Laws & Regulations on Setting Up Business in Japan
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1 Laws & Regulations on Setting Up Business in Japan
2 Contents Chapter 1 About our office Chapter 6 Work rules Chapter 2 Introduction Chapter 7 Safety and hygiene Chapter 3 Labor contracts Chapter 8 Resignation and dismissal Chapter 4 Wages Chapter 9 Social Security System Chapter 5 Legislation on working hours, breaks and days off Chapter 10 Reference Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 2
3 Chapter 1 About our office
4 Chapter 1 01 About our office Director: Miho Hoshi A labor and social security attorney in Hoshi Labor Consulting in Tokyo. Service HR outsourcing service to small and medium sized companies in Japan. - Draw up work rule - Statutory social insurance procedures - Employment and labor consulting service Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 4
5 Chapter 2 Introduction
6 Chapter 2 01 Application of laws Laws below apply in principle to all enterprises in Japan. Laws pertaining to labor and the protection of workers. The Labor Standards Law Minimum standards on working conditions The Industrial Safety and Health Law Minimum standards on working conditions regarding health and safety The Minimum Wage Law Minimum standards on wages... etc These laws apply in principle to all enterprises in Japan, - regardless of whether the employer is Japanese or foreign - regardless of whether the company is a foreign or Japanese-registered corporation. They also apply to foreign workers in Japan provided that the foreign workers meet the definition of workers under these laws. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 6
7 Chapter 3 Labor contracts Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 7
8 Chapter 3 01 Working conditions Employers must notify the employees the employment conditions. The term of the agreement Workplace Duties of employees Start and finish times Work in excess of regular working hours Breaks Days off and leaves Methods of determining, calculating and paying wages Wage calculation period Payment times Resignation Dismissal Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 8
9 Chapter 3 02 Term of labor contracts Labor contracts generally do not stipulate a term. In general Labor contracts DO NOT stipulate a term. If a term is specified it must be no longer than 3 years (except in a few special cases) However, a worker may RESIGN by notifying his/her employer at any time as long as at least one year has elapsed since the date of the start of the contract term. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 9
10 Chapter 3 03 Probation period Employers are allowed to set a limited period of probation. In general Probation periods last for about 3 months Notice! The refusal to employ after the probation period = Dismissal of an employee In order for the refusal to be legally allowed, valid reasons for refusal are required and it must be objectively reasonable for the employer to refuse. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 10
11 Chapter 4 Wages Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 11
12 Chapter 4 01 Principles of wage payment Employers must pay wages in legal tender, directly to the employee. in legal tender Employers must pay wages directly to the employee not less than once per month on a specified date Employers allowed to remit wages into a bank account specified by the employee (where the employee agrees to that method of payment) deduct social insurance premiums, taxes and similar expenses from wages. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 12
13 Chapter 4 02 Guarantee of minimum wage The minimum wage is determined according to region and industry. Minimum wage by region Tokyo... Kanagawa... Chiba Minimum wage by industry the steel industry... the machine industry... the car industry The higher of the two minimum wages is applied. The current minimum wage for Tokyo 821 yen per hour by the latest revision in September 2010 *818 yen for Kanagawa Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 13
14 Chapter 4 03 Wage system (1) Summer and winter bonuses are typical for Japanese companies. Summer and winter bonuses. Allowances the amount paid in bonuses makes up a relatively high proportion of total wages paid to employees *In FY2009, the average bonus paid by private-sector companies was 3.97 months' worth of of prescribed monthly wages (for clerical and technical occupations). (Source: National Personnel Authority) monthly wages usually include a basic wage and a range of allowances, which may include accommodation, family and transportation allowances. Bonuses Allowances not reflected Overtime pay Base wage 100 (per an hour) (per an hour) An effect of the high proportion of wages made up of various allowances and bonuses consequently is to lower the rate of overtime pay paid for work outside normal working hours. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 14
15 Chapter 4 04 Wage system (2) Traditional seniority system is still major, but some adopt new systems. Seniority system Employees' wages increase in accordance with the number of years of service at a company. New Systems An increasing number of businesses are introducing new systems Ability-based and duty-based pay systems Wages are determined according to each employee's abilities or duties. Performance-based pay systems Wages are determined according to each employee's rate of achievement of set goals. As a result, more and more businesses are adopting a yearly wage system. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 15
16 Chapter 4 05 Severance pay system Almost all enterprises in Japan have some form of severance pay system. Severance pay system When a worker leaves an enterprise employer will make a lump-sum payment according to factors including: length of service reason for leaving the enterprise Merit: Reducing Tax This is not subject to social insurance contributions and is treated more favorably for tax purposes than ordinary pay. Provided that certain conditions are met, these contributions are recognized as expenses for accounting purposes (reducing tax). Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 16
