This article comprehensively analyzes the Japanese employment system and provides in-depth guidance for Chinese companies going overseas in Japan. First, we will discuss the unique employment contract system in Japan, including the characteristics and legal requirements of open-term and fixed-term contracts. Then, Japan’s working time regulations are elaborated, covering standard working hours, overtime system and unique discretionary labor system. The article also provides an in-depth analysis of Japan’s strict dismissal regulations and explains the importance of “objective reasonable reasons” and “social understanding.” In addition, this article also introduces Japan’s complete social insurance system, including health insurance, annuity, unemployment and work-related injury insurance. The article also explores the characteristics of the Japanese trade union system and its role in industrial relations. Pay special attention to Japan’s unique lifelong employment and seniority-based systems, and analyze their impact on corporate management. For companies interested in hiring foreigners in Japan, the article provides detailed explanations of relevant regulations and visa systems. Finally, the article comprehensively compares the main differences in employment laws between China and Japan, and provides practical suggestions and precautions for Chinese companies operating in Japan.

Overview of Japanese employment contracts

1.1 Unfixed term contract vs fixed term contract

Japan’s employment contract system is mainly regulated by the Labor Contract Law (労卍Contract Law) and the Labor Standards Law (労働Standard Law), forming a unique dual structure. This structure includes two main types: indefinite-term contracts (non-term contracts) and fixed-term contracts (term contracts), reflecting the particularity and flexibility of the Japanese labor market.

Indefinite-term contracts are the most common form of employment in Japan and are deeply rooted in Japan’s lifelong employment culture. This type of contract does not set a specific termination date and provides employees with high employment stability. Article 3 of the Labor Contract Law provides a legal basis for indefinite-term contracts, emphasizing that the employment relationship should be based on mutual understanding and trust between labor and management. This type of contract is usually available to regular employees, and is particularly common in larger businesses. It not only reflects Japan’s traditional concept of lifelong employment, but also reflects the company’s emphasis on long-term talent cultivation and retention.

In contrast, a fixed-term contract sets a clear term for the employment relationship and is strictly regulated by Article 4 of the Labor Contract Law. This clause stipulates that the maximum term of a single fixed-term contract is 3 years. However, the law also takes into account special circumstances and allows extension of the period to 5 years under certain conditions. These special circumstances include: (1) hiring employees with specialized knowledge, skills or experience; (2) hiring employees over 60 years old. This provision aims to balance employers’ needs for flexible employment with employees’ employment stability.

It should be noted that Article 18 of the Labor Contract Law, which came into force in April 2013, introduced the “No-fixed Period Conversion Rule” (无fixed-term conversion rule). According to this rule, if a fixed-term contract is renewed or extended for more than five years in total, the employee has the right to apply to convert the contract to an indefinite-term contract. After receiving the application, the employer must accept the conversion unless there are special reasons. This provision aims to prevent employers from abusing fixed-term contracts and maintaining unstable employment relationships for a long time, thereby further protecting the rights and interests of employees.

1.2 Written and express requirements for employment conditions

Although Japanese law does not mandate that employment contracts must be in writing, Article 15 of the Labor Standards Law clearly stipulates that employers are obliged to express important labor conditions to employees in writing. This requirement aims to ensure the transparency of the employment relationship, prevent possible disputes arising from oral agreements, and also provide legal protection for the protection of employees’ rights and interests.

According to Article 15 of the Labor Standards Act and related Ministry of Health, Labor and Welfare orders, the 14 conditions of employment that employers must clearly specify include:

• Labor contract term
• Work location and work content
• Working hours (including start and end time, whether there is any labor beyond the prescribed working hours, etc.)
• rest time
• rest day
• Overtime regulations
• Wage determination, calculation and payment methods
• Salary payment date
• promotion
• Matters related to retirement
• Reasons for dismissal
• Severance pay (if any)
• Bonus (if any)
• Safety and health

The clear stipulation of these conditions is not only a legal requirement, but also an important basis for building harmonious labor relations. Employers should take this requirement seriously and ensure that each condition is clear and specific and avoid vague or ambiguous statements.

Employers who fail to meet this obligation may face serious legal consequences. First, according to Article 120 of the Labor Standards Act, violation of written express requirements may result in a fine of up to 300,000 yen. Secondly, according to the Supreme Court’s precedent (Judgment of the Supreme Court on March 13, 1961), in labor disputes, vague employment conditions are usually interpreted in favor of employees. This means that employers may be disadvantaged in disputes because certain conditions are not clearly stated. Therefore, clearly stipulating employment conditions in writing is not only a need to comply with the law, but also an important measure for enterprises to avoid risks and protect their own interests.

1.3 Probation period system

Although Japan’s probationary period (trial period) system is not clearly defined in statutory law, it has been widely recognized and standardized through case law. This system provides employers with the opportunity to assess the capabilities of new employees, while also providing a buffer period for employees to adapt to the new work environment.

Regarding the maximum period of probation, although there is no clear legal provision, according to the precedent of the Tokyo High Court (Tokyo High Court, April 9, 2009), the probation period should generally not exceed 3 months. The setting of this period is mainly based on the provisions of Article 627 of the Civil Code regarding the notice period for the termination of employment contracts. This means that even within the probationary period, the employer’s termination of the contract should be subject to certain procedures and restrictions.

During the probation period, although the employer enjoys greater freedom to dismiss, this freedom is not absolute. According to the Supreme Court’s precedent (the Supreme Court’s decision on December 12, 1978), an employer still needs to meet the following conditions to fire an employee during the probation period:

• The employee is truly not suitable for the position
• This level of unsuitability is such that continued employment is no longer possible
• The employer has fulfilled appropriate inspection obligations

Even during the probation period, when an employer fires an employee, he or she must comply with the 30-day notice period stipulated in Article 20 of the Labor Standards Act or pay the corresponding dismissal notice allowance. This provision reflects Japanese law’s comprehensive protection of employees’ rights and interests, even during special stages such as the probation period.

Therefore, employers need to be cautious when setting up and implementing the probation period system. They should not only make full use of this period to evaluate employees, but also pay attention to comply with relevant legal provisions to avoid getting into legal disputes due to unfair dismissal.

1.4 Comparison of the main differences between Chinese and Japanese employment contracts

There are significant differences in the employment contract systems between China and Japan. These differences reflect the different labor cultures, legal traditions and economic development stages of the two countries. Understanding these differences is particularly important for businesses operating across borders.

In terms of contract form, Japan does not mandate written contracts. Instead, it requires employers to state important labor conditions in writing in accordance with Article 15 of the Labor Standards Act. In contrast, Article 10 of China’s Labor Contract Law clearly stipulates that a written labor contract must be signed, reflecting the strict requirements of Chinese law for regulating labor relations.

