By ATOM Legal Professional Corporation English speaking lawyers in Japan

According to the Japanese Staffing Services Association (JASSA), the employment situation in Japan remains high, with a market that favors candidates. The average jobs-to-application ratio in Japan was 1:1.5 in 2017, indicating that there are currently more vacant jobs than there are job seekers. When it comes to staffing, what this means for your company is that you’ll have to take extra measures in order to secure a skilled employee in a competitive market. If you’re looking to staff your Japanese company as effectively as possible, we suggest using this article as a guideline to gauge the pros and cons of hiring permanent/full-time workers, contract employees, and temporary agency workers. 

Hiring of Permanent Employees (Sei-shain)

The permanent/full-time employee status (sei-shain) is the most coveted contract for most workers in Japan, and it’s easy to see why — it provides stability, employee benefits, and job security. The benefits to you as a company for hiring permanent employees are that you can attract talent and build employee loyalty in your workforce.

In addition, permanent employees in a managerial position don’t receive an extra allowance for overtime work (so long as your company is compliant with all Japanese labor laws) — therefore, this can prove to be more cost-effective for your company in the long-term. The negative side to hiring permanent employees is that if things do not work out ultimately, terminating/dismissing the employee can be a difficult and tedious process.

Hiring of Contract Employees (Keiyaku-shain)

Contract employees (keiyaku-shain) are workers under contracts for a specified term — typically three, six, or twelve months, renewable upon expiration. Contract employees are a less risky way of hiring employees, as most contracts have a relatively short expiration date. Contract employees typically have the same benefits as permanent employees do (social security, paid leave, etc.), and this is therefore still an attractive option for job seekers in Japan. 

Many employers in Japan hire contract employees to entice prospective workers with employee benefits while not having to commit to said worker, should things not work out by the end of the contract period. Many employers in Japan used to hire and keep renewing the contracts of contract employees instead of hiring them for a permanent position. As several companies were abusing this system, Japanese courts have tightened rules in regards to this and thus contract employees now have the same protection as permanent employees.

Hiring of Temporary Agency Workers (Haken-shain)

Due to the decline in birth rate and an aging population, many companies in Japan have turned to external sources for employment, such as temporary agency workers and outsourcing. This fact is made evident in a recent survey conducted by Hays, where over half of Japanese employers (53%) used temporary staffing in 2017 (Source: 2017 Hays Asia Salary Guide). Hiring temporary agency workers can be very effective, especially if your company is in need of a worker to fill-in a position at your company for a short term. Temporary Agency Workers (haken-shain) are not official employees in your company — instead, they are employees of one of many temporary agencies in Japan. 

There are many other benefits to hiring temporary agency workers — your company has no obligation to the employee if they are not fit for the job, you can ask for a replacement, and you don’t need to cover their commuting expenses, as well as other employee benefits such as health insurance, paid leave, etc. However, keep in mind that the trade-off for these pros is that temporary agency workers tend to cost more as you’ll be paying a premium for this quick-hiring solution.

In the case of foreign workers in Japan, it’s imperative that you are well aware of the many different types of visas and their limitations in Japan. To learn more, we strongly recommend reading our article on types of visas for foreign employees in Japan by clicking here.

This page is intended to be used for informational purposes only and should not be a substitute for obtaining professional legal advice.

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