# Payroll in Japan: employer costs, taxes and compliance

> Machine-readable page from Payroll Overview (https://payrolloverview.com/), the independent index of global payroll providers.
> Canonical page: https://payrolloverview.com/countries/japan/
> Methodology: every figure carries a source and a date in our database; ratings are averages of third-party platforms (https://payrolloverview.com/methodology/).
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> Data updated: February 2026
> Every figure below carries its statutory source and year.

Running payroll in Japan means handling a monthly cycle that touches several moving parts at once. Each pay run requires you to calculate gross salary, withhold income tax and social insurance from the employee's side, add your own employer contributions on top, and file the relevant paperwork, all in Japanese. It sounds manageable until you realize those contribution rates shift periodically and the filings follow their own rhythm.
This guide walks through what an employee actually costs you in Japan, how the pay cycle works in practice, what the leave and termination rules mean for your payroll team, and when it makes sense to hand the whole thing to a specialist. The data tables on this page carry the exact figures; the text here gives you the context to read them sensibly.

## Employer costs & taxes

| Item | Value | Source |
|---|---|---|
| Employer social security (on top of gross salary) | 15.7% | OECD (2025) |
| Employee social security (withheld from pay) | 14.7% | OECD (2025) |
| Total tax wedge (taxes as share of labor cost) | 33.1% | OECD (2025) |
| Corporate tax rate | 21.4% | OECD (2025) |

## Pay & payroll operations

| Item | Value | Source |
|---|---|---|
| 13th-month salary | customary | ILO EPLex (2026) |
| Minimum wage (per month) | ¥182,726 | ILOSTAT (2024) |
| Average wage (per year) | 49,446 | OECD (2024) |
| Statutory work week | 40 hours/week | Statutory working time (national labour law) (2024) |

## Leave & time off

| Item | Value | Source |
|---|---|---|
| Paid annual leave | 10 days | National government (2026) |
| Public holidays | 16 days | National government (2026) |
| Maternity leave | 14 weeks | OECD Family Database (2024) |
| Paternity leave | 56.1 weeks | World Bank Women, Business and the Law (2026) |
| Parental leave | 44 weeks | OECD Family Database (2024) |

## Termination

| Item | Value | Source |
|---|---|---|
| Notice period | 4.3 weeks | World Bank Employing Workers / B-READY (2019) |
| Severance pay (at 1 year tenure) | 0 weeks | World Bank Employing Workers / B-READY (2019) |
| Employment protection (OECD EPL, scale 0-6) | 2.1 | OECD (2019) |

## Labor market context

| Item | Value | Source |
|---|---|---|
| Retirement age | 65 | OECD Pensions at a Glance (2024) |
| Unemployment rate | 2.5% | OECD (2025) |
| GDP per capita | $32,487 | World Bank Open Data (2024) |
| Union density | 16.2% | OECD/AIAS ICTWSS (2024) |
| Collective bargaining coverage | 15.2% | OECD/AIAS ICTWSS (2023) |

## Employer contribution breakdown

| Contribution | Rate |
|---|---|
| Pension & disability | 9.15% |
| Health & long-term care | 5% |
| Unemployment insurance | 0.95% |
| Work injury insurance | 0.25% |

Total: about 15.35% of gross salary, paid by the employer on top of pay.

## Worked example: total employer cost

| Line | Annual |
|---|---|
| Gross annual salary | 49,000 |
| Employer contributions (about 16%) | + 7,673 |
| Total employer cost | 56,673 |

Rounded from the average wage, before benefits, allowances or provider fees.

The gap between what you agree to pay someone and what they actually cost you is real and worth planning for. In Japan, employer social security contributions sit at roughly fifteen percent on top of gross salary, so a mid-range hire costs noticeably more than their headline number suggests. See the table below for the exact rates broken down by contribution type.
The total tax wedge, which combines employer contributions, employee contributions, and income tax as a share of total labor cost, comes in just above a third. In plain terms, for every hundred yen of labor cost you carry, only about two-thirds lands in the employee's pocket after all deductions. That is worth factoring in when budgeting headcount, especially across a larger team.

Payroll in Japan runs monthly, and most employers pay once a month on a fixed date. There is no statutory thirteenth-month payment, but a twice-yearly bonus, known as a summer and winter bonus, is widely customary across Japanese employers, so candidates will often expect it even if it is not written into law. The monthly minimum wage floor works out to around ¥182,726, though the actual figure varies by prefecture, so you will want to check the rate for wherever your employees are based. As a payroll operator, your job each cycle is to apply the correct withholding, confirm the gross clears the applicable minimum, and get contributions calculated before the payment goes out.

On the leave side, employees are entitled to ten days of paid annual leave to start, and Japan also has sixteen public holidays in the calendar year, both of which feed into your payroll accrual and scheduling. For termination, the notice period runs just over four weeks, and that notice window needs to be reflected in any final pay calculation. One thing that simplifies the off-boarding calculation slightly: there is no statutory severance payment required, so final pay is mostly about clearing any outstanding salary, accrued leave, and the notice period rather than calculating a separate lump sum.

If you do not already have a registered legal entity in Japan, you cannot run payroll there directly, full stop. Even with an entity in place, filings are in Japanese, contribution rates get updated, and the bonus conventions add a layer of expectation management that catches foreign employers off guard. A global payroll provider or employer of record handles the entity requirement, keeps your rates current, and manages the local filings, which is often a cleaner option than building that capability from scratch, particularly if you are starting with a small team or testing the market.