In terms of probation period regulations, Japan has established the practice through case law that it generally does not exceed 3 months, while Article 19 of China’s Labor Contract Law allows a probation period of up to 6 months, depending on the contract period. This reflects China’s longer employee evaluation period for employers.

Regarding the provisions of fixed-term contracts, Article 18 of Japan’s Labor Contract Law allows continuous fixed-term contracts, but if the cumulative period exceeds 5 years, it can be converted into an unlimited period. Article 14 of China’s “Labor Contract Law” stipulates that after two consecutive fixed-term contracts are concluded, an unlimited-term contract should be concluded. This reflects the different emphasis of the two countries on the balance between labor market flexibility and employee stability.

Firing difficulty is also a significant difference. Article 16 of Japan’s Labor Contract Law requires that dismissal must have “objectively reasonable reasons” and be “socially consistent.” This standard is interpreted quite strictly in practice. In contrast, although Articles 39, 40, and 41 of China’s Labor Contract Law also stipulate statutory grounds for dismissal, they generally give employers greater flexibility.

The idea of ​​lifetime employment remains influential in Japan, making open-ended contracts more common. China’s employment model is more diversified, and fixed-term contracts are more common in practice.

These differences pose challenges for Chinese companies planning to enter the Japanese market. Enterprises need to pay special attention to the following points:

• Although written contracts are not mandatory in Japan, employment conditions should still be documented in detail to avoid potential disputes.
• Set a reasonable trial period, which in principle should not exceed 3 months.
• Be careful with fixed-term contracts to avoid being forced to switch to an open-ended contract due to multiple renewals.
• Establish a personnel management system that complies with Japanese laws and culture, and seek a balance between ensuring employee stability and maintaining corporate flexibility.
• Fully understand Japan’s strict dismissal restrictions and handle employee dismissals with caution.

By in-depth understanding of these differences, companies can better adapt to Japan’s labor environment, effectively avoid legal risks, establish harmonious labor relations, and lay a solid foundation for successful operations in the Japanese market. When formulating human resources strategies, companies need to fully consider Japan’s unique employment culture and legal requirements, and find the right balance between protecting employee rights and maintaining operational flexibility.

Working hours regulations

2.1 Legal working hours

Japan’s working time system is mainly regulated by the Labor Standards Law (労卍Standards Law), and Article 32 of this law clearly stipulates standard working hours. According to this regulation, legal working hours are 40 hours per week and no more than 8 hours per day. This standard aims to protect the health and quality of life of workers, while also ensuring the standardization of business operations.

However, in order to adapt to the diverse work needs of modern society, Japanese law also allows the implementation of flexible working hours. This system mainly includes three forms: the deformed working time system (変shaped労卍 Time System), the flexible working time system (フレックスタイム System) and the off-site working time system (off-site work time system).

The modified labor time system allows working hours to be adjusted within a specific period, as long as the average working hours during that period do not exceed the legal standard. This system is suitable for seasonal work or industries with large fluctuations in workload. For example, Article 32-2 of the Labor Standards Act stipulates a modified working time system for one-month units, which allows for flexible arrangements of working hours within a month, as long as the monthly average does not exceed 40 hours.

The flexible working time system allows employees to decide their own working hours within a certain range, as long as they are on duty during core working hours and meet the specified total working hours within a certain period (usually one month). Such a system needs to be implemented through a collective bargaining agreement, with core working hours and flexitime clearly defined.

The business off-site working time system is suitable for those positions that mainly work outside the company and it is difficult to accurately calculate working hours, such as sales staff. Under this system, statutory working hours are deemed to have been worked unless there is a special agreement.

The implementation of these flexible working time systems requires certain conditions to be met, including reaching a written agreement with a labor union or a majority of employee representatives and filing it with the Labor Standards Inspection Office. The establishment of these systems reflects Japan’s labor law’s efforts to find a balance between protecting the rights and interests of workers and meeting the needs of enterprises for flexible employment.

2.2 Overtime system

In Japan, overtime (unemployment) is a complex and sensitive topic. Although the law stipulates standard working hours, in practice overtime is quite common in many businesses. Japan’s overtime system is mainly regulated by Article 36 of the Labor Standards Law, so it is also called the “36 Agreement” (36 Agreement).

According to the 36 Agreement, if an enterprise needs to allow employees to work overtime, it must sign a written agreement with the labor union or a majority of employee representatives and file it with the Labor Standards Inspection Office. This agreement needs to clearly stipulate the specific reasons for overtime work, time limits, etc. The “Law on Workstyle Reform” (Law on Work Style Reform) implemented in April 2019 further strengthened overtime restrictions and clarified the upper limit of overtime hours to 45 hours per month and 360 hours per year in principle. Under special circumstances, a maximum overtime limit of 100 hours per month and 720 hours per year can be agreed in a written agreement.

There are also strict regulations on how overtime pay is calculated. According to Article 37 of the Labor Standards Act, overtime rates are as follows:

• Overtime work outside legal working hours: 1.25 times the salary
• Working on legal rest days: 1.35 times the salary
• Late night work (22:00-5:00): 1.25 times the salary
• Late night overtime work outside legal working hours: 1.5 times the salary
• Overtime work exceeding 60 hours per month: 1.5 times the salary (applicable to large enterprises, implementation of small and medium-sized enterprises will be postponed until April 2023)

These regulations aim to curb excessive overtime through economic means and protect the physical and mental health of workers. However, in practice, some companies may circumvent these regulations, such as the phenomenon of “unpaid overtime” (unpaid overtime) by default. Therefore, the Japanese government has stepped up its efforts to investigate and deal with illegal overtime work in recent years.

2.3 Discretionary labor system

The discretionary labor system (discretionary labor system) is a unique working time system in Japan. It is suitable for positions where working methods and time are difficult to quantify and are more suitable for evaluation based on results. Articles 38-3 and 38-4 of the Labor Standards Act respectively stipulate two types of discretionary labor systems: specialized business-type discretionary labor systems and planning business-type discretionary labor systems.

The specialized business-type discretionary labor system is applicable to specific professional fields, such as research and development, information system design, news gathering and editing, etc. Implementing this system requires reaching an agreement with the labor union or a majority of employee representatives and filing it with the Labor Standards Inspection Office.

The planning business-type discretionary labor system has a wider application scope, including core operations, planning, investigation and other positions of the enterprise. Implementing this system requires the establishment of a labor-management committee, a strict review process, and approval by the Minister of Health, Labor and Welfare.

