Employment Contracts in Japan

1. Minimum Requirements

An employment contract may be made orally or in writing, provided that the employer notifies the following terms and conditions of employment in writing to the employee when an employment agreement is reached:

  • Whether it is a fixed term or open-ended contract
  • Whether there will, or may be, a renewal (for fixed term employment) and if yes the criteria for determining renewal
  • Place of work, and description of work
  • Commencement and finish time of work hours, whether there will be work beyond prescribed work hours (i.e. overtime/ holiday work), break period, days off, holiday, and if employees are divided into two or more groups (in different timeframes) rules regarding switching time frames
  • Method of determining the amount, calculation, payment, cutoff date of calculation of salary (excluding retirement allowance)
  • causes for retirement (including causes for dismissal).

The law stipulates that rules concerning the following matters, if any, must be indicated (method not necessarily in writing) if applicable, also when employment agreement is reached:

  • Scope of eligible employees, method of determining the amount, calculation, method of payment and timing of retirement pay
  • Special salary (excluding retirement pay), bonus
  • Safety and health
  • Vocational training
  • Compensation for accidents/ sickness or injury not caused by work
  • Awards and disciplinary measures
  • Leave

2. Fixed-term/Open-ended Contracts

The employer and employee are free to execute a fixed term contract, which does not need to be renewed unless the parties agree.

However, when fixed term employment contracts, which started after 1 April 2013, are renewed to reach a period exceeding 5 years, the employee will acquire a right to request and change the relationship to open-end. There have already been two separate legislative acts with exceptions to this maximum time period.

There is no minimum term for fixed term employment.

3. Trial Period

A probationary period may be applied at the beginning of an employment relationship – there is no statutory rule on the length, although it is viewed as void if it is too long or otherwise places the employee in an overly unstable situation. A typical period is 6 months.

4. Notice Period

As a general principle, the employer must give the particular employee one of the following:

  • at least 30 calendar days’ prior notice,
  • payment in lieu of such notice equivalent to the particular employee’s average wage for 30 days, which should be paid when notifying the employee of the dismissal;
  • a combination of notice and payment where the employer shall pay for the number of days of notification short of 30 (e.g., if the employer gives 14 days’ prior notice, it must pay an amount equivalent to 16 days’ worth of the average wage of the particular employee).
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