Ask the Experts Human Resources Management
Transcript: text for visually impaired.
Description: "JETRO" logo is displayed on the upper right corner of the screen. The title appears. The letters "Ask the Experts" appear one by one. In the background, there are two women and two men talking. The small blue text "Human Resources Management" appears under the text "Ask the Experts." There is a moving geometric pattern in the background. A short-haired woman in a white shirt and black pants appears facing the camera.
Caption: MAAYA KONISHI/MC
MC: Hello everyone, this is "Ask the Experts." When starting a full-fledged business in Japan, it is very important to establish a company in Japan as a base for localization and business development.
Description: The screen changes to show the MC from the chest up, viewed from the front right.
MC: For establishing the base, you need to proceed in accordance with Japanese laws and regulations.
Description: The MC is talking facing the camera.
MC: In this video series, experts in the field of incorporation will explain the advantageous information that foreign companies need to know when incorporating in Japan.
Description: The screen changes to show the MC, viewed from the front left. A white arrow appears on the right of the screen with the blue text "Human Resources Management."
MC: In this episode, we will be focusing on Human Resources Management. Experts will explain the topics that many foreign companies have questions about when establishing a base in Japan.
Description: The screen fades to white. The text "Understanding Japanese employment culture" appears in three lines in the middle of the screen. The screen clears up to show a person in a shirt and black pants from the shoulder down over an ornamental foliage plant, who is sitting on a chair. The screen changes to show the MC, who talks to the person. The screen changes to show a man in a light blue shirt from the chest up.
Caption: TOSHIYA KAMII
Labor and Social Security Attorney and Certified Public Accountant (California, USA) Grant Thornton Japan
MC: Let me introduce Mr. Kamii. He has supported and advised many companies to start up their businesses in Japan. Thank you for coming today.
Description: Kamii nods while listening to the MC. The screen changes to show the MC, who talks to Kamii.
Kamii: Thank you for having me today.
Description: A white box appears to the right of the MC with the blue text "Which is our top priority and what should we be careful of?"
MC: There's so much to do, which is your top priority and what should we be careful of?
Description: The screen changes to show Kamii, who answers. A blue arrow appears on the left of the screen with the white text "Understanding Japanese employment culture."
Caption: Which is our top priority and what should we be careful of?
Kamii: Understanding Japan's labor and employment laws and regulation is important. But equally important is to understand Japan's culture and employment culture that exists behind those rules.
Description: The screen changes to show the MC and Kamii, who are talking facing each other, sitting on chairs positioned at angles in front of the camera.
MC: I see.
Description: The screen changes to show Kamii, who answers.
Kamii: Working style, environment and culture are all products of each country's history and naturally, they differ from country to country. And so Japan's labor and employment rules root themselves to the country's long history, which I'll try my best to touch during the session today.
Description: The screen changes to show the text "Japan's wage and salary system" in two lines in the middle of the screen. The screen changes to show the MC and Kamii, who are talking facing each other, sitting on chairs positioned at angles in front of the camera. The screen changes to show the MC, who talks to Kamii.
MC: Let's move on to the first topic. What would you say is distinctive about Japan's wage and salary system?
Description: A white box appears to the right of the MC with the blue text "What are the Japanese distinctive wage and salary systems?"
Caption: What are the Japanese distinctive wage and salary systems?
Description: The screen changes to show Kamii, who answers.
Kamii: I would raise overtime payment, transportation allowance and perhaps severance payment as matters that are distinctive to Japan's wage and salary system as some other countries do not offer these kinds of system. Many people are surprised to hear of the need to make overtime payments in Japan, but it is on statutorily required under the Labor Standards Act in Japan to make these payments. And some companies, however, on structure their wage and salary system in a way to minimize their need to make overtime payments. But when doing this, it's important to keep in mind that the company needs to record and track and also monitor employee's time and attendance.
Description: A blue arrow appears to the left of Kamii with the white text "Overtime Payment," followed by the second blue arrow with the white text "Transportation Allowance" and the third blue arrow with the text "Severance Payment." These three arrows are placed from top to bottom. The screen changes to show Kamii from the shoulder up. A blue arrow appears to his left with the text "Overtime Payment." The screen changes to show the MC, who talks to Kamii.
MC: How about transportation allowance and severance pay?
Description: The screen changes to show Kamii, who answers.
Kamii: While there are no statutory requirements for the employer to pay transportation allowance or severance payment to existing or terminating employees, most if not all, businesses in Japan do offer these as part of their wage and salary system. And so businesses may face challenges hiring employees if they do not offer these benefits. Under the lifetime employment system, severance payment was made to terminating employees as a reward and appreciation for lifetime commitment and services. And the amount was pretty significant. And it was calculated usually by multiplying the final month's pay. So the salary and then you would multiply a coefficient which was determined based on service years and performances. And it contributed to a significant or large sum of money. So it was considered as an important source of income for retirement. And in recent years, however, businesses are shifting towards Defined Contribution Pension whereby employers make monthly fixed contributions to employees personal account and employees are on their own to make investment decisions and have the responsibility to grow their investment.