Under the discretionary labor system, regardless of the actual working time, it is deemed to have been worked for the pre-agreed time. This system provides enterprises with greater employment flexibility and also provides employees with more work autonomy. However, there is also a risk of misuse leading to overwork, so implementation requires special caution.

In comparison, China’s working hour system is relatively simple. China’s Labor Law stipulates the standard working time system (8 hours per day, 40 hours per week), the comprehensive calculated working time system and the irregular working time system. Although China also has an irregular work system similar to Japan’s discretionary labor system, its scope of application and implementation conditions are relatively simple, and it is mainly implemented through administrative approval procedures.

2.4 Annual leave system

Japan’s annual leave system (paid leave every year) is stipulated in Article 39 of the Labor Standards Act. The system is designed to ensure employees have adequate breaks and promote work-life balance.

According to the law, employees who have worked for 6 consecutive months and have an attendance rate of more than 80% are entitled to at least 10 days of paid annual leave. As the working years increase, the number of annual leave days will gradually increase, reaching a maximum of 20 days. The specific provisions are as follows:

• Working for 6 months or more: 10 days
• Working for 1 year and 6 months: 11 days
• 2 years and 6 months of service: 12 days
• 3 years and 6 months of service: 14 days
• 4 years and 6 months of service: 16 days
• 5 years and 6 months of service: 18 days
• Working for 6 years and 6 months or more: 20 days

Annual leave can be used cumulatively, but in principle it should be used within two years. This provision is intended to encourage employees to actually take time off, rather than accumulate a large amount of unused time off.

In order to further promote the actual use of annual leave, the “Law on the Reform of Tsunekata” that came into effect in April 2019 introduced a planned annual leave system. This system requires employers to ensure that employees who are entitled to more than 10 days of annual leave each year use at least 5 days of annual leave each year. Employers can negotiate with employees to decide on vacation time, but in principle, if employees apply for vacation on their own initiative, employers are not allowed to refuse.

The introduction of the planned annual leave system reflects the Japanese government’s determination to improve the long-standing cultural problem of “vacation shame” (rest break habit). This culture makes many Japanese employees unwilling or afraid to use their annual leave rights. By making it legally compulsory to use part of annual leave, there is hope that this will gradually change and promote a healthier working culture.

Japan’s working time system and vacation system reflect efforts to find a balance between protecting the rights and interests of workers and meeting the needs of enterprises for flexible employment. The complexity of these systems reflects the characteristics of Japanese society and economy, and also provides a useful reference for the labor law systems of other countries. For companies operating in Japan, it is crucial to deeply understand and correctly implement these systems. It is not only a need for compliance, but also an important way to establish good labor relations and improve employee satisfaction and productivity.

Dismissal provisions

3.1 Legal grounds for dismissal

Japan’s dismissal system is famous for its strictness, which is mainly due to its unique cultural background of lifelong employment. According to Article 16 of Japan’s Labor Contract Law, employers must have “objectively reasonable reasons” (objectively reasonable reasons) for dismissal of employees and meet “social compatibility” (social compatibility). These two standards form the core of Japan’s dismissal system.

“Objective reasonable grounds” require that dismissal must be based on objective facts rather than the employer’s subjective judgment. This may include serious disciplinary violations by employees, long-term poor performance, company operating difficulties, etc. For example, if an employee repeatedly violates company rules and regulations seriously and fails to correct the violation despite warnings, this may constitute an objective and reasonable reason. However, just because an employee is not performing as expected or disagreeing with a superior is not usually considered an objectively valid reason.

“Social consistency” is a social moral judgment on dismissal. Even if there are objective and reasonable reasons, if the dismissal is considered to be too harsh or unfair in social moral concepts, it may still be deemed as unfair dismissal. For example, directly dismissing a long-term employee who has made a minor mistake without giving him a chance to make corrections may not be socially equitable.

In addition, Japanese law also clearly stipulates circumstances that prohibit dismissal to protect the rights and interests of specific groups. Article 19 of the Labor Standards Act stipulates that an employer shall not fire an employee while the employee is recovering due to work-related injury or illness and within 30 days thereafter. Likewise, the Equal Employment Opportunities for Men and Women Act and the Childcare and Nursing Leave Act prohibit dismissal due to pregnancy, childbirth or childcare leave. These provisions provide additional employment security for female employees and help promote gender equality and work-life balance.

3.2 Dismissal procedure

Japanese law also has strict regulations on dismissal procedures, which are mainly reflected in the dismissal notice system. Article 20 of the Labor Standards Act requires that when an employer fires an employee, he must give at least 30 days’ notice or pay a dismissal notice allowance equivalent to 30 days’ wages. This provision is intended to provide employees with a buffer period to seek new job opportunities.

The calculation method of dismissal notice allowance is relatively simple. It is generally the amount of wages an employee would receive for 30 days of normal work. For situations where the salary includes variable components such as performance bonuses, the average of the last three months is usually used as the basis for calculation. It is worth noting that even if the dismissal notice allowance is paid, the dismissal itself still needs to meet the aforementioned “objective reasonable reasons” and “social equivalence” requirements.

However, the law also provides for some exceptions. For example, for employees during the probation period (not exceeding 14 days), or in the case of dismissal due to the employee’s gross negligence, the employer can fire immediately without notice and does not need to pay dismissal notice allowance. However, the threshold for such summary dismissal is very high and usually only applies to employees who have committed serious violations of the law or serious violations of company regulations.

3.3 Special provisions for economic layoffs

In Japan, large-scale layoffs (economic layoffs) due to business difficulties are subject to stricter restrictions. The Supreme Court of Japan has established the “four-element standard” for economic layoffs through precedents, namely:

• Necessity of layoffs: The company must be facing serious operating difficulties that cannot be sustained by other measures alone.
• Layoff avoidance efforts: The company must demonstrate that it has tried to take other measures to avoid layoffs, such as cutting expenses, halting new hiring, encouraging voluntary separation, etc.
• Reasonableness of personnel selection: The criteria for selecting laid-off employees must be fair and reasonable and must not be discriminatory.
• Full consultation with employees: The company must fully communicate with the union or employee representatives to explain the necessity and specific plans for layoffs.

These four elements must be met at the same time, and none of them is indispensable. For example, even if the company does face operational difficulties, the layoffs may still be deemed invalid by the court if no other measures are taken to avoid layoffs or if the selection criteria are unreasonable. This standard greatly limits the freedom of enterprises to carry out economic layoffs, and is also an important guarantee for Japan’s employment stability.

3.4 Analysis of Article 16 of the Labor Contract Law

Article 16 of the “Labor Contract Law” stipulates: “Dismissal is invalid when it is an abuse of rights.” This is called the “jurisdiction of abuse of dismissal rights.” This clause is the core of Japan’s dismissal system. It legalizes the aforementioned “objective reasonable reasons” and “social equivalence” standards.

