Employee Benefits in Japan: What Global Employers Need to Know in 2025

Expanding into Japan is an exciting opportunity, but it brings new responsibilities and challenges, including managing employee benefits for your future Japanese employees. 

Japanese employment benefits are heavily influenced by cultural expectations and societal norms, with Japanese companies striving to foster employee loyalty and valuing long-term employment. As a result, benefits packages in Japan stand out even among countries known for generous benefits coverage, like Sweden and Denmark. 

In this guide, I'll cover the basics for managing employee benefits in Japan, including eligibility, legal requirements, and standout perks.

I’ll also point you in the right direction for the next steps, highlighting the best Employer of Record (EOR) services for managing benefits in Japan, in case you need some additional help getting this process started.

Who Qualifies for Statutory Benefits in Japan?

In Japan, statutory employee benefits are primarily available to workers with standard employment contracts, including full-time, part-time, and fixed-term roles, provided they meet specific conditions. 

These employees are enrolled in Japan’s social security system, which covers health insurance, employee pension insurance, unemployment insurance, and workers’ accident compensation insurance. 

Generally, enrollment in social insurance is mandatory if an employee works more than 20 hours per week, earns at least 88,000 yen per month (approximately 1.06 million yen per year), and is expected to be employed for more than two months. 

In such cases, benefits typically begin on the first day of employment. These statutory benefits ensure support for various life events such as illness, injury, unemployment, and retirement, thereby promoting stability and financial security.

Who Is Excluded?

• Freelancers and Contractors: These individuals are generally considered self-employed and are not eligible for employee-based statutory benefits. However, they are responsible for enrolling themselves in the National Health Insurance and National Pension systems.
• Low-Income Workers: Workers earning less than 88,000 yen per month or working fewer than 20 hours per week are typically excluded from coverage under the Employees’ Health and Pension Insurance programs.
• Interns and Agency Temps: Eligibility for these categories depends on the specifics of the contract.
  • Interns may be excluded if their status resembles that of students or short-term trainees. 
  • Agency-dispatched workers are generally eligible if their employment meets the same requirements as other contract employees.

To explore detailed information about statutory benefit eligibility, you can refer to Japan's Social Insurance Authority or the Ministry of Health, Labour and Welfare.

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Statutory Employee Benefits in Japan

Like in any country, understanding and complying with statutory benefit requirements in Japan is crucial for employers to maintain legal compliance and uphold their reputational standing. Failure to provide legally mandated benefits can lead to legal penalties, financial losses, and damage to a company's reputation. 

Below is a summary of the major statutory benefits required in Japan:

National Health Insurance (Kenko Hoken): 

• Japan’s national healthcare insurance covers 70% of medical expenses for non-occupational illnesses and injuries, with contributions based on income.
• It’s mandatory for employees who work more than 20 hours per week. 
• Premiums are shared between employer and employee and vary by prefecture and health insurance union. 

Employees’ Pension Insurance (Kosei Nenkin Hoken): 

• Provides old-age pensions starting at age 65.
• Eligibility begins after 10 years of pension contributions. 
• Premiums are equally split between employer and employee. 

Employment Insurance (Koyo Hoken): 

• Sometimes called unemployment insurance, this benefit offers financial support to individuals during periods of unemployment, including parental leave, and certain training programs. 
• Most employees are covered through a contribution system involving both employers and employees.
• This insurance applies to employees who work at least 20 hours per week and are expected to be employed for over 31 days.

Workers’ Compensation Insurance (Rodo Saigai Hoshou Hoken): 

• Fully funded by the employer, this insurance covers medical care, medical expenses, and income support for employees experiencing work-related injuries and illnesses. 
• It is mandatory for all businesses, regardless of size, though benefits are administered to the employee by the government.

Long-Term Care Insurance (Kaigo Hoken): 

• Required for all residents aged 40 and older, this public insurance program supports services for those needing nursing care.
• It’s funded by contributions from health insurance premiums and public funds.

Paid Leave (Yūkyū Kyūka): 

• Employees who have worked for at least 6 months and attended work at least 80% of the time are entitled to a minimum of 10 paid vacation days per year. 
• Employers are legally required to ensure at least 5 days are used annually.

