On this page (7 sections)
Overview and why companies expand from Australia to Japan
- Japan is one of Australia's largest trading partners, with strong demand for Australian food, resources, education and technology.
- The Japan-Australia Economic Partnership Agreement supports trade and investment.
- A one to two hour time difference makes collaboration with Australian teams easy.
- Australians aged 18 to 30 can apply for a working holiday visa in Japan.
For Australian employers, Japan combines clear statutory rules with strong expectations about process. Working conditions must be set out in writing, overtime requires a filed labour agreement, social insurance enrolment is mandatory and dismissal is difficult once employment is established.
Australia and Japan at a glance
| Topic | Australia | Japan |
|---|---|---|
| Employment contracts | A written contract is not legally required but is standard practice. Employers must give every new employee the Fair Work Information Statement, plus the Casual or Fixed Term Contract Information Statement where relevant. A modern award or enterprise agreement usually sets minimum terms. Fixed-term contracts are generally limited to 2 years or 2 consecutive contracts. | Employers must give a written notice of working conditions at hiring, including wages, hours, place of work and the scope of any changes. Many employers also have rules of employment that must be filed with the labour office once they have 10 or more employees. |
| Probation | No statutory probation. In practice the unfair dismissal "minimum employment period" works as one: 6 months, or 12 months for small businesses with fewer than 15 employees. | Probation of 3 to 6 months is common. It does not remove dismissal protection, although employees dismissed in the first 14 days are not entitled to notice. |
| Working hours | Maximum 38 ordinary hours a week plus reasonable additional hours under the National Employment Standards. Awards set overtime rates. Employees have a right to disconnect outside working hours unless refusing is unreasonable. | Statutory limit of 8 hours a day and 40 hours a week. Overtime needs a written labour-management agreement (a "36 agreement") and is capped, generally at 45 hours a month and 360 a year. |
| Minimum wage | National Minimum Wage of $26.44 an hour ($1,004.90 a week) from 1 July 2026. Most employees are covered by a modern award with higher minimum rates for their classification. | Set by prefecture. The national weighted average for FY2025 is ¥1,121 an hour, with each prefecture's new rate taking effect between late 2025 and early 2026. |
| Annual leave | 4 weeks paid annual leave a year for full-time employees (5 weeks for some shift workers), accruing progressively. Untaken leave is paid out on termination. Many awards add a 17.5% leave loading. | 10 days after 6 months of service, rising to 20 days after 6.5 years. Employers must make sure staff entitled to 10 or more days take at least 5 each year. |
| Sick leave | 10 days paid personal/carer's leave a year for full-time employees, plus 2 days unpaid carer's leave and 2 days paid compassionate leave per occasion. All employees can also take 10 days paid family and domestic violence leave a year. | No statutory paid sick leave. Health insurance pays a sickness allowance of about two-thirds of pay from the fourth day off work. |
| Parental leave | Up to 12 months unpaid parental leave after 12 months of service, with the right to request 12 more. The government funds up to 26 weeks of Parental Leave Pay at the national minimum wage from 1 July 2026, paid through Services Australia rather than the employer. | Maternity leave of 6 weeks before and 8 weeks after birth. Childcare leave until the child turns 1 (extendable to 2), with benefits paid by Employment Insurance rather than the employer. |
| Public holidays | National public holidays such as New Year's Day, Australia Day, Good Friday, Easter Monday, Anzac Day, Christmas Day and Boxing Day, plus state and territory holidays. Employees who work on a public holiday are usually paid penalty rates under their award. | 16 national holidays. Employers are not legally required to make them paid days off. |
| Retirement and social security | Superannuation Guarantee of 12% of qualifying earnings, paid by the employer on top of wages. Since 1 July 2026 super must be paid each payday and reach the fund within 7 business days (Payday Super). There is no separate employer social security levy. | Employees' Pension Insurance at 18.3% of standard monthly remuneration, split equally. Health insurance (the rate depends on the prefecture and insurer), employment insurance and workers' accident insurance are also compulsory. |
| Payroll taxes | Employers withhold PAYG income tax from wages. Each state and territory charges payroll tax once total Australian wages pass a threshold, for example 5.45% above $1.2 million in NSW and 4.85% above $1 million in Victoria. Workers' compensation premiums are also payable. | Employers withhold income tax and local resident tax and complete a year-end tax adjustment for employees. |
| Notice periods | Employer notice under the National Employment Standards: 1 week (up to 1 year of service) rising to 4 weeks (over 5 years), plus 1 week if the employee is over 45 with at least 2 years of service. Pay in lieu is allowed. Awards set employee notice. | At least 30 days notice of dismissal or pay in lieu. |
| Dismissal protection | Unfair dismissal protection applies after the minimum employment period to employees covered by an award or agreement, or earning under the high income threshold of $190,100 (from 1 July 2026). General protections against adverse action apply from day one. Small businesses can follow the Small Business Fair Dismissal Code. | A dismissal is void unless it is objectively reasonable and socially appropriate under the Labour Contract Act. In practice dismissal is hard, so negotiated exits are common. |