17 Chapter 5 Legislation on working hours, breaks and days off Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 17
18 Chapter 5 01 Working hours, breaks, days off The Labor Standard Act stipulates working hours, etc. as below: Working hours In principle Exception not exceed 40 hours per week or 8 hours per day excluding breaks (this is known as "statutory working hours") 44 hours per week at a maximum of 8 hours per day (some specified businesses with less than 10 regular employees.) breaks Works more than 6 hours Works more than 8 hours not less than a 45 minute break not less than a 1 hour break Day off Statutory days off * at least 1 day off per week, or 4 days off in any 4-week period * Sundays or public holidays need not necessarily be days off, and other days may be selected as employees' days off instead by agreement between the employer and employees. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 18
19 Chapter 5 02 Agreements on overtime and work on days off Working in excess of statutory working hours needs an agreement. Working hours Days off Working hours statutory working hours Days off statutory days off Employers must submit Notification of Agreement on Overtime and Work on Days off to its local Labor Standards Inspection Office. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 19
20 Chapter 5 03 Overtime Payment Employer must pay for employees' overtime work and work on days off Work days statutory 25%(1)+25%(3) working hours 10:00 p.m. 5:00 a.m. 25% 50% Days Off 35%(2)+25%(3) 10:00 p.m. 5:00 a.m. 35% 60% (1) Work in excess of statutory working hours (2) Work on statutory days off (3) Work late at night (between 10 p.m. and 5 a.m.) 25% 35% 25% Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 20
21 Chapter 5 04 Exceptions for managers and supervisors Working hours Breaks Days off night works The employees in positions of management or supervision are not subject to the regulations on working hours, breaks and days off with the exception of regulations on night work. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 21
22 Chapter 5 05 Paid leave Employers must grant 10 days' paid leave to employees. The number of days of paid leave available to employees increases in proportion to employees' length of service as below. Years of service Leave days granted Employers must grant 10 days' paid leave to employees that worked for 6 consecutive months from the time of hiring and who worked on not less than 80 percent of all schedule work days. This paid leave may be taken consecutively or separately. Where an employee's application to take paid leave will hinder the normal business operations, the employer may require the employee to take such paid leave at a different time. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 22
23 Chapter 6 Work rules Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 23
24 Chapter 6 01 Work rules Employers with 10 or more regular employees must draw up work rules Where work rules are established, they have the same legal force as labor contracts in so far as they are reasonable in content. Work rules must at a minimum contain the following 3 items Start and finish times, breaks, days off, leave of absence, and work shift arrangements Methods of determining, calculating and paying wages Resignation or dismissal Any arrangements established regarding the following matters must be included 4 Retirement allowances 8 Job training 5 Extraordinary wages, etc. 9 Workers' accident compensation 6 Responsibility for meal expenses, etc. 10 Awards and disciplinary measures 7 Safety and hygiene 11 Other matters Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 24
25 Chapter 7 Safety and hygiene Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 25
26 Chapter 7 01 Safety and hygiene Employers must pay due consideration to safety and hygiene matters. Before hiring After hiring Health check-up upon hiring When hiring a regular employee, employers must have the new employee undergo a predetermined health check-up before hiring him/her. Periodic health check-up Employers must have all regular employees undergo a health check-up by a doctor once per year. * * In the case of employees engaged in specific kinds of work which may damage the employees' health including late night work and work involving X-rays, employers must undergo at least once every six months. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 26
27 Chapter 8 Resignation and dismissal Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 27
28 Chapter 8 01 Approved grounds for dismissal Reasonable grounds for dismissal is inevitable. Necessity The company must prove that its business circumstances are such that redundancies are unavoidable and necessary. Effort to avoid redundancy The company must prove that it has made serious managerial efforts to avoid redundancies such as by reassigning staff and advertising for voluntary redundancies. Reasonable selection The company must prove that the standards by which it selected those to be made redundant are reasonable, and that redundancies were carried out fairly. Reasonable process The company must prove that it conducted sufficient consultations with workers and labor unions. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 28
29 Chapter 8 02 Dismissal in practice The legal steps are not usually taken for the dismissal. The legal steps Persuasion not common in Japan practically common in Japan example The employer will explain the business or job situation to the worker in order to persuade him or her to resign, and ultimately the worker will usually be persuaded to resign voluntarily. It is also often common for various conditions to be discussed (such as the topping up of a worker's severance pay) to encourage a worker to agree to resign. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 29
30 Chapter 8 03 Dismissal procedures (1) If employers dismiss an employee, they must take the following process. Case 1 Notice 30 days Dismissal OK Case 2 Notice Dismissal The employer must pay the employee 30 days' wages ( Notice allowance ) Exception (next page) Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 30