Maternity Leave (Sango Kyūka): 

• Expecting mothers are entitled to 6 weeks of prenatal and 8 weeks of postnatal leave.
• Benefits are paid through health insurance if the employee is enrolled in the system, typically covering two-thirds of base salary.
• An additional salary allowance may be offered based on company agreements.

Childcare Leave (Ikuji Kyūka): 

• Available to both parents until the child is 1 year old, this benefit is also extendable to 2 years under certain conditions (e.g., unavailability of nursery care). 
• This benefit is administered and paid by Japan’s Employment Insurance program.

Paternity Leave:

• Fathers are entitled to the same childcare leave as mothers, following recent updates promoting gender equality in parenting roles. 
• Since 2002, the “Postnatal Paternity Childcare Leave” system now allows up to 4 weeks of leave within 8 weeks of childbirth.
• Employees may also be eligible for additional paternity leave depending on their company agreement.

Complying with these statutory benefits is a key part of adhering to the regulations set by Japan’s Ministry of Health, Labour and Welfare (MHLW), which safeguards employee rights and promotes a fair work environment. 

For more detailed information, you can visit the Ministry of Health, Labour and Welfare website.

Leave Entitlements in Japan

As noted above, leave entitlements in Japan are also protected by law. These national leave policies are designed to balance work and life, with specific regulations governing each type of leave.

Here’s a summary of the different types of leaves Japan offers to support a range of employees’ needs: 

• Annual Paid Vacation (Nenji Yukyu Kyuka): Employees who have worked continuously for 6 months are entitled to a minimum of 10 days of paid leave.
  • The annual leave entitlement increases with length of service, up to a maximum of 20 days per year after 6.5 years of continuous employment.
  • Employers are legally required to ensure that employees take at least 5 of their entitled paid leave days annually.
  • The annual leave benefit is intended to promote rest and rejuvenation and is administered by the employer.
    
• Public Holidays (Shukujitsu): Japan has 16 national public holidays per year.
  • While employers are not legally required to provide these days off, it is standard practice in most workplaces to treat them as paid holidays. 
  • The list of holidays may vary slightly from year to year depending on how dates fall in the calendar.
    
• Maternity Leave (Sango Kyuka): Pregnant employees are entitled to 6 weeks of leave before childbirth and 8 weeks after.
  • During maternity leave, employers are not required to pay wages, but eligible employees receive maternity allowance payments from their health insurance provider.
  • Maternity leave payments typically amount to two-thirds of the employee’s salary.
    
• Paternity Leave: Since October 2022, Japan allows fathers to take up to 4 weeks of paternity leave within 8 weeks after childbirth, in addition to standard parental leave.
  • The leave can be taken in up to two installments, and is supported by employment insurance if eligibility requirements are met.
  • Some companies also offer extended paid leave as an added benefit for new fathers.
    
• Parental Leave (Ikuji Kyuka): Both mothers and fathers can take childcare leave until the child turns 1 year old.
  • This can be extended to 1.5 or even 2 years if nursery care is unavailable or other specific conditions are met. 
  • During this period, income support is provided through Employment Insurance, typically covering about 67% of wages for the first 6 months and 50% thereafter.

Japan’s approach to paid vacation is evolving, with government initiatives aimed at encouraging employees to take their entitled time off to avoid burnout. 

However, cultural factors such as loyalty to the company or fear of burdening coworkers often lead to underutilization of annual leave. Employers play a critical role in encouraging work-life balance by promoting and facilitating paid time off usage.

What About Sick Leave in Japan?

Japan does not have a statutory sick leave policy under national labor law. 

Unlike in many Western countries, there is no legal requirement for employers to provide paid sick leave. However, companies often address this gap in one of the following ways:

• Company-Specific Sick Leave Policies: Many employers voluntarily include 5 to 10 days of paid or unpaid sick leave per year in their employment contracts. This is a common practice, particularly in medium to large enterprises.
• Using Annual Paid Leave: In the absence of a dedicated sick leave policy, employees are generally expected to use their annual paid vacation days when they fall ill.
• Short-Term Disability: For longer illnesses or injuries, employees may qualify for injury and sickness allowance (Shobyo Teatekin) from their health insurance provider. This allowance becomes available after 3 consecutive missed workdays and pays approximately two-thirds of standard wages for up to 18 months.

While Japan offers generous parental leave entitlements, its lack of statutory sick leave is a notable gap compared to many Western countries where paid sick days are a legal requirement. This creates a unique opportunity for global employers operating in Japan to stand out in a competitive talent market.

