Section 4. Human Resource Management

4.4 Wages

4.4.1 Principles of wage payment

Employers must pay wages in legal tender, directly to the employee, not less than once per month, and on a specified date. However, employers are allowed to remit wages into a bank account in said employee’s name specified by the employee where the employee agrees to that method of payment, and may also deduct social insurance premiums, taxes and similar expenses from wages.

4.4.2 Guarantee of minimum wage

The minimum wage is determined according to region and industry. Where an employee is subject to two different minimums, the employee is entitled to the higher of the two minimum wages. The employer must pay the employee a wage that is not less than the minimum wage. The minimum wages in main prefectures are as follows (effective from September 30, 2020).

Prefectures Tokyo Kanagawa Osaka Aichi Hyogo Chiba Hokkaido Miyagi Hiroshima Fukuoka
Minimum hourly wage (yen) 1,013 1,012 964 927 900 925 861 825 871 842

4.4.3 Wage system

It is typical for Japanese companies to pay wages on a monthly basis, and to pay employees summer and winter bonuses. One characteristic of Japanese wages is the make-up: monthly wages usually include a basic wage and a range of allowances, which may include accommodation, family and transportation allowances. Another characteristic is that the amount paid in bonuses makes up a relatively high proportion of total wages paid to employees*1. 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. This system also allows labor costs to be immediately reduced in the event of a recession, for example. Although more businesses are adopting a yearly wage system, there are often few benefits for employers in practice under Japanese labor law*2. Further information is available through the Basic Survey on Wage Structure statistics collated regularly and provided by the Ministry of Health, Labor & Welfare in both Japanese and English.

  1. *1

    According to Japan Business Federation (“Keidanren”) statistics, the average bonus paid by private-sector companies in FY2019 was 4.9 months' worth of monthly base pay (for non-managerial positions in all industries).

  2. *2

    Whether or not a yearly wage system is introduced or extra wages are paid for overtime work is irrelevant. If a company in Japan introduces a yearly wage system, it almost always only covers management-level employees.

4.4.4 Severance pay system

Almost all enterprises in Japan have some form of severance pay system. Normally when a worker leaves an enterprise, his/her employer will make a one-off payment calculated according to factors including length of service and reason for leaving the enterprise. 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, an enterprise that contributes to a severance pay reserve held by a government, financial, or similar institution may recognize these contributions as expenses for accounting purposes.

Section4: Table of Contents


Section4: Documents businesses are required to submit to authorities

Section Documents Where documents are listed within the URL Reference The competent
authorities's URL
4-3 Notice of EmploymentExternal site: a new window will open See PDF Ministry of Health,
Labour and WelfareExternal site: a new window will open
4-3 Employment Agreement ReferencePDF File(227KB)
4-5 Notification of Agreement on Overtime work Working on Holidays Ministry of Health,
Labour and WelfareExternal site: a new window will open
4-6 Rules of Employment ReferencePDF File(1.9MB) Ministry of Health,
Labour and WelfareExternal site: a new window will open
4-9 Notification of Acquisition of Employment Insurance Qualification ReferencePDF File(1.1MB) Ministry of Health,
Labour and WelfareExternal site: a new window will open
4-9 Notification of the Acquisition of Health insurance Qualification Employees' Pension Insurance Qualification ReferencePDF File(245KB) Japan Pension ServicesExternal site: a new window will open
4-9 Labor insurance Estimated insurance premiums / Increased estimated insurance premiums / Final insurance premiums Declaration ReferencePDF File(919KB) Ministry of Health,
Labour and WelfareExternal site: a new window will open
4-9 Basic amount for calculation of monthly remuneration of person insured Health insurance Employees' pension insurance ReferencePDF File(216KB) Japan Pension ServicesExternal site: a new window will open
4-9 Notification of Dependent Under Health Insurance (Change) ReferencePDF File(731KB) Japan Pension ServicesExternal site: a new window will open
4-9 Notification of the Establishment of a Labor Insurance Relationship ReferencePDF File(1.1MB) Ministry of Health,
Labour and WelfareExternal site: a new window will open
4-9 Notice of establishment of the business place to which employment insurance is applied ReferencePDF File(520KB) Ministry of Health,
Labour and WelfareExternal site: a new window will open
4-9 Notice of New Application Health insurance Welfare pension insurance ReferencePDF File(263KB) Japan Pension ServicesExternal site: a new window will open
4-9 Declaration of Tax Exemption for Salaried Employees (Change)External site: a new window will open See the format National Tax AgencyExternal site: a new window will open
4-10 Income Tax Withholding Certificate ReferencePDF File(309KB) National Tax AgencyExternal site: a new window will open

Materials listed as ‘Reference’ contain samples of documents regarding registration, visa, taxation, personnel and labor matters that are necessary when a foreign company establishes a corporation or other entity in Japan. These documents are not published by competent authorities and therefore are not official. For those who are going through the official procedures, please obtain the latest official documents from the competent authorities and related bodies or consult a person who specializes in advising on such information and procedures.

The information contained in this documents should be used at the reader’s independent discretion. While JETRO makes every effort to ensure the accuracy of the information it provides, no responsibility is accepted by JETRO for any loss or damage incurred as a result of actions based on the information provided in these documents or provided by the external links listed on these pages.

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