The True Cost of Employing Someone in Japan (2026 Rates, With Worked Examples)
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This article is general information about how things usually work in Japan. It is not legal advice, does not create a lawyer–client relationship, and may not reflect the latest changes. For your specific situation, consult a qualified professional.
If you are planning your first hire in Japan, the salary you agree on is not what the role will cost you. On top of it, the employer pays a set of statutory contributions — mostly social insurance — that add roughly 12–16% of salary for a typical full-time employee in 2026.
I’m a Japan-qualified lawyer, and part of my work is reading and drafting employment-related documents in English — offer letters, employment agreements and contractor agreements — and explaining Japanese pay practices such as bonuses and allowances to colleagues in English. The rates below come from Japanese-language official sources; I’ve pulled them together so you can budget without reading those pages yourself.
All rates were checked on October 13, 2026. They change, often every April, so please confirm them before you rely on them.
The short answer
For an employee in Tokyo, covered by the national health insurance association (Kyokai Kenpo), the employer’s share in 2026 works out to about:
| Annual salary | Employer contributions (approx.) | As % of salary |
|---|---|---|
| ¥5,000,000 | ¥785,000 | 15.7% |
| ¥8,000,000 | ¥1,237,000 | 15.5% |
| ¥12,000,000 | ¥1,485,000 | 12.4% |
Add roughly another 0.8% of salary if the employee is aged 40 to 64 (long-term care insurance, explained below). The percentage falls at higher salaries because the pension contribution stops growing once pay passes a ceiling.
The assumptions behind these numbers, and what they leave out, are set out further down.
What the employer pays, item by item
Japan’s employer contributions are mostly split 50/50 with the employee. The employee’s half is withheld from salary; the employer pays its half on top. Two items are paid by the employer alone.
Health insurance
According to the Japan Health Insurance Association (Kyokai Kenpo), the 2026 health insurance rate for Tokyo is 9.85%, applying from March 2026. The employer pays half: 4.925%.
The rate differs by prefecture, and companies that belong to their own health insurance society (kenpo kumiai) use that society’s rate instead.
Long-term care insurance (employees aged 40–64 only)
For employees aged 40 to 64, a long-term care insurance contribution is added. Kyokai Kenpo sets it at 1.62% nationwide for 2026, again split in half — 0.81% for the employer.
Child and childcare support levy (new in 2026)
From the April 2026 contribution month (collected from May pay), a new child and childcare support levy (kodomo kosodate shienkin) is collected together with health insurance. Kyokai Kenpo sets it at 0.23%, split between employer and employee — about 0.115% each.
It is small, but it is new, and many English-language cost guides do not include it yet.
Employees’ pension insurance
The employees’ pension rate is 18.3%, split equally, so the employer pays 9.15%. This is the largest single item.
Pension contributions are calculated on a “standard monthly remuneration” that is capped. As of October 2026, the cap is ¥650,000 a month. Pay above that level does not increase the pension contribution. Under a 2025 pension reform, this cap is scheduled to rise in stages from September 2027, so budgets for senior hires will need revisiting.
Child-rearing contribution (employer only)
Separately from the new levy above, employers pay a child-rearing contribution (kodomo kosodate kyoshutsukin) of 0.36%, with no employee share. It uses the same capped base as the pension.
Employment insurance
According to the Ministry of Health, Labour and Welfare, for the year from April 2026 to March 2027 the employment insurance rate for general businesses is 1.35% in total, of which the employer pays 0.85% and the employee 0.5%. Agriculture, construction and some other sectors use higher rates.
Workers’ accident compensation insurance (employer only)
The employer pays the whole of workers’ accident compensation insurance. The rate depends on the industry; for many office-based businesses it is 0.3% of wages, while higher-risk industries pay considerably more.
Summary of employer rates
| Item | Employer share | Notes |
|---|---|---|
| Health insurance | 4.925% | Tokyo, Kyokai Kenpo; varies by prefecture |
| Long-term care insurance | 0.81% | Only for employees aged 40–64 |
| Child and childcare support levy | 0.115% | New from April 2026 |
| Employees’ pension | 9.15% | Capped at ¥650,000/month of remuneration |
| Child-rearing contribution | 0.36% | Employer only; same cap as pension |
| Employment insurance | 0.85% | General businesses, Apr 2026–Mar 2027 |
| Workers’ compensation | ~0.3% | Typical office business; varies by industry |
Worked examples
Here is how the numbers above were calculated, so you can redo them for your own case.