Description: Two blue arrows appear to the left of Kamii. The upper one contains the white text "Transportation Allowance" and the lower one, "Severance Payment." The screen changes to show the MC and Kamii, who are talking facing each other, sitting on chairs positioned at angles in front of the camera. The screen changes to show the MC, who talks to Kamii.
MC: So to attract employees and recruit them it seems important to research in advance what kind of contract would be best in each case?
Description: The screen changes to show Kamii, who answers with a deep nod.
Kamii: Yes, I would think so.
Description: The screen changes to show the text "Health check-ups" in one line in the middle of the screen. The screen switches to show the MC and Kamii, who are talking facing each other, sitting on chairs positioned at angles in front of the camera. The screen changes to show the MC, who talks to Kamii.
MC: The next question is about health check-ups. In Japan, health check-ups are common. Are health check-ups for employees obligatory according to Japanese labor laws?
Description: A white box appears to the right of the MC with the blue text "Are health check-ups for employees obligatory in Japanese labor laws?" The screen changes to show Kamii, who answers.
Caption: Are health check-ups for employees obligatory in Japanese labor laws?
Kamii: Yes, indeed they are. In Japan, the law requires employers to provide at least one health check-ups a year to employees for prevention and early detection of disease and to maintain employees' health condition. Newly hired employees are also required to undergo health check-up and provide its result to the employer as evidence of their fitness to work.
Description: A blue arrow appears to the left of Kamii with the white text "Medical examination at least...ONCE A YEAR." A deep pink box with the white text "Obligation" overlaps the upper right corner of the arrow.
Kamii: And one reason why health check-ups are important in Japan is that employers are required by law and judgment of courts to give various considerations to the safety of their employees. And this goes back in history but post World War II Japan's foreign trading and importing increase as the country was recovering from the war and increasing cargo containers resulted in an outbreak of infectious disease, and the importance of early detection of disease was widely recognized as being important to ensure employees work in healthy conditions. So perhaps this is a good example of how history has shaped up Japan's laws and regulations requiring employers to provide health check-ups.
Description: The screen changes to show the MC and Kamii, who are talking facing each other, sitting on chairs positioned at angles in front of the camera. The screen changes to show the MC, who talks to Kamii.
MC: I didn't know about the historical background. health check-ups must be distinctive of Japan, so I'm assuming many people find this surprising.
Description: The screen changes to show Kamii, who answers.
Kamii: They do indeed. In fact, requirements are often not seen in other countries. So many people are taken by surprised to learn of this compliance requirements. And frequently asked questions include where to arrange health check-ups, or what test items to go to have employees undergo, who pays for the cost and how to treat employees' time when they're outside of the office undergoing their health check-ups.
Description: A large blue box appears to the left of Kamii from the bottom of the screen. The box contains checkboxes followed by the white text "Where to arrange health check-ups?", "What test items?", "Who pays?" and "How to treat employees' time outside the office?" The screen changes to show the MC, who talks to Kamii.
MC: I see. So it's important to find ways to adjust new customs and cultures.
Description: The screen changes to show Kamii, who answers.
Kamii: Yes, absolutely. And also, annual health check-ups are not services provided by Certified Labor and Social Security Attorneys. So obviously, they're provided by physicians and doctors, so businesses have to ask their human resource department or administrative department to coordinate with medical clinics, hospitals and also with employees. And this compliance requirement is often overlooked by businesses that are not accustomed to the working culture in Japan.
Description: The screen switches to show the MC and Kamii, who are talking facing each other, sitting on chairs positioned at angles in front of the camera. On the left side of the screen, a white illustration against a blue background appears, showing a pair of large and small buildings. From the illustration, a double arrow is drawn toward the center of the screen, where a blue box appears with the white text "Corporate Agreement." From the box, another double arrow is drawn to the right of the screen. The right side of the arrow points to a white illustration of a hospital against a blue background.
Kamii: What basically businesses have to do is they need to enter into a corporate agreement with medical clinics or hospitals, and have employees make reservations with these medical clinics and have them undergo necessary health check-ups.
MC: I see.
Description: The screen changes to show the text "Notes on different types of employment" in two lines in the middle of the screen. The screen changes to show the MC and Kamii, who are talking facing each other, sitting on chairs positioned at angles in front of the camera. The screen changes to show the MC, who talks to Kamii. The screen changes to show a white box to the right of the MC with the blue text "What are the caveats of different types of employment?"