In practical terms, if an employee believes that the dismissal is unfair, he or she can bring a lawsuit in court. The court will determine whether the dismissal is valid based on the specific circumstances and comprehensively consider factors such as the reasonableness of the reason for dismissal, the company’s handling procedures, and the employee’s degree of fault. If the court finds that the dismissal is invalid, the employment relationship will be deemed to have never been interrupted and the company must reinstate the employee and pay him or her the wages for the period of dismissal.

In practice, this principle greatly limits the possibility of companies firing employees at will. In order to avoid lengthy legal disputes, many companies often choose to terminate labor contracts with employees through consensus, such as providing higher severance compensation. Although this approach increases the cost of the enterprise, it also balances the interests of both labor and capital to a certain extent.

3.5 Comparison of dismissal systems between China and Japan

In contrast, although China’s dismissal system also attaches importance to protecting the rights and interests of workers, it generally gives companies greater flexibility. Articles 39, 40 and 41 of China’s Labor Contract Law respectively provide for negligent dismissal, economic layoffs and 30 days’ notice of termination of the labor contract.

In China, if an employee seriously violates rules and regulations or causes heavy losses to the company, the company can immediately terminate the labor contract without paying financial compensation. This is much more relaxed than Japan’s instant dismissal conditions. In addition, Chinese laws on economic layoffs are relatively simple. The main requirement is to notify the labor union or all employees 30 days in advance and report the layoff plan to the labor administration department.

Another significant difference is that Chinese law provides for a statutory economic compensation system. Regardless of whether it is an economic layoff or other dismissal due to no fault of the employee, the company is required to pay economic compensation based on the employee’s working years. In Japan, unless otherwise agreed between employer and employee, the law does not mandate the payment of severance compensation.

In general, Japan’s dismissal system focuses more on protecting existing employment, making it difficult for companies to unilaterally fire employees. This maintains employment stability to a certain extent, but may also lead to rigidity in the labor market. In contrast, China’s system not only protects the rights and interests of workers, but also gives companies more flexibility in employment. However, this also means that Chinese employees may face higher employment insecurity.

Understanding these differences is critical for businesses operating in both countries. In Japan, companies need to handle dismissal issues more carefully and try to solve personnel problems through other methods such as job transfers and training. In China, although dismissal is relatively easy, companies also need to pay attention to strictly complying with legal procedures to avoid unnecessary labor disputes.

No matter which country you are in, establishing good labor relations and a reasonable personnel management system are the best ways to avoid dismissal disputes. Enterprises should pay attention to employee training and performance management, establish a fair and transparent evaluation system, and properly handle labor relations through consultation and other means when necessary. This is not only conducive to the long-term development of the enterprise, but also helps to maintain social harmony and stability.

Social insurance system

4.1 Health insurance and welfare pension

Japan’s social insurance system is known for its comprehensiveness and high coverage, of which health insurance and employees’ pensions are the two core pillars. These two insurances are usually jointly paid by employers and employees to provide workers and their families with comprehensive medical protection and financial support after retirement.

Health insurance covers the vast majority of employed persons and their dependents, providing extensive medical protection. Insured persons only need to pay 30% of the medical expenses when seeking medical treatment (10% or 20% for those over 65 years old), and the remaining part will be borne by the insurance. This greatly reduces the medical burden on individuals and protects the health of the entire population. The insurance premium is 50% borne by each employer and employee. The specific proportion varies according to personal income and region, but it is usually around 9%-10% of monthly income.

The Employees’ Pension is Japan’s public pension system, which aims to provide basic living security for retirees. All current employees are required to participate, and the contribution ratio is equally divided between the employer and the employee, totaling approximately 18.3% of the monthly salary. After retirement, insured persons can receive pensions corresponding to their contribution years and amounts. It is worth noting that Japan implements a pay-as-you-go system, that is, the contributions of current employees are used to pay the pensions of current retirees, which brings certain challenges when Japan faces the problem of population aging.

Foreigners working in Japan are also required to take out these two insurances in principle. However, taking into account the particularity of international talent mobility, Japan has signed social security agreements with many countries. These agreements allow foreigners who are dispatched to work in Japan for a short period of time (usually within 5 years) to continue to participate in the social insurance of their home country, exempting them from the obligation to pay corresponding insurance in Japan, thereby avoiding double payment. However, it should be noted that even if the employee’s pension is exempted, health insurance is usually still required unless it can be proven that the same level of medical coverage is available in the home country.

4.2 Employment insurance

Employment insurance is an important part of Japan’s social security system to protect unemployed people. It not only provides basic living security for the unemployed, but also helps the unemployed return to work as soon as possible through various employment support measures.

The application conditions and amounts for unemployment insurance benefits are quite detailed. Generally speaking, applicants need to meet the following conditions: have at least 12 months of insurance participation records in the two years before unemployment; involuntary resignation (such as company bankruptcy, layoffs, etc.) or voluntary resignation with justifiable reasons; have continued employment Willingness and ability; actively seeking employment. Unemployed people who meet these conditions can receive unemployment insurance benefits for 90-330 days, depending on the number of years of insurance coverage, age and reason for leaving the job.

The amount of unemployment insurance benefits is usually 50%-80% of the average daily wage in the six months before leaving the job, with upper and lower limits. For example, for unemployed people aged 60-64, the amount available is 80% of their previous salary. This gradient setting not only takes into account the difficulty of re-employment for the elderly unemployed, but also reflects additional protection for low-income groups.

The contribution rate for employment insurance is relatively low. Employers are required to contribute 0.6% of employees’ wages, while employees only contribute 0.3%. This setting not only reduces the burden on employees, but also encourages companies to maintain stable employment through higher employer contribution ratios.

4.3 Work-related injury insurance

Work-related injury insurance is a key system in Japan’s labor insurance system to protect workers’ occupational safety and health. It covers employees in almost all industries, whether full-time or part-time, who suffer injuries or illnesses while at work or commuting to and from get off work.

The compensation standards of work-related injury insurance are quite comprehensive, including medical compensation, suspension compensation, disability compensation, survivors’ compensation and other aspects. For example, an employee who is unable to work due to a work-related injury can receive suspension compensation equal to 80% of the average daily wage until recovery or a disability level is determined. For cases that cause permanent disability, a lump sum compensation or a lifetime annuity will be given according to the level of disability. This comprehensive security system effectively reduces the economic burden and life pressure of employees caused by work-related injuries.