Offer Sick Leave to Stand Out in the Market

By voluntarily offering a clearly defined and generous sick leave policy—whether paid or partially paid—employers can demonstrate a strong commitment to employee well-being and modern workplace standards.

Voluntarily offering sick leave not only improves trust and loyalty among local employees but also serves as a valuable recruitment differentiator, particularly for international talent or younger professionals who increasingly prioritize health and work-life balance.

In a culture where workers often hesitate to take time off due to fear of burdening others, formalizing sick leave sends a powerful message: your health comes first. For forward-thinking companies, it's a simple yet strategic investment in both people and performance.

Common and Additional Employee Benefits in Japan

While not legally required, many Japanese employers offer a range of supplementary benefits to enhance employee satisfaction, loyalty, and retention. 

These voluntary perks are a powerful tool in attracting and keeping top talent, especially in competitive industries. In Japan's employment culture, these benefits are often considered standard practice, even though they’re not mandated by law.

Here’s a summary of the most common non-statutory benefits that are widely adopted or culturally expected by Japanese employees:

• Private Pension Plans (Corporate Pension): Offered as a supplement to the national pension, this benefit provides additional retirement security. It’s especially common in white-collar and large enterprise settings.
• Supplemental Health Insurance: While national health insurance covers 70% of medical costs, many employers provide additional group health insurance to either top up the standard medical insurance coverage or cover additional expenses such as hospitalization upgrades, dental services, or specialized treatments.
• Company Cars: These are sometimes provided for business use, enhancing convenience and mobility for employees.
• Commuting Allowance: Many companies offer commuter transportation allowances, often fully reimbursing public transit costs.

Commuting Allowances are Culturally Expected in Japan

“Japanese companies are expected to cover commuting costs. And I mean ALL commuting costs. When we first started hiring there, I didn’t realize this wasn’t negotiable. One of our best candidates turned down our offer because we initially only offered partial commuting coverage.”
~Andrew Lokenauth, author of TheFinanceNewsletter

• Technology or Computer Allowances: With the rise of telework, some companies now offer stipends to help cover costs related to remote work setups, such as home internet or computer equipment.
  
• Housing Allowances (Jūtaku Teate): Especially common for roles involving relocation, housing allowances help cover rent or subsidize company-leased apartments. They are often expected in industries like finance, consulting, and manufacturing, particularly in high-cost urban areas like Tokyo. Offering housing support can be a major draw for domestic and foreign talent alike, easing the burden of Japan’s often expensive housing market.

Housing Allowances are Culturally Expected in Japan

“Another surprising one is the prevalence of housing allowances. About 30% of our Japanese employees receive some form of housing support.” ~ Andrew Lokenauth, Author of TheFinanceNewsletter

• Performance Bonus: Bonuses are a core component of Japanese compensation packages. It’s typical to see semi-annual bonuses in June and December, often calculated as a multiple of monthly salary. These are typically tied to company and individual performance.
  
• Year-End Bonus (Bosei): This is often synonymous with the December performance bonus and is not a Western-style “Christmas bonus.” Instead, it’s based on company customs and employee performance, and is often negotiated during collective bargaining.

Incorporate Cultural Expectations into your Benefits Strategy

“When counseling companies, I suggest a kind of mixed strategy. Keep end-of-year bonuses that are tied to seasonality but make them a part of a global compensation design by assigning them proportional to performance metrics. That way, you can be respectful of local customs but still have a cohesive worldwide organization. It’s making a benefits package that feels culturally respectful but still cutting edge and competitive on the world stage.” ~ Ben Johnson, HR Leader and CEO of Big Ben

• Seasonal Bonuses: Unlike in some other countries, a "13th month salary" is not a separate or mandatory benefit in Japan. Instead, semi-annual bonuses (often paid in June and December) serve a similar function, and should not be confused with an automatic extra month’s pay.

Poorly Constructed Benefits Can Lead to High Employee Turnover

“Japanese employees literally plan their lives around these twice-yearly bonuses (usually in June & December). …The interesting thing is, while Western companies might see these as ‘optional,’ they’re basically mandatory in Japan. I learned this the hard way when we tried to move away from them. Our turnover rate jumped from 5% to nearly 25% in just a few months.” ~ Andrew Lokenauth, Author of TheFinanceNewsletter

These additional benefits can significantly improve employee satisfaction, engagement, and retention. In a highly structured work culture, even small gestures can contribute meaningfully to employee well-being and work-life balance. 