MC: My next question is regarding diverse employment conditions. Recently, workstyles are becoming more and more diverse, and employees have different agreements with their companies accordingly. However, if employment conditions are diverse, what are important points to keep in mind?
Description: The screen changes to show Kamii, who answers.
Caption: What are the caveats of different types of employment?
Kamii: Yes, working conditions and social insurance eligibility of directors and part-time employees and subcontractors differ from those of regular employees in various ways. So it's important to keep the differences in mind and making sure what employees are required or eligible to participate in when making decisions to what kind of offerings to go make.
Description: The screen changes to show illustrations against a gray background, which move from bottom to top of the screen. There is the text "Employees" on the right of the screen with an illustration of the upper bodies of three people. On the lower left is a blue box containing an illustration of shaking hands with the text "Contract." To the right of the illustration, right under the text "Employees," is the blue text "Employment contract" against a white background. Under the text "Contract" is a blue box containing the text "Earnings" with an illustration of a hand holding a bag with a dollar sign above. Next to it is a light blue box with the blue text "Wages." Under the text "Earnings" there is a blue box with an illustration of a heart held by hands with the text "Responsibilities." To the right of the illustration is the blue text "Employees are not responsible for the corporation's liability" against a white background. The screen scrolls up to show the illustrations that have been shown so far. An illustration of a person with a medal appears at the top with the text "Directors" underneath. The screen scrolls down. The blue text "Appointment contract (Labor Standards Act does not apply.)" appears against a white background to the right of the text "Contract." To the right of "Earnings" is a light blue box with the blue text "Directors' remuneration." To the right of "Responsibilities" is the blue text "Directors may be responsible for the corporation's liability." When the screen scrolls down to the bottom, the camera zooms out to show the whole diagram covering two white-based columns: "Employees" and "Directors."
Kamii: And in accordance with Japanese Labor Standards Act and Labor Contract Act, regular employees enter into employment contract with the employer. On the other hand, directors enter into appointment contract in accordance with Companies Act and are not governed by the Labor Standards Act. And so directors generally cannot participate in employment insurance and worker's accident compensation insurance. So if they do want coverage for these accidents, they need to on find private insurances. And the same is true for subcontractors. They are also required to register with national Health Insurance and National Pension, which is a system aside from corporate employees.
Description: The screen changes to show the MC and Kamii, who are talking facing each other, sitting on chairs positioned at angles in front of the camera. As another example of a difference between an employee and a director, director may be held accounted for and personally be liable for the company's actions, whereas employees may be liable for damages that might cause the company, but in general, the company will be responsible for any actions of employees. And further employees receive wages as compensation for the work determined by management, but directors receive director remuneration for their services determined by the articles of association or resolutions in the general meeting of shareholders.
Description: The screen changes to show the MC, who talks to Kamii. A white box appears to the right of the MC with the blue text "What are the tax considerations regarding salary and director remuneration?"
MC: So depending on the type of contract, earnings and responsibilities change. I'm thinking we need to take into account wages and director remuneration from a tax perspective as well.
Description: The screen changes to show Kamii, who answers.
Caption: What are the tax considerations regarding salary and director remuneration?
Kamii: We do, that's a very important point. Director remuneration requires tax considerations because as mentioned by JETRO's tax advisor, wages are fully deductible as expenses or costs for corporate tax purposes. However, director remuneration may not be fully deductible, so it's important to consult with a tax professional. The screen changes to show a blue arrow to the left of Kamii, containing an illustration of the upper body of a person at the top, followed by the text "Tax Adviser," and the text "Director remuneration may NOT be deductible" underneath. The "NOT" is written in red.
Description: The screen changes to show the MC, who talks to Kamii. A white box appears to the right of the MC with the blue text "What could potentially be a source of trouble?"
MC: What kind of issues could potentially be a source of trouble?
Description: The screen changes to show Kamii, who answers.
Kamii: It is common for foreign businesses to pay quarterly commissions especially to those and sales functions. For Japan tax purposes these commission's are categorized as bonuses, therefore fall outside the scope of director remuneration, which needs to be fixed in its amount and payment timing.
Description: A blue arrow appears with an illustration of Mt. Fuji and the sun on the left and the text "Quarterly Commissions" on the right. Under the illustration and text, an upside-down triangle appears, pointing to the text "Bonus" and "Director Remuneration" in the order listed. The text "Director Remuneration" is struck through by red lines.
Kamii: And as a result, these quarterly commissions are not deductible expenses for corporate tax purposes. And to avoid such treatments, it may be possible to lump quarterly commissions into one bonus and subjected to advanced reporting to the Tax Office which may allow it to be deductible. However, the drawback is that it may not be happy news for the Director as they might lose out on their incentive for the quarterly commissions.
