Japan's employment law system has undergone a significant round of legislative updates that came into effect in April 2025. Foreign employers operating in Japan – whether through a local subsidiary, branch office, or direct hiring arrangement – face new obligations that carry material compliance risk if left unaddressed.
Japan's updated employment legislation introduces strengthened disclosure requirements for employment contracts, revised dismissal notice procedures, and expanded social security enrolment obligations. All employers with staff in Japan are subject to these changes, regardless of company size or country of incorporation. The primary compliance deadline for affected businesses has passed for the April 2025 cohort, making immediate remediation of non-compliant contracts and internal procedures the priority for international companies that have not yet acted.
This alert explains what changed, which business categories are most exposed, and the concrete steps foreign employers should take without delay.
What changed and when it took effect
Japan's employment legislation was amended to expand the mandatory written disclosure obligations at the point of hiring. Employers are now required to provide a more detailed written rodo joken tsuchisho (labour conditions notice) at the time of contract conclusion. This applies to all employment contract types – permanent, fixed-term, and part-time.
For fixed-term contracts, the updates impose new requirements around renewal criteria. Employers must now state explicitly in the employment contract whether renewal is anticipated, under what conditions it may occur, and the maximum number of permitted renewals. Failure to include these terms exposes an employer to a worker's claim of yuki nashi rodo keiyaku (indefinite-term employment conversion) under Japan's employment legislation after five continuous years of service.
The termination procedure rules were also tightened. The dismissal notice period requirement – already a minimum of 30 days under Japan's employment legislation – is now subject to stricter documentation standards. Employers must retain written evidence of the grounds for dismissal. Courts in Japan have long held that a dismissal lacking objectively reasonable grounds and social acceptability is invalid. The updated rules make it easier for a worker to establish a procedural breach even before reaching that substantive test.
Separately, the social security enrolment thresholds for part-time workers were lowered. Employers at companies with fewer than 51 employees must now enrol qualifying part-time staff in the shakai hoken (social insurance) system. This is a significant change for foreign companies that have relied on part-time or short-hours staffing to manage costs.
Collective agreement obligations were also clarified. Where a rodo kyoyaku (collective agreement) is in place, its terms now take explicit precedence in specific areas over individual employment contract terms that are less favourable to the worker. Foreign employers who have imported group-level employment policies without local tailoring are particularly exposed here.
For a broader understanding of the corporate structure implications of these changes, our team's analysis of corporate law matters in Japan provides relevant context on subsidiary and branch office obligations.
Who is affected: threshold criteria and business categories
The changes affect all employers with workers based in Japan, without a minimum headcount threshold for the core disclosure and termination rules. The social security expansion, however, applies to companies with fewer than 51 employees as a new category – larger companies were already subject to those obligations.
Foreign employers most directly affected include the following categories:
- Multinational companies operating a Japanese subsidiary or branch that use fixed-term contracts for local staff
- Technology and services companies hiring part-time or project-based workers in Japan
- Companies that apply group-wide employment policies without a Japan-specific employment contract template
- Businesses that rely on individual employment contract terms that conflict with any applicable collective agreement
- Employers who have not reviewed their dismissal documentation practices since the previous legislative cycle
A common mistake among international employers is assuming that the global group employment contract – often drafted under English or EU law – satisfies Japanese statutory requirements. It does not. Japan's employment legislation mandates specific disclosures in the Japanese language. A contract that omits these disclosures is treated as deficient regardless of what a parallel English document says.
To receive an expert assessment of your employment contract exposure in Japan, contact us at info@ferrazwhitmore.com.
Immediate actions for international companies
The window for proactive compliance is now. Employers who have not acted since April 2025 should treat the following steps as urgent.
Audit all employment contracts. Review every active employment contract against the updated disclosure requirements. Fixed-term contracts in particular must be checked for renewal clause language. Any contract silent on renewal criteria should be amended before the next renewal date.
Update the labour conditions notice template. The standard rodo joken tsuchisho template must reflect the new mandatory fields. This is not optional – issuing a deficient notice at onboarding is a standalone violation under Japan's employment legislation.
Review dismissal and termination procedures. Confirm that your HR team's termination procedure includes written documentation of grounds at each stage. The dismissal notice period of 30 days must be observed. Payment in lieu is permitted but must be handled correctly under applicable employment legislation to avoid triggering additional claims.
Check social security enrolment for part-time staff. If your Japan headcount is below 51 employees and you have part-time workers meeting the new qualifying thresholds. generally those working at least a specified number of hours weekly with a sufficient monthly salary. they must be enrolled in the social insurance system. Late enrolment attracts retroactive contribution obligations and potential penalties.
Reconcile group policies with any collective agreement. If a collective agreement applies to your workforce or workplace, review all group-level HR policies against it. Where the collective agreement provides more favourable terms to workers, those terms prevail over individual contract terms. Distributing a group policy document that contradicts an applicable collective agreement creates direct legal exposure.
For detailed guidance on structuring compliant employment arrangements in Japan, the firm's employment law practice in Japan covers the full range of obligations for foreign employers.
Foreign employers who have recently entered the Japanese market may also find it useful to review the parallel regulatory developments covered in our alert on employment regulation changes in the UAE. This shares certain structural similarities in the treatment of fixed-term workers and social insurance obligations.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our employment law practice supports international companies managing workforce compliance across Asia-Pacific, the Middle East, and European markets. Engaging a lawyer in Japan with cross-border experience is essential when group employment policies must be reconciled with local statutory requirements. As an international law firm covering Japan, we assist foreign employers with employment contract audits, termination procedure reviews, social security compliance, and collective agreement analysis. Our team combines Portuguese civil law expertise with English common law tradition to deliver practical solutions for clients operating across multiple legal systems. To discuss your Japan employment compliance position, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.