The premiums for work-related injury insurance are entirely borne by the employer and employees do not need to pay. Premium rates vary depending on the risk level of the industry, usually between 0.25%-8.8%. On the one hand, this setting reflects the employer’s responsibility for employee safety, and on the other hand, it also encourages employers to pay attention to workplace safety management to reduce accident rates and insurance costs.

In Japan, there is a clear distinction between work-related injury insurance liability and employer liability. Work-related injury insurance mainly solves the basic compensation issues for employees due to work-related injuries, but does not exempt the employer from civil liability for compensation that may need to be borne. If an employee suffers a work-related injury due to gross negligence or intent on the part of the employer, in addition to receiving compensation from work-related injury insurance, the employee may also request additional damages from the employer. This system design not only protects the basic rights and interests of employees, but also retains the possibility of seeking more compensation through civil litigation, thereby constraining employers to pay attention to workplace safety management to a certain extent.

4.4 Comparison of social insurance systems between China and Japan

Although the social insurance systems of China and Japan are similar in overall framework, there are significant differences in specific implementation and coverage.

In terms of insurance types, Japan’s social insurance system is relatively simple, mainly including health insurance, welfare pension, employment insurance and work-related injury insurance. China’s social insurance includes five major insurances: pension, medical care, unemployment, work-related injury and maternity insurance, plus housing provident fund. This setup in China is more comprehensive, but also increases management complexity.

In terms of payment ratio, the overall social insurance payment rate in Japan is lower than that in China. For example, Japan’s total pension insurance (employee’s pension) payment ratio is about 18.3%, while China’s total pension insurance payment ratio can reach about 28% (of which the employer pays 20% and individuals pay 8%). This difference reflects the different strategies adopted by the two countries in balancing social security and economic development.

In terms of coverage, Japan’s social insurance system has more comprehensive and unified coverage. For example, Japan’s health insurance covers almost all citizens, including the non-employed population. In China, there is still a certain gap in social insurance benefits between urban and rural areas and between different employment groups, although the gap has been shrinking in recent years.

In terms of unemployment insurance, Japan’s system is more mature and flexible. Japan’s unemployment insurance benefits are paid for a longer period, up to 330 days, and the amount is linked to previous wages, so the level of protection is relatively high. In contrast, the payment period of unemployment insurance benefits in China usually does not exceed 24 months, and the amount is relatively fixed and linked to the local minimum wage standard.

In terms of work-related injury insurance, both countries have adopted a full employer-paid model, but Japan’s work-related injury recognition has a wider scope, including accidents that occur on the way to and from get off work. China has also gradually expanded the scope of work-related injury recognition in recent years, but it is still relatively limited.

Regarding the pension system, Japan adopts a unified pay-as-you-go system, while China uses a combination of pay-as-you-go system and individual account system. Japan’s approach simplifies management, but faces greater payment pressure in the context of an aging population. Although China’s hybrid system increases management complexity, it can theoretically better cope with the challenges of population aging.

In general, Japan’s social insurance system is more mature, unified and comprehensive, but it also faces tremendous pressure from an aging population. China’s system is more diverse and flexible, but there is still room for improvement in uniformity and coverage. The systems of both countries have their own advantages and disadvantages, reflecting their respective stages of socio-economic development and cultural traditions. In the future, both countries need to seek a balance between security level, sustainability and economic development, and continuously improve the social insurance system.

Trade unions and collective bargaining

5.1 Characteristics of Japanese trade unions

The Japanese trade union system has unique characteristics, the most significant of which is the prevalence of enterprise-specific trade unions. Unlike many Western countries, which are dominated by industry-specific trade unions, Japanese trade union organizations are mainly based on single enterprises. This enterprise-specific trade union model originates from Japan’s unique lifetime employment system and corporate culture, which creates a relatively close relationship between the union and the enterprise.

Under the enterprise-specific union system, union members are usually limited to employees of the same enterprise, which allows the union to focus more on the specific needs and problems of employees in the enterprise. This model helps the union gain an in-depth understanding of the company’s operating conditions, so that it can put forward more practical demands when negotiating with management. At the same time, it also promotes communication and cooperation between labor and management, and reduces confrontational labor conflicts to a certain extent.

However, enterprise-specific trade unions also have some limitations. Because the scope of union organization is limited to a single enterprise, it often lacks sufficient influence and bargaining power when facing the entire industry or broader labor issues. In order to make up for this shortcoming, Japan has also developed some industrial unions and union federations, such as the Japan General Federation of Trade Unions (Japan Federation), to represent labor interests at a broader level.

Japan’s union organization rate has shown a downward trend in recent years and is currently about 17%. While this rate is higher than in the United States, it is lower than in many European countries. The decline in the unionization rate is mainly due to factors such as the increase in the proportion of informal employees, the expansion of the service industry, and the decline in participation of young people in unions. The decline in union organization rates has had a certain negative impact on the influence of labor unions, but Japanese unions still play an important role in industrial relations, especially in the annual spring labor negotiations (harundo).

5.2 Legal status of trade unions

The legal status of Japanese trade unions is mainly stipulated by the Trade Union Law (労働法). This law provides a clear legal basis for the formation and operation of trade unions and protects workers’ rights to organize and join trade unions. According to the Trade Union Law, a trade union can be formed as long as it is initiated by two or more workers and certain conditions are met. These conditions include: the union must be mainly composed of workers, be independent of employers in organizational operations, and have the main purpose of maintaining and improving labor conditions.

Once a union is established and legally recognized, it has a wide range of rights. These rights include but are not limited to: the right to engage in collective bargaining with employers, the right to organize strikes and other collective actions, the right to participate in labor dispute mediation, etc. At the same time, trade unions also assume corresponding obligations, such as fairly representing the interests of all members, complying with laws and regulations, and maintaining financial transparency.

It is particularly worth noting that Japanese law gives strong protection to trade unions. For example, an employer may not fire or discriminate against an employee for participating in union activities or face legal sanctions. This legal protection provides a strong guarantee for the normal operation and development of trade unions.

5.3 Collective bargaining system

Collective bargaining is the core mechanism in Japanese industrial relations, and the Trade Union Law provides detailed regulations on its procedures and effectiveness. Collective bargaining is usually initiated by a trade union and the employer is obliged to engage in negotiations in good faith. Negotiations mainly involve labor conditions such as wages, working hours, welfare benefits, etc., but may also include broader issues such as corporate operating policies.

The collective bargaining process generally includes the following steps: first, the union proposes a negotiation request to the employer; second, both parties determine the time, place, and issues for negotiation; and then conduct multiple rounds of negotiations until an agreement is reached or an impasse is reached. If negotiations reach an impasse, unions may take collective action such as strikes or seek government mediation.

