
Furthermore, an employment contract is not merely a piece of paperwork.
It is also a crucial tool for preventing misunderstandings with employees and protecting the company.
In this article, we will introduce six items that must be clearly defined when hiring employees in Japan.
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6 Essential Items to Include in a Japanese Employment Contract
1. Salary
The first thing that must be clarified is the salary.
For example:
- Base salary
- Allowances
- Payment date
- Payment method
- Rules for pay raises
and so on.
Foreign business owners should be particularly mindful that
“Monthly salary: X yen”
may not be sufficient on its own.
If allowances are provided, the contract must specify their amounts, eligibility criteria, and how the salary is calculated.
For example, regarding transportation expenses, you must clarify whether they are covered and, if so, the conditions (e.g., up to Y yen).
Additionally, Japan has a minimum wage system.
Even with an agreement from the employee, you cannot set a salary that falls below the minimum wage.
2. Working Hours
The next important point is working hours.
Specifically,
- start time
- end time
- break time
must be clearly defined.
Some foreign business owners
hold the view that
“it’s only natural to work until the job is done.”
However, in Japan, managing working hours is crucial.
To avoid future disputes over overtime pay or working hours, it is necessary to clearly define working hours.
3. Days Off and Leave
In Japan, the law requires companies to grant employees at least one day off per week or at least four days off over a four-week period.
Set the days off in accordance with this requirement.
Additionally, in Japan, companies are required to grant paid leave to employees who have been employed for at least six months and have worked at least 80% of all working days during the applicable period.
The number of paid leave days granted to employees is also determined by factors such as the number of years worked.
Some foreign business owners
believe that “paid leave is a system reserved for large companies.”
However, these rules apply regardless of the company’s size.
4. Job Duties and Workplace
The specific duties the employee will perform are also an important item to include.
Particular caution is required when hiring foreign employees.
Depending on their status of residence, there may be restrictions on the types of work they are permitted to perform.
Therefore,
it is important to clearly specify
“what kind of work they will be responsible for.”
In addition, the workplace must be clearly stated.
If there is a possibility of a change in the workplace, potential locations must also be listed.
5. Contract Term
The contract term is another item that must be clearly specified.
For example,
- Employment contract with no fixed term
- 1-year contract
- a 6-month contract
and so on.
If the contract term is fixed, the start and end dates of the contract must also be specified.
If the contract term is vague,
disputes may arise regarding
“how long the employee was expected to work.”
Furthermore, in the case of a fixed-term employment contract, the possibility of renewal and the criteria for renewal must also be specified.
Furthermore, for employees under fixed-term employment, it is necessary to clearly state that they may apply for conversion to indefinite-term employment, as well as the working conditions following such conversion.
Additionally, when entering into a fixed-term employment contract, the maximum contract term is generally three years. However, for workers with specialized knowledge or those aged 60 or older, the maximum term is five years; please exercise caution when setting the contract term.
6. Resignation & Termination
Regarding resignation,
・The deadline for submitting a resignation notice
・Whether a mandatory retirement system is in place
・Whether a continued employment system is in place
and other such details must be clearly stated.
The grounds for dismissal must also be clearly specified. Be sure to specify the behaviors and circumstances that could constitute grounds for dismissal.
A statement such as “Dismissal shall be carried out in accordance with the Work Rules” is also acceptable.
It’s Not Just a Matter of “Listing These 6 Items and You’re Done”
The six items introduced so far are mandatory provisions that must be included.
However, in practice, there are other matters that must also be specified.
For example:
- If bonuses are paid, details regarding bonuses
- Retirement allowance system
and so on.
Therefore,
“using an online template as-is”
is not recommended.
It is important to tailor the content to your company’s actual circumstances.
Business Manager Visa and Employment Contracts
For foreign business owners holding a Business Manager status of residence, an appropriate employment contract is even more critical.
This is because, currently, employing full-time staff is one of the requirements.
However, it is not enough to simply draw up a contract.
- The employee must actually be working
- Appropriate wages must be paid
- Working hours must be properly managed
- The employee must be enrolled in social insurance
and so on—it is essential that these conditions are met in practice.
In other words, an employment contract is not merely a “formal document”; it also serves as evidence of the company’s actual operations.
Summary
When hiring employees in Japan, it is important to clearly define the terms of employment.
In particular,
- salary
- working hours
- days off and vacation
- job duties and work location
- contract term
- matters related to resignation
are items that must be included.
An employment contract is not merely a formality.
It is a crucial mechanism for building a relationship of trust with employees and protecting the company.
This is especially important for foreign business owners; to avoid problems later on, it is essential to prepare thoroughly before hiring.