31 Chapter 8 04 Dismissal procedures (2) The exceptions of the previous page are below: The causes attributable to the employee. as below: A crime (e.g. theft, embezzlement or causing injury) Impossibility to continue the business as a result of natural disaster or other such unavoidable circumstances. Breach of the rules (e.g. a negative influence on other worker) A false statement in the resume Absence for 2 weeks or more without notice and without due cause Neglect for work not improved after repeated warnings. The approval of the local Labor Standards Inspection Office. Employers may dismiss employees without notice and without paying a notice allowance Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 31
32 Chapter 8 05 Restrictions on dismissal Employers cannot dismiss employees in the following situations. 1 2 leave (by illness or injury at work) 30 days maternity leave childbirth 30 days 6 weeks 8 weeks dismissal dismissal While an employee is on leave from work as a result of illness or injury incurred in the course of work, or for 30 days after the completion of such leave. While an employee is on maternity leave of 6 weeks before (14 weeks in the case of multiple pregnancy) and eight weeks after the childbirth, or for 30 days after the completion of such leave. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 32
33 Chapter 9 Social Security System Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 33
34 Chapter 9 Outline for Social Security System 01 Japan has a universal insurance system whereby everybody residing in Japan must, in principle, take part in the public health (medical) insurance and pension insurance system. Japan has 4 different kinds of insurance systems which companies are legally obliged to take part in; all workers that meet certain criteria are covered by the insurance. insurance rate Workers' Accident Compensation Insurance Employer : about 0.35~10.3% *Additional 0.005% in in order to to fund benefits for for asbestosinduced diseases. This covers any illness or accident incurred by workers as a result of work or while commuting to or from work. Rate is renewed every April Employment Insurance Employer : 0.95% Employee : 0.6% (generally) This provides for workers that become unemployed and helps to maintain stable employment such as by providing financial aid and subsidies. Rate is renewed every March. Health Insurance and Nursing Care Insurance Employees' Pension Insurance 10.82%. 9.32%(Tokyo) w/o Nursing care paid evenly by Employer and Employee % evenly paid by Employer and Employee *Additional 0.13% in in order to to fund benefits for for family with children These cover medical and nursing care expenses incurred by workers. Worker more than 40 years old pays for nursing care insurance in addition to health insurance. The rate of health care is depend on the prefecture. Rate is renewed every April This provides for benefits to workers in their old age, or in the case of death or disability. Rate is renewed every September Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 34
35 Chapter 9 02 Labor Insurance and Social Insurance Social Security System Labor Insurance Social Insurance 1. Workers' Accident Compensation Insurance General Contributions 2. Employment Insurance 3. Health, Insurance and Nursing Care Insurance 4. Employees' Pension Insurance contributions for children allowance Worker's Accident Compensation Insurance + Employment Insurance = Labor Insurance Health, Nursing Care Insurance + Employees' Pension Insurance = Social Insurance Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 35
36 Chapter Labor Insurance Benefit ~ Worker's Accident Compensation Insurance~ Medical treatment (compensation) benefit : Free medical treatment is provided until employees have recovered from any injury or illness attained from work Temporary disability (compensation) benefit: This benefit is equivalent to 60% of the basic daily benefit (average wages) payable from the 4th day of the employee s incapacity, if the employee has been unable to work because of medical treatment and has been unable to earn his/her wages. In addition, a special disability benefit equivalent to 20% of the basic daily benefit will be paid to the worker from the fourth day. Injury and disease (compensation) benefit : Temporary disability compensation benefit shall be terminated and be replaced by injury and disease compensation pension when an employee does not recover from injury/disease after one year and half from the start of medical treatment Physical disability (compensation) benefit : A physical disability compensation annuity, a lump sum or a special supplement shall be paid according to the grade of disability if any physical handicap remains after the injury or illness has been cured. Survivor's (compensation) benefit : The survivor's compensation annuity or a lump sum shall be paid if an employee has died Funeral expenses (Benefit): The person who conducts the funeral shall be paid with 315,000 yen plus 30 days of the basic daily benefit amount, or 60 days of the basic daily benefit amount, whichever sum is higher when an employee has died Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 36
37 Chapter 9 04 Labor Insurance Benefit ~ Employment Insurance~ Employment Insurance Benefit : When a person insured under the employment insurance scheme but loses his/her job due to dismissal, bankruptcy or personal circumstances, etc., and cannot find a job in spite of the will and ability to work, unemployment benefits are provided to that person To be eligible : the person must have been insured for 12 months or more in total during the 2 years prior to the date of leaving work regardless of the length of designated working hours per week. Date of resignation A = 12 months or more A + B = 12 months or more A 2 years A B Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 37