The result of collective bargaining is usually reflected in a labor-management agreement (労働agreement). Under the Trade Union Law, a written collective bargaining agreement is legally binding and breach of the agreement may result in legal liability. The labor-management agreement not only binds the parties who sign it, but also applies to employees who join the company after the agreement is signed, reflecting the universal applicability of the agreement.

The process of formulating a collective bargaining agreement usually includes steps such as drafting, negotiation, signing and filing. The content of the agreement needs to clearly stipulate the effective period, scope of application, specific terms, etc. Once signed, both parties are obligated to abide by and enforce the agreement. If a dispute arises during the implementation process, it can be resolved through negotiation or legal proceedings.

Japan’s annual spring labor negotiations (harendo) are an important form of collective bargaining. From March to April every year, unions across the country start negotiations with employers almost simultaneously, mainly discussing issues such as wage increases. The outcome of the spring fight often has a wide-ranging impact on wage levels across the country, reflecting the important position of collective bargaining in Japanese labor relations.

5.4 Comparison of trade union systems in China and Japan

Although the trade union systems in China and Japan both aim to protect labor rights and interests, they have significant differences in organizational structure, functional positioning, and operating methods.

In terms of organizational structure, China adopts a top-down pyramid structure, with the All-China Federation of Trade Unions as the apex and various levels of trade union organizations under it. Japan, on the other hand, is dominated by bottom-up enterprise-specific trade unions, supplemented by industrial trade unions and joint trade union organizations. This structure in China brings the union closer to the government, while the structure in Japan brings the union closer to the reality of the enterprise.

In terms of functional orientation, in addition to representing and safeguarding the legitimate rights and interests of employees, Chinese trade unions also undertake multiple functions such as participating in the management of national and social affairs and organizing employees to actively participate in economic construction. Japanese trade unions mainly focus on safeguarding the rights and interests of employees in their own enterprises or industries, and are less involved in broader social functions.

In terms of operation methods, Chinese labor unions resolve labor issues more through coordination with the government and enterprises, while Japanese labor unions mainly safeguard employee rights and interests through collective bargaining directly with enterprises. Japan’s spring labor negotiations are a typical example, which are not available in China.

In terms of legal status, both countries have special trade union laws stipulating the rights and obligations of trade unions. However, Japan’s “Trade Union Law” places more emphasis on the independence and collective bargaining rights of trade unions, while China’s “Trade Union Law” places more emphasis on the role of trade unions in socialist construction.

In terms of union organization rate, China’s union organization rate is much higher than Japan’s. This is mainly because China’s trade union membership is automatic or semi-automatic in many cases, while Japan’s is entirely based on voluntary principles. However, high organizational rates do not necessarily mean greater influence, and Japanese unions may actually have greater influence in corporate decision-making.

In terms of collective bargaining, although both countries have relevant systems, collective bargaining in Japan is more common and institutionalized, especially playing a key role in wage determination. In contrast, although China’s collective bargaining system is constantly improving, its role in practice still needs to be strengthened.

The trade union systems of China and Japan reflect their respective political and economic systems and cultural traditions. Chinese trade unions embody more of the characteristics of state leadership, while Japanese trade unions embody more of the characteristics of entrepreneurialism. In the future, both countries will face the challenge of how to better play the role of trade unions in the new economic situation. They need to continue to reform and innovate while maintaining their respective characteristics.

Characteristic system: lifetime employment and seniority sequence

6.1 Lifetime employment system

The lifetime employment system is an iconic feature of Japanese business management, and its history can be traced back to the economic reconstruction period after World War II. During that period, Japan faced severe labor shortages and a lack of technical talent. In order to attract and retain talents, many large companies have begun to promise to provide employees with lifelong employment security. This approach not only solves the employment needs of enterprises, but also contributes to social stability.

Over time, the lifetime employment system has gradually become a core component of Japanese corporate culture. It is not only a form of employment, but also a social contract that reflects the mutual commitment and trust between the company and its employees. Under this system, companies promise to provide employees with long-term, stable jobs, and employees reward the company with loyalty and hard work. This mutually beneficial relationship promotes the long-term development of the company and the career stability of its employees.

However, after entering the 1990s, with the bursting of Japan’s economic bubble and the intensification of global competition, the traditional lifetime employment system faced huge challenges. Many companies are finding that the cost of maintaining this system is getting higher and higher, and the flexibility is not enough to cope with the rapidly changing market environment. As a result, lifetime employment began to evolve.

In modern Japanese companies, pure lifetime employment is relatively rare, but its impact is still far-reaching. Most large companies still tend to provide long-term employment security for core employees, while also adding more flexible employment forms, such as contract workers, dispatched workers, etc. This hybrid model allows companies to maintain a certain degree of employment stability while also adjusting their human resource structure according to market demand.

Despite this, the idea of ​​lifetime employment remains deeply ingrained in Japanese society. Even with changes in actual operations, many Japanese still expect to work for a company for a long time, and companies still value the long-term development of their employees. This cultural characteristic makes Japan’s labor market significantly different from other countries, and also provides a unique background for Japanese companies’ talent management strategies.

6.2 Salary system based on seniority and merit

The seniority salary system is another Japanese characteristic system closely linked to the lifetime employment system. The core concept of this salary system is that employees’ compensation is mainly based on their working years and age in the company, rather than solely on personal ability or performance. Under this system, employees’ salaries will gradually increase as their working years increase, usually with a certain salary increase every year.

The operating mechanism of the merit sequence system is relatively simple. Companies typically set a base salary scale, with new employees starting at the lowest level and automatically advancing to higher salary levels each year based on years of service and age. In addition to the base salary, various allowances and bonuses may be included, but these are also usually linked to years of service. The characteristic of this system is that it is highly predictive, and employees can clearly foresee their future salary levels.

The merit sequence system has its obvious advantages. First, it provides employees with stable income growth expectations, which is conducive to improving employees’ work enthusiasm and loyalty. Secondly, this system reduces salary competition among colleagues and helps maintain a harmonious working atmosphere. Additionally, it encourages long-term employee development, as salary increases are directly related to length of service with the company.

However, this system also has obvious shortcomings. The main problem is that it may undermine employees’ motivation to work because salary increases are not directly related to individual performance. In addition, this system may lead to rapid growth in labor costs, especially during economic downturns, which may put great pressure on enterprises. Another problem is that it can hinder the promotion and development of young talent, since promotions often rely more on seniority than ability.

Faced with these challenges, many Japanese companies have begun to reform the seniority system and introduce more salary elements based on ability and performance. But in general, the impact of seniority sequence is still far-reaching and remains an important feature of the Japanese salary system.