Description: The screen changes to show the MC, who talks to Kamii.
MC: I see. So it's important to check the details of the different employment contracts in advance.
Description: The screen changes to show Kamii, who replies with a deep nod.
Kamii: Absolutely, and I would recommend consulting tax professionals that are introduced by JETRO.
Description: The screen changes to show the white text "Payments from two locations: Japan and home country" in three lines. The screen changes to show the MC, who talks to Kamii. A white box appears to the right of the MC with the blue text "What are the caveats for payments from two different locations?"
MC: Moving on. Upon establishing a company in Japan and bringing employees from your home country to Japan, there may be cases where wages are paid from two countries. What do we need to be careful of?
Description: The screen changes to show Kamii, who answers.
Caption: What are the caveats for payments from two different locations?
Kamii: We will normally call that split payroll arrangement, where payroll is paid both in Japan and in the home countries. And it's common for international assignees in Japan to have the split payroll arrangements. Split payroll arrangements works well where an employee leaves their dependent family members behind in their home countries or have mortgage payments to make as it is more efficient and effective then arranging frequent international wire transfers, incurring wire transfer fees. Under split payroll arrangement, Japanese income tax is withheld from wages paid in Japan, but it is not withheld from wages paid in the home countries. And as a result, such international assignee would generally be required to file a personal tax return in Japan.
Description: A blue arrow appears to the left of Kamii with the white text "Split Payroll." The screen changes. A white box appears against a gray background. In the center, there is an illustration of a human upper body, painted blue, with the text "Working in Japan" underneath. There is an illustration of a large building with the text "Other countries" to the right of the first illustration. To the left is an illustration of a pair of large and small buildings with the text "Japan" underneath. From the two illustrations, there are arrows extending to the person at the center. Both have an illustration of a bag with a dollar sign at the center, above which there is the text "Wages." These illustrations are being gradually enlarged. A blue straight line is drawn under the illustrations. There is the text "You will need to confirm tax treatments in each country" under the line. The screen changes to show a blue arrow to the left of Kamii with the white text "Income Tax." Under the arrow, another blue arrow appears with the white text "Double taxation."
Kamii: If foreign income tax is withheld from wages paid in the home country, the international assignee may have to go through double taxation. It's important to review whether such foreign income tax is refundable or eligible for foreign tax credit in Japan.
Description: The screen changes to show the text "For companied considering expansion into Japan" in three lines. The screen changes to show the MC, who talks to Kamii.
MC: Thank you for sharing with us such beneficial information. Could you give us a message for those who are thinking of expanding their businesses in Japan?
Description: The screen changes to show Kamii, who talks facing the camera.
Kamii: Sure. When I receive requests for consultation, I make an effort to first try to understand the company's business model. For example, the size of the business, how it generates profit, positions of employees within the company among others, as it helps identify areas to focus consultation on. In recent years, advancement in technology is spurring new business models that are often complex and difficult to understand. However, without sufficient understanding, we may find ourselves in unexpected compliance pitfalls. When entering the Japanese market, I would ask everybody to explain the company's business and hiring plans and seek advice from professionals through JETRO's coordination. It would help us conduct effective consultation and also identify potential preferential treatment that may be to the company's benefit.
Description: The screen changes to show the MC and Kamii, who are talking facing each other, sitting on chairs positioned at angles in front of the camera. The screen changes to show the MC, who talks facing the camera.
MC: Thank you very much Mr. KAMII. We hope you all understood the important points of establishing a company in Japan. In addition to the Human Resources Management video you just saw, there are also videos on taxation and company registration and visas so feel free to check those out too.
Description: The screen changes to show the MC, who talks facing the camera. Two white arrows extend to the MC from the right of the screen. They contain the blue text "Company Registration and Visas" and the text "Taxation in Japan." The screen fades to white, and the text "JETRO's support" appears in the center of the screen. The screen changes to show the MC, who talks facing the camera. A navy-themed world map titled JETRO worldwide offices appears on the right, where a balloon with a number is displayed for each of the relevant countries and regions. From the left: Europe 15, Africa 9, Middle East 5, Russia CIS 3, Asia 27, Japan 51, Oceania 2, North America 8, and Central & South America 7.
MC: JETRO has more than 70 overseas offices to support foreign companies entering the Japanese market and developing their business. If you are a foreign company considering expanding your business to Japan, or establishing a base in Japan, please visit your nearest JETRO office or contact us through the inquiry form provided in the description below. Our experienced staff will be happy to guide you through the process. We wish you success in the Japanese market. See you soon.
Description: The screen fades to white. The logo of JETRO Japan External Trade Organization appears, under which letters appear randomly to form the large blue text "Succeed Together in Japan and Beyond."
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