In Japan, offering a thoughtful benefits package is not just a perk—it’s an important competitive advantage.

Benefits That Attract Top Talent in Japan

While not mandatory or universally expected, forward-thinking employers in Japan are increasingly offering modern, lifestyle-oriented benefits to stay competitive in a tight labor market. 

These progressive perks reflect a shift toward more flexible, inclusive, and employee-centric workplace cultures—especially among global companies and large domestic firms striving to attract high-caliber talent.

Here are several optional benefits that can help your company stand out in Japan:

Wellness Programs: 

Although not widespread, wellness initiatives are gaining traction. These can include subsidized gym memberships, mental health counseling, and access to wellness apps or services. 

Some companies also host health seminars or organize wellness retreats to promote overall employee well-being. 

Mental health support is especially important as awareness grows around work-related stress (karoshi prevention).

Flexible Work Arrangements:

Post-pandemic, telework and flextime have become more accepted in Japan, particularly in large firms and foreign-invested companies. 

Offering remote work, hybrid models, and flexible start times can greatly enhance employee satisfaction and is especially appealing to younger workers and working parents.

Professional Development Opportunities:

Investing in employee growth through online courses, certifications, language training, or job rotation programs is highly valued, particularly in Japan’s skills-oriented career environment. 

Many companies also offer education subsidies or learning budgets.

Innovative Workspaces: 

While traditional office layouts remain common, some employers—particularly in the tech, media, and startup sectors—are designing smart workplaces with shared lounges, wellness areas, nap rooms, and brainstorming spaces to encourage creativity and collaboration.

Sabbatical Leave: 

Sabbaticals are not standard practice in Japan, but a few progressive companies offer them as part of retention strategies for long-tenured staff or in recognition of milestone achievements. 

When available, these are often unpaid or partially paid, and reflect a cultural shift toward personal development and burnout prevention.

Offer Sabbatical Leave to Truly Stand Out

Due to Japan’s traditionally low rate of extended leave-taking, offering sabbaticals can truly differentiate an employer from competitors, making it easier to attract talent.

Meal Subsidies and Cafeteria Plans: 

Many Japanese companies offer subsidized meals, either through in-house cafeterias (shain shokudō) or monthly meal allowances. These perks not only ease daily living costs but also foster a stronger workplace community. 

Some companies even offer tea, coffee, or snack subsidies, reflecting cultural nuances around hospitality and wellness. 

For remote workers, meal vouchers or lunch delivery stipends are sometimes provided to extend this benefit beyond the office.

Pet-friendly Policies: 

While very rare in traditional Japanese office settings, pet-friendly policies are occasionally found in smaller startups or foreign-led companies with relaxed cultures. 

While pet-friendly policies are not a hiring norm, they may resonate with niche demographics and contribute to a fun, low-stress atmosphere.

A Note of Caution

If implemented, pet-friendly policies require careful workplace planning and legal considerations around health, safety, and allergies.

Vacation Bonus: 

While not common or widely adopted as a standard practice in Japan, some Japanese companies offer additional pay during vacation periods, encouraging employees to take time off. 

If offered, this benefit can be a powerful incentive to encourage time off and distinguish your benefits package.

These modern benefits are becoming more relevant as Japanese workplaces adapt to global talent expectations.

Don't Fight the Local Bonus Culture - Work With It!

“From my experience managing a hybrid system, the key is maintaining core global benefits while adding Japan-specific elements. We kept our global health insurance & PTO policies but added a modified bonus structure for Japan. Instead of fighting the bonus culture, we incorporated it into our total compensation calculations.” ~ Andrew Lokenauth, Author of TheFinanceNewsletter

Many top-performing employers in Japan are beginning to integrate progressive perks that support holistic employee well-being, flexibility, and professional growth—a trend especially evident in industries facing labor shortages or talent wars.

How to Set Up and Manage Employee Benefits in Japan

Setting up and managing employee benefits in Japan requires careful planning, cultural awareness, and strict adherence to local employment laws. 