| Severance | Statutory redundancy pay of 4 weeks (1 to 2 years of service) rising to 16 weeks (9 to 10 years), then 12 weeks at 10 years or more, when long service leave usually takes over. Small businesses with fewer than 15 employees are generally exempt. | No statutory severance. Retirement allowances and negotiated packages are customary. |
| Mandatory benefits | Superannuation, workers' compensation insurance (state-based and compulsory), paid leave under the National Employment Standards and long service leave under state and territory laws, usually after 7 to 10 years of service. | Social and labour insurance enrolment and annual health checks are mandatory. Commuting allowances are customary rather than required. |
| IP and restraint clauses | Post-employment restraints are only enforceable if reasonable to protect a legitimate business interest. Employers generally own IP that employees create in the course of employment. The federal government has proposed banning non-compete clauses for employees under the high income threshold from 2027; this was not law at the last review. | Non-competes are enforced only if reasonable in scope, usually with compensation. Employee inventions are covered by the Patent Act, which requires reasonable remuneration. |
| Visas and right to work | Every worker needs Australian work rights, which employers can check through VEVO. Sponsored skilled hires generally use the Skills in Demand (subclass 482) visa, which needs an approved sponsor. Some EORs can sponsor, many cannot. | Foreign professionals usually need a status of residence such as Engineer/Specialist in Humanities/International Services, sponsored by the employer. Australians aged 18 to 30 can apply for a working holiday visa. |
The differences that matter most
Overtime needs a 36 agreement
Unlike Australia, where reasonable additional hours are allowed under the NES, Japanese employers can't require overtime without a filed labour-management agreement. Overtime is capped and paid at a premium of at least 25%, rising to 50% for hours over 60 in a month.
Dismissal is a last resort
Japanese courts apply the doctrine of abuse of the right to dismiss. Employers are expected to try training, reassignment and warnings first. Plan exits carefully and consider negotiated separation agreements.
Rules of employment
Employers with 10 or more employees must prepare rules of employment, consult an employee representative and file them with the labour standards office. These rules often set out discipline, allowances and leave.
Social insurance
Employer contributions to pension, health and employment insurance are substantial, on top of salary. Health insurance rates vary by prefecture and insurer.
Leave and holidays
Annual leave starts at 10 days after 6 months, compared with Australia's 4 weeks from day one, and Japan has no statutory paid sick leave. Japan has 16 national holidays, which employers are not required to make paid days off.
Common compliance traps
- No 36 agreement before overtime is worked.
- Unpaid overtime for staff who are not truly managerial.
- Dismissals without a documented process, which courts often void.
- Missing the 5-day annual leave rule.
- Social insurance enrolment errors for part-time or short-term staff.
How an EOR works in Japan
A Japanese EOR employs your hire through its local entity, issues a written notice of working conditions, enrols the employee in social and labour insurance, runs payroll with tax withholding and the year-end adjustment and maintains overtime agreements. You manage the work. Because Japanese corporate set-up is time-consuming, many Australian companies start with an EOR before forming a kabushiki kaisha or godo kaisha.
Frequently asked questions
What is a 36 agreement?
Under Article 36 of the Labour Standards Act, employers need a written agreement with a majority union or employee representative, filed with the labour standards office, before requiring overtime or holiday work. Overtime is capped, generally at 45 hours a month and 360 hours a year.
Can I dismiss an employee in Japan for poor performance?
Only if the dismissal is objectively reasonable and socially appropriate. Courts expect extensive performance management, training and consideration of reassignment before dismissal. Negotiated departures are common.
What social insurance do Japanese employers pay?
Employers enrol staff in health insurance, employees' pension insurance, employment insurance and workers' accident insurance. Pension insurance is 18.3% of standard monthly remuneration, split equally between employer and employee.
How much annual leave do employees get in Japan?
10 days after 6 months of service, rising to 20 days after 6.5 years. Employers must make sure employees entitled to 10 or more days take at least 5 days each year.
Is the minimum wage the same across Japan?
No. Each prefecture sets its own minimum wage. The national weighted average for FY2025 is ¥1,121 an hour, with Tokyo among the highest.
Sources
Last reviewed:
Figures on this page were checked against these official sources on 8 October 2026. Rates and thresholds change, often on 1 January, 1 April or 1 July, so confirm current figures before relying on them.
- Ministry of Health, Labour and Welfare: Labour standards for foreign workers
- Ministry of Health, Labour and Welfare: Minimum wages
- Japanese Law Translation database
- Japan Pension Service
- Immigration Services Agency of Japan
- Fair Work Ombudsman: National Employment Standards
- Fair Work Ombudsman: Annual Wage Review 2026
- Fair Work Ombudsman: Fair Work Information Statement
- Fair Work Ombudsman: Dismissal and notice
- Fair Work Ombudsman: Redundancy pay
- Fair Work Ombudsman: Unfair dismissal
- Fair Work Ombudsman: Right to disconnect
- ATO: Payday Super
- Services Australia: Parental Leave Pay
- Revenue NSW: Payroll tax
- State Revenue Office Victoria: Payroll tax
- Department of Home Affairs: Skills in Demand visa (subclass 482)
Related guides
New to the model? Start with what an Employer of Record is, then compareEOR costs and pricing models.