38 Chapter 9 05 Social Insurance Benefit ~ Health Insurance~ 1 Medical treatment (compensation) benefit : When the insured person or his/her dependent becomes ill or is injured, 70% of the medical cost is covered by the health insurance. 2 Sickness and injury allowance : When the insured person becomes unable to work due to an illness or injury, Sickness and injury allowance shall be provided. The amount of the allowance is 60% of the insured person's daily standard remuneration, commencing from the fourth day of leave from work.) 3 Allowances for when the insured person or the spouse gives birth to a baby or in maternity During the maternity leave ( 6 weeks prior to and 8 weeks after the childbirth ), they get the allowance which is 60% of the insured person's daily remuneration, commencing from the 4th day leave from work. Addition to that, lump sum allowance for childbirth and nursing ( 420,000) is provided. The amount is the same if the insured is male and his dependent spouse gives birth). 4 Funeral Allowance, Dependent Funeral Allowance When the insured person dies, funeral allowance which amount is the monthly remuneration will be paid. (If it is less than 100,000 yen, allowance is 100,000 yen). If the insured person's nonworking dependents died, 50,000 yen is provided as dependent funeral allowance. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 38
39 Chapter 9 05 Social Insurance Benefit ~ Health Insurance~ Voluntary Pension Employees' Pension Basis National Pension self employed company employees wife of company's employee All person live in Japan The Japanese pension system consists of a National Pension and an Employees Pension Insurance, etc. The National Pension is the basis of the public pension systems, and it pays Basic Pension benefits commonly to all insured persons. The Employees Pension Insurance is a system for paying insured persons remuneration - related pension in addition to the Old - age Basic Pension Benefits of the National Pension. Therefore, the members of the Employees Pension Insurance, etc. automatically join the National Pension, as well. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 39
40 Chapter 9 06 Social Insurance Benefit ~ Employees' Pension Insurance~ Old - age pension A person has participated in the public pension system for twenty - five years or more. He/she will start receiving his/her old - age pension when he/she reaches sixty - five years of age. 65 years of age 25 years or more Old - age pension Less than 25 years No pension 25 years or more Old - age pension Disability pensions Survivors pensions Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 40
41 QUESTIONS?? Please contact us if you have any questions or need help. hoshimiho@hoshi-consulting.com Tel/Fax /35
42 Chapter 10 Reference Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 42
43 Chapter Recruiting methods Major channels of recruiting in Japan are below "Hello Work" by government Universities Employment agencies Newspapers Magazines Websites 1. Hello Work "Hello Work" offers free support for people looking for work and companies looking for workers; all industries are covered by the agency. 2. Universities Some regional public organizations and education institutions such as universities also provide employment services for free. 3. Employment agencies Privately-run employment agencies come in several types, including executive search-type agencies, as well as those which build up a database of registered potential employees and employers. 4. Newspapers, Magazines, Websites Japan also has a wide range of newspapers, magazines (e.g., job-transfer magazines, industryspecific magazines, etc.), and internet websites through which companies can find employees. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 43
44 Chapter Legislation on recruitment Employers must provide equal oppotunity to women as to men The principle of freedom of contract Restrictions Employers can decide... Kinds of workers Numbers of hiring Equal opportunity to women as to men by the Equal Employment Opportunities Law... Employers may not specify male or female employees when advertising situations vacant, with the exception of a few specific positions. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 44
45 Chapter Governing law Which country's law to use may be determined by an agreement. In the case of international contracts which country's law to use as the governing law may be determined by agreement between the parties Labor contracts are no exception Legislation that is clearly intended to protect workers as a matter of policy will be compulsorily enforced in the forum state regardless of any such agreement. Even if a worker agrees to the law of a region other than that in which labor services are provided being used as the governing law for a labor contract, he/she may claim the benefit of specific (general) forcible provisions in the region in which labor services are provided by indicating to the employer that he/she wishes that such provisions should be applied. e.g. Labor Standards Law Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 45
46 Chapter Corporate directors and executive officers An engagement agreement should be concluded with Directors, etc. Workers Labor contract Directors, etc. Engagement agreement The relationship between the Companies and directors is, as a rule, subject to the Companies Act rather than labor law. If a director does not have the right to represent a company and is employed in a manner very similar to that of a worker, he/she may be simultaneously subject to labor law as a dual worker/director, etc. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 46
47 Chapter International Social Security Agreement (1) To avoid dual coverage of the pension, Japan has signed and implemented International Social Security Agreement with following countries. UK Netherland France Germany Czech Canada Korea Belgium USA Exemption from coverage in Japan : If you are to work in Japan not more than 5 years, you need a Certificate of Coverage It proves that you are currently covered by the social security system of the agreement country from which you have been sent. Notice : Employee s dependant family can not use this system. Copyright (C) 2011 Hoshi Labor Consulting. All Rights Reserved. 47
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