6.3 Impact on foreign enterprises

The two distinctive systems of lifetime employment and seniority have had a profound impact on foreign companies operating in Japan, especially in terms of talent recruitment and retention strategies.

In terms of talent recruitment, foreign companies need to realize that many Japanese job seekers, especially fresh graduates, still expect to find a long-term and stable job. Therefore, if foreign companies can provide long-term career development prospects similar to lifetime employment, it will be easier to attract excellent Japanese talents. At the same time, foreign companies also need to note that Japan’s job market is relatively closed, and there are fewer cases of changing jobs midway, which means that recruiting experienced mid- to senior-level talents may face challenges.

In terms of talent retention, foreign companies need to understand the importance Japanese employees place on career stability. Although foreign companies may not be able to provide complete lifetime employment security, they can meet Japanese employees’ expectations for long-term career development through other methods, such as providing clear career development paths and focusing on employee training. At the same time, considering that Japanese employees attach great importance to company loyalty, foreign companies should also focus on cultivating company culture and enhancing employees’ sense of belonging.

In terms of salary system design, foreign companies need to find a balance between following Japanese traditions and introducing international practices. One possible strategy is to adopt a hybrid compensation system that includes a certain degree of merit-sequence elements to meet Japanese employees’ expectations for stable income growth, but also introduces compensation components linked to individual performance and abilities to motivate employees to improve their performance.

In addition, foreign companies can also consider introducing some salary incentives that are popular internationally but relatively rare in Japan, such as stock options, to enhance their attraction to high-potential talents. However, when implementing these measures, Japan’s cultural background and legal environment need to be fully considered to ensure that these measures can be understood and accepted by Japanese employees.

The human resource management strategies of foreign companies in Japan need to fully respect and understand Japanese traditions, while also appropriately introducing innovation to achieve effective talent management in Japan’s unique environment.

6.4 Comparison with Chinese corporate culture

There are significant differences between Japan’s lifetime employment and seniority-based systems and China’s corporate culture, which reflects the differences in history, culture and economic development paths between the two countries.

In terms of employment stability, although China also attaches great importance to the stability of labor relations, compared with Japan’s lifetime employment system, China’s job market is more flexible and fluid. Although China’s Labor Contract Law provides employees with certain employment protections, it does not mean “lifetime employment.” Chinese employees, especially the younger generation, are more inclined to choose jobs based on personal development needs and market opportunities, and have high career mobility.

In terms of salary system, Chinese companies generally adopt a more market-oriented and performance-oriented salary system, which is in sharp contrast to Japan’s merit-based system. In China, employee compensation depends more on personal abilities, performance and market value. Although age and working years are also factors to consider, their impact is relatively small. This difference reflects China’s more intense market competition and emphasis on efficiency and performance.

In terms of corporate loyalty, Japanese employees usually have a strong sense of belonging and loyalty to the company, while Chinese employees have relatively low loyalty. This difference partly stems from the cultural traditions of the two countries and is also related to the characteristics of their respective job markets. Japan’s collectivistic culture and lifelong employment tradition have fostered a strong sense of corporate identity, while China’s rapid economic development and frequent career mobility have led employees to pay more attention to personal development.

In terms of talent training, Japanese companies prefer long-term, systematic internal training, while Chinese companies rely more on the external talent market and rapid updating of knowledge and skills. This difference is reflected in many aspects such as training systems and career development paths.

In addition, in terms of decision-making methods, Japanese companies usually adopt a slower collective decision-making process and emphasize consensus; while Chinese companies tend to make decisions more quickly and top-down, reflecting the different management cultures and market environments of the two countries.

Regulations related to the employment of foreigners

7.1 Status of residence system

Japan’s status of residence system is the core legal framework governing foreigners’ work and residence in Japan. This system stipulates in detail the types of work and residence conditions that foreigners can engage in in Japan, and has important guiding significance for companies to hire foreign employees and for foreigners to find employment in Japan.

In terms of work visa types, Japan has a variety of residency statuses for different majors and skill levels. The most common ones include the “Technical, Humanistic Knowledge, International Business” visa, which is suitable for foreigners engaged in professional or technical work, such as engineers, IT professionals, translators, etc. The “Highly Specialized Occupation” visa is aimed at talents with advanced professional skills and is evaluated using a points system based on the applicant’s academic qualifications, work experience, annual income and other factors. There is also a “Business and Management” visa, which is suitable for foreigners who start a business or serve as corporate executives in Japan.

Each status of residence has its own specific work scope restrictions. For example, foreigners holding a “Technical, Humanistic Knowledge, International Business” visa can only work in fields related to their academic qualifications or work experience. The “Highly Specialized Occupation” visa gives holders greater employment flexibility, allowing them to work in multiple related fields. Understanding these restrictions is critical for both businesses and foreign employees to ensure legal employment and employment.

Changing and extending the status of residence are procedures that foreigners often face when working in Japan for a long time. When foreigners wish to change the nature of their work or continue to work in Japan, they need to apply for a change or extension of their status of residence. This process usually requires the submission of detailed application materials, including a new employment contract, company qualification certificates, personal academic qualifications and work experience certificates, etc. The application needs to be submitted to the local immigration bureau before the current period of stay expires. The review process usually takes 1-3 months, during which the applicant can continue to reside and work in Japan.

7.2 Specified Skills Visa System

The Specified Skills Visa System is a new status of residence launched by Japan in April 2019 to cope with labor shortages in specific industries. This system is designed to attract more foreign workers, especially in some industries facing serious manpower shortages.

The system mainly applies to 14 specific industries, including nursing, construction, agriculture, food services, food processing, etc. Each industry has its specific skill requirements and quotas. For example, in the nursing industry, applicants need to pass the Japanese Language Proficiency Test and Nursing Skills Test; while in the construction industry, relevant technical qualifications and work experience are required.

The Specific Skills Visa is divided into two levels: Specific Skills Type 1 and Specific Skills Type 2. The No. 1 visa allows the holder to work in Japan for up to 5 years, but cannot bring family members; the No. 2 visa has no limit on the length of stay and can bring family members to Japan. Currently, only the construction and shipbuilding industries are open to the Type 2 visa.

The process of applying for a specific skills visa is relatively complicated and requires the cooperation of many parties. First, applicants need to pass relevant skills and Japanese language tests. Then, you need to find a Japanese company that is willing to hire and obtain an employment contract from that company. Next, the applicant or his agent needs to submit application materials to the Japanese embassy or consulate abroad, including passport, photos, employment contract, skill certificate, Japanese language proficiency certificate, etc. The entire process can take several months, depending on the applicant’s readiness and review progress.

7.3 Legal obligations for the employment of foreigners

When employing foreigners in Japan, employers need to fulfill a series of legal obligations. These obligations are designed to ensure that the rights and interests of foreign workers are protected, and at the same time to maintain Japan’s employment order and social stability.

Employers are obliged to report the employment status of foreign employees to the public employment security office (i.e. “Hello Work”). This includes reporting when a foreign national is newly hired, as well as reporting when a foreign employee leaves the company. The content of the report includes the foreigner’s name, status of residence, residence card number, employment period and other information. These reports must be completed within one month of hiring or separation.

Employers need to ensure that the work content of foreign employees is within the scope allowed by their status of residence. For example, a foreigner holding a “study abroad” status of residence can only work part-time within a specified period of time, and it is the employer’s responsibility to ensure that this limit is not exceeded.

In addition, employers are also required to provide foreign employees with the same working conditions as Japanese employees, including wages, working hours, rest time, paid leave, etc. This is based on Japanese labor law, which prohibits employment discrimination based on nationality.

Japanese law stipulates strict penalties for illegal employment of foreigners. If an employer knows or should know that a person is not eligible to work in Japan but still hires him or her, he or she may face up to 3 years in prison or a fine of 3 million yen. In addition, illegal employment may also damage the reputation of the company and affect the qualifications to apply for the employment of other foreigners in the future.

In order to avoid illegal employment, employers should carefully check the residence card and status of residence of foreigners, and regularly confirm their period of stay. At the same time, enterprises should also establish internal management systems to ensure that all foreign-related employment activities comply with legal regulations.

7.4 Comparison of foreign employment policies between China and Japan

As two important economies in Asia, China and Japan have both similarities and significant differences in their foreign employment policies, which reflects the different stages of economic development and demographic characteristics of the two countries.

In terms of policy orientation, Japan has gradually relaxed restrictions on the employment of foreigners in recent years due to the serious problems of population aging and labor shortages, such as the introduction of a specific skills visa system to attract more foreign workers. In contrast, as a country with a large population, China’s overall demand for foreign labor is not as urgent as Japan’s, but it still actively attracts highly skilled talents. China’s foreign employment policy is more geared towards attracting high-end talents who can promote economic development and technological innovation.

In terms of visa system, Japan’s residence qualification system is relatively detailed, with multiple visa categories set up for different job types. China adopts a work permit system, which divides foreign talents into three categories: A, B, and C, and adopts different policies according to different categories. The Japanese system focuses more on specific work content, while the Chinese system focuses more on the overall quality assessment of talents.

In terms of employer obligations, both countries require employers to report foreign employees to the government, but Japan’s reporting system is stricter and more frequent. China requires employers to obtain employment certificates and residence permits when hiring foreigners, while Japan emphasizes regular reporting during employment.

In terms of labor protection, both countries emphasize that foreign employees should enjoy the same labor rights as domestic employees, but Japan’s implementation may be stricter in practice. This is partly because Japan has a more mature labor law system and stricter enforcement.

In terms of strategies to attract talents, Japan has focused more on attracting all types of foreign workers by opening up specific industries and relaxing visa restrictions, while China has focused more on attracting high-end talents by providing preferential policies and improving the living environment. For example, China’s “Thousand Talents Plan” is a plan to introduce high-level overseas talents.

Japan’s foreign employment policies are more open and detailed, reflecting its urgent need to cope with labor shortages. China’s policies are more selective, targeting high-end talents who can promote economic transformation and innovation. The policy differences between the two countries reflect their respective economic development stages and strategic needs, providing important reference for companies when formulating transnational human resources strategies.

Summary of the main differences in employment laws between China and Japan

8.1 Differences in contract systems

There are some significant differences in the labor contract systems between China and Japan. These differences reflect the different labor cultures and legal traditions of the two countries. In terms of written contract requirements, Chinese law clearly stipulates that employers must sign written labor contracts with employees, and this must be completed within one month from the date of employment. Employers who fail to enter into a written contract within the stipulated time will be subject to penalties of double wages. In contrast, Japanese law encourages the use of written contracts but does not require them. Japanese employers can choose to establish an employment relationship by verbal agreement or by issuing an offer letter. However, Japanese law requires employers to explain working conditions to employees in writing, including wages, working hours and other important matters.

In terms of the length of the probation period, Chinese law stipulates that the probation period must not exceed 6 months, and the length of the probation period is linked to the term of the labor contract. For example, the probation period for a fixed-term contract of less than 1 year shall not exceed 1 month, and the probation period for a contract of 1 to 3 years shall not exceed 2 months. In Japan, there is no clear statutory probation period limit. The length of the probation period is usually determined by the employer, but it generally does not exceed 3-6 months. It is worth noting that in Japan, even during the probation period, dismissal of employees must be justified and cannot be dismissed at will.

These differences reflect China’s stricter control over labor relations, which aims to protect workers’ rights, while Japan retains more flexibility but also protects employees’ rights through other means.

8.2 Differences in working time systems

There are significant differences between China and Japan in terms of working time management, especially overtime management. Chinese law stipulates that standard working hours are 8 hours per day and 40 hours per week, and overtime hours must not exceed 36 hours per month. Employers need to negotiate with labor unions and workers when arranging overtime work, and pay overtime pay no less than 150%, 200% or 300% of usual wages, depending on the time of overtime work (working days, rest days or legal holidays). However, in actual implementation, many Chinese companies have overtime work phenomena such as “996” (9 a.m. to 9 p.m., 6 days a week), which has become a hot topic in society.

In contrast, Japan’s overtime management is stricter. Japan’s standard working hours are the same as those in China, but there are stricter restrictions on overtime. Japan implements the “36 Agreement” system, which means that companies must sign an agreement with employee representatives to clearly stipulate the upper limit of overtime hours. The latest revision of the Labor Standards Law stipulates that, except for special circumstances, overtime hours shall not exceed 45 hours per month and 360 hours per year. Businesses that violate these regulations will face severe penalties.

In terms of the special working hours system, Japan has a “discretionary labor system” which is similar to China’s “comprehensive working hours system”, but the scope of application and management methods are different. Japan’s discretionary labor system is mainly applicable to highly professional jobs, such as research and development, news gathering and editing, etc. It allows employees to arrange their working hours independently and calculate wages according to scheduled working hours, regardless of actual working hours. China’s comprehensive working hours system is more extensive and can coordinate working hours within a certain period based on industry characteristics and work needs. Both systems aim to provide more flexible working hours management for specific industries or work natures, but the Japanese system places more emphasis on professional autonomy, while the Chinese system focuses more on the balance of overall working hours.

8.3 Differences in dismissal systems

In terms of dismissal systems, both China and Japan have restrictions on employers’ right to