Assumptions: Tokyo; Kyokai Kenpo; employee under 40; salary paid in 12 equal monthly amounts with no bonus; an office-type business. The “standard monthly remuneration” used for social insurance is set in bands, so I have used the actual monthly salary as an approximation. Real figures will differ slightly.
| Item (annual, employer share) | ¥5M salary | ¥8M salary | ¥12M salary |
|---|---|---|---|
| Health insurance | ¥246,250 | ¥394,000 | ¥591,000 |
| Child and childcare support levy | ¥5,750 | ¥9,200 | ¥13,800 |
| Employees’ pension | ¥457,500 | ¥713,700 | ¥713,700 |
| Child-rearing contribution | ¥18,000 | ¥28,080 | ¥28,080 |
| Employment insurance | ¥42,500 | ¥68,000 | ¥102,000 |
| Workers’ compensation | ¥15,000 | ¥24,000 | ¥36,000 |
| Total | ¥785,000 | ¥1,236,980 | ¥1,484,580 |
| Total cost (salary + contributions) | ¥5,785,000 | ¥9,236,980 | ¥13,484,580 |
Notice that the pension figure is the same for the ¥8M and ¥12M salaries. Both are above the ¥650,000 monthly cap, so the contribution stops there.
Costs these numbers leave out
The figures above are the statutory minimum. In practice, these items often matter as much:
- Bonuses. Twice-yearly bonuses are a strong market expectation in Japan, even though they are not generally required by law. Social insurance contributions are also charged on bonuses, with separate caps.
- Commuting allowance. Most employers pay commuting costs. The allowance is generally included in the pay used to calculate social insurance, so it raises contributions too.
- Paid leave and holidays. Employees are entitled to paid annual leave under the Labour Standards Act, and Japan has around 16 public holidays.
- Payroll and compliance administration. Someone has to calculate withholding, file social insurance enrolments, handle year-end tax adjustment (nenmatsu chosei) and keep records. That is either your staff’s time or an outsourced cost.
- Ending the employment relationship. This is the cost foreign employers most often underestimate. Japanese law makes it hard to dismiss an employee without a well-supported reason, and in practice separations are commonly handled by agreement, often with a negotiated package. It is worth factoring that possibility into the decision to hire, not only into the budget.
Where an EOR fits in the budget
If you do not have a company in Japan, an employer of record (EOR) can employ the person for you. An EOR’s fee is generally in addition to salary and the statutory contributions above; the contributions are passed through to you.
As published on the providers’ own pricing pages (checked October 13, 2026):
- Deel lists its EOR service at $599 per employee per month.
- Remote lists EOR pricing starting at $599 per employee per month.
At $599 a month, that is about $7,200 a year — roughly ¥1.08 million at ¥150 to the dollar. For the ¥8M salary above, the all-in annual cost through an EOR would be in the region of ¥10.3 million (salary + contributions + EOR fee), before bonuses and allowances.
Whether that is better value than setting up your own entity depends mainly on how many people you plan to hire and for how long. Incorporating in Japan brings its own setup costs and ongoing accounting, payroll and filing work, which an EOR fee replaces. For one or two hires, or while you are testing the market, the EOR fee is often the simpler option; as headcount grows, the comparison shifts.
Always ask for a written quote that separates the EOR fee from statutory costs, and check what happens to costs if the employment ends.
Key points
- In 2026, employer contributions in Japan add roughly 12–16% to salary for a typical full-time employee in Tokyo.
- The pension contribution (9.15% for the employer) is the largest item, and it stops growing at ¥650,000 a month of pay.
- A new child and childcare support levy applies from April 2026.
- Bonuses, commuting allowances and the cost of ending employment are not in the statutory figures but often matter as much.
- EOR fees, typically around $599 per employee per month from the major providers, sit on top of salary and contributions.
Sources
- Japan Health Insurance Association (Kyokai Kenpo): 2026 insurance rates (Japanese)
- Ministry of Health, Labour and Welfare, Yamagata Labour Bureau: Employment insurance rates for FY2026 (Japanese)
- Kyokai Kenpo: Contribution table for Tokyo (Japanese, PDF), including the child-rearing contribution rate
- Deel: Pricing
- Remote: Pricing