An Employer’s Guide to Pay and Perks in Japan

Japan enforces both regional minimum wages (e.g. applied generally) and industrial minimum wages (e.g. applied to specific sectors). If both apply, employers are required to pay the higher of the two. They include base salary and monthly allowances like housing or managerial stipends, but exclude occasional payments, such as marriage allowances; payments made at intervals exceeding one month, such as bonuses; overtime work, holiday work, and late-night work allowances; and perfect attendance allowances, commuting allowances, and family allowances.

Agreements to pay an employee below the minimum wage are void, and violations can result in fines of up to JPY 500,000.

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Social security is split into Social Insurance (pension and health) and Labour Insurance (workers’ compensation and unemployment). Social Insurance premiums are shared equally between employer and employee, while premiums for unemployment insurance are partially borne by employees and the remainder by the employer. Workers’ compensation is fully employer-funded.

As an example, a 30-year-old employee earning JPY 1.33 million per month (approximately EUR 100,000 per year) would see combined monthly social security contributions of over JPY 273,000, shared between employer and employee according to the relevant ratios. For employees over 40, this amount will be slightly higher as a longer-term care insurance premium will be added.

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Legally required benefits in Japan include various types of leave (e.g., maternity, childcare etc), overtime pay, annual health check-ups, and full social insurance coverage. Common additional perks include commuting allowances and sick leave.

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While not legally mandated, contractual or discretionary bonuses are also common in Japan. They are often paid twice a year and according to government statistics, range from one to two months’ salary on average, although this does ultimately depend on the particular sector, together with other factors. Employers may make bonus eligibility conditional on continued employment but cannot reclaim bonuses already paid (e.g. through claw back provisions), except in cases of overpayment.

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Employers in Japan must navigate strict wage laws and social obligations in what is complex landscape of regional and sector-specific rules. It is important that they are on top of the applicable minimum wage to avoid the potentially significant fines and carefully budget for social security contributions. Employers may also want to consider additional benefits beyond those legally required in Japan to enhance talent retention and attraction.

*Anderson Mori & Tomotsune