Here’s a step-by-step guide to establishing and administering an effective benefits program that complies with Japanese regulations and meets workforce expectations:

1. Partner with Local Benefits Providers: Collaborate with local insurance companies and financial institutions to offer competitive benefits tailored to the Japanese market. This may include supplemental health insurance, group life insurance, corporate pension plans, and wellness services. Working with providers familiar with Japanese labor practices ensures legal and cultural alignment.
2. Ensure Compliance with MHLW Regulations: Familiarize yourself with the Ministry of Health, Labour and Welfare's guidelines to ensure that your benefits package meets all legal requirements. Labor laws in Japan can be complex, so regular consultation with legal or HR professionals is recommended.
3. Use an EOR Service in Japan: For foreign companies without a legal entity in Japan, an Employer of Record (EOR) service can serve as the legal employer for your local hires, managing payroll, taxes, and statutory benefits on your behalf.

Author's Tip

Working with an EOR ensures full compliance with Japanese employment laws and reduces the administrative burden of managing local HR operations.

4. Communicate Benefits to Employees: Clearly explain the benefits package to employees (both in Japanese and English), highlighting the value and advantages of each offering to ensure understanding and appreciation.

5. Monitor and Update Benefits Offerings: Regularly review and adjust the benefits package based on employee feedback and market trends to maintain competitiveness and employee satisfaction. You can solicit feedback through employee surveys or exit interviews, and benchmark your benefit offerings against industry trends to ensure relevance.

Author's Tip

Updating offerings—especially in areas like remote work, wellness, or child care—can help retain talent and reflect evolving workforce needs.

Partnering with a local HR consultancy or EOR service can greatly simplify benefit administration in Japan. These partners bring deep knowledge of labor law, taxation, and cultural norms, allowing foreign employers to focus on growth while maintaining full compliance.

By following these steps, your company can build a benefits program that both supports your workforce and enhances your reputation as an employer of choice in the Japanese market.

Stay Compliant with Local Employment Laws

Non-compliance with Japan’s employment laws can lead to serious legal, financial, and operational consequences for your business. Employers must ensure that hiring, payroll, benefits, and worker classifications are handled in accordance with Japanese labor regulations to avoid violations that could impact business continuity and reputation.

Here are some key compliance risks to be aware of:

• Employee Misclassification: Misclassifying employees as contractors can result in audits, forced back payments, and legal disputes.
• Underfunding Social Security Contributions: Failing to contribute adequately to social insurance programs can result in hefty fines and damage your company's reputation.
• Corporate Fines and Penalties: Non-compliance with labor laws can attract significant fines and legal action. For example, refusing to pay overtime may be punishable by a fine of up to ¥300,000 per incident.
• Reputational Damage: In Japan’s relationship-driven business culture, compliance violations can severely damage trust among employees, partners, and regulators making it more difficult to attract talent, secure business partnerships, or expand locally.
• Operational Disruptions: Labor disputes or government audits can stall business operations, impose unexpected costs, and require urgent legal intervention. 

By staying compliant, you’ll protect your company from these risks, ensuring smooth, uninterrupted operations and maintaining a positive reputation in the Japanese market.

Get Support Setting Up Benefits in Japan

Understanding and managing employee benefits in Japan requires careful alignment with both legal obligations and cultural expectations. 

From providing statutory entitlements like health insurance and pension contributions, to offering additional perks such as housing allowances or flexible work options, your benefits strategy plays a critical role in attracting and retaining top talent.

Navigating these challenges, especially if you're hiring remotely or don't yet have a local entity, can be complex. That’s why many international companies choose to partner with an Employer of Record (EOR) in Japan. 

An EOR takes on the legal responsibility of employing workers on your behalf, handling payroll, taxes, benefits enrollment, and compliance with local labor laws, including Japanese work visas.

To save you time, here's a list of EOR providers in Japan that can help you take the next steps:

1. 1. Deel — Best EOR for a streamlined contract management process
2. 2. RemoFirst — Best for budget-conscious remote team expansion
3. 3. Omnipresent — Best for labor law compliance
4. 4. Remote — Best for competitive and cost-effective benefits packages
5. 5. Atlas HXM — Best for direct EOR services
6. 6. Velocity Global — Best for navigating complex regulatory landscapes
7. 7. Globalization Partners — Best for an AI-driven global employment platform
8. 8. Horizons — Best for a flexible EOR contract with no termination fee
9. 9. Mercans — Best for an advanced EOR management platform
10. 10. Links International — Best EOR for accessing Asian talent quickly

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