Hiring Your First Employee in Japan

The first hire is the point where a company in Japan stops being an administrative shell and becomes an employer, and employer is a much heavier word here than it is in most places.

Nothing about it is difficult. It is just that a set of obligations switches on at once, several of them are not optional, and the decision is considerably harder to undo than in the markets most founders come from.

The cost is not the salary

Budget somewhere in the region of fifteen to sixteen percent on top of gross salary for the employer's share of social insurance. The exact figure moves with the prefecture, the person's age, and the year, so treat that as a planning number and confirm the current rates rather than quoting mine.

That covers the employer half of health insurance, pension, and the labour insurances. There is also commuting allowance, which is customary and effectively expected, and it is not trivial in a city where a commute can cost real money every month.

A salary that looks affordable becomes a different number once you add all of it. Work out the loaded cost before you make an offer, not after.

What has to be enrolled, and when

Four systems, and they have different triggers and different offices.

Workers' accident compensation insurance (労災保険) applies from the first employee, with no exception, and the employer pays all of it. This is the one people forget because it is cheap.

Employment insurance (雇用保険) applies once the person works enough hours and is expected to stay long enough. Thresholds exist and they change, so check the current ones.

Health insurance and pension (社会保険) are generally mandatory for a company employing people, including for a director drawing a salary. Many new founders assume this only starts at some larger headcount. It does not.

The filings go to different places, the Labour Standards Inspection Office, Hello Work, and the Pension Service, within short windows after the person starts. This is the standard point at which people engage a 社会保険労務士, and it is usually money well spent for the first hire.

The contract has to be in writing and it has to say specific things

Japanese labour law requires that certain conditions are given to the employee in writing. Wage, working hours, place of work, the nature of the work, the term, and the rules for termination and retirement, among others.

Two practical points that catch foreign employers.

If you employ people, you need a set of work rules (就業規則) once you pass a headcount threshold, and having them earlier is a good idea anyway. They are the document that lets you answer questions consistently instead of inventing an answer per person.

Overtime is not something you can simply assume. Making an employee work beyond statutory hours requires a specific labour agreement, commonly called the 36協定, filed with the Labour Standards Inspection Office. Without it, that overtime is not lawful, even if the employee is happy to do it.

Firing is genuinely difficult

This is the single most important thing for a founder from the United States to internalise, and it changes hiring strategy rather than just paperwork.

Japan does not have at will employment. Dismissal must be objectively reasonable and socially acceptable, and the standard is applied strictly. Poor performance, on its own, is usually not sufficient unless you can show sustained documented effort to help the person improve, along with attempts to find another role for them.

In practice most separations happen by mutual agreement, often with a settlement, because the alternative is slow and uncertain and can be expensive.

The consequence is simple. Hire slowly. Use the probationary period seriously rather than as a formality. And be honest with yourself about whether you need an employee at all yet, or whether the work is better placed with a contractor or an agency for now.

Contractor is not a workaround

Engaging someone as a contractor to avoid the obligations is a strategy that works until it does not.

If the working relationship looks like employment, direction over how and when the work is done, fixed hours, exclusivity, integration into the team, then it can be treated as employment regardless of the label on the contract, with backdated liabilities attached.

Contractors are a legitimate way to work. Contractors who are employees wearing a different word are a liability sitting quietly on your balance sheet.

If you are hiring a foreign national

Their residence status has to permit the work you are hiring them for. That is your responsibility to verify, not only theirs, and there are penalties for getting it wrong.

If the role does not match their current status, they need a change of status before starting, which takes time. Build that into the start date rather than discovering it a week before.

The short version

The first hire in Japan is not expensive in a way that should stop you. It is committed in a way that should slow you down.

Get the enrolments right in the first month, write a real contract, and assume the person you hire is someone you will be working with for years. That assumption is closer to the truth here than almost anywhere else, and it is not a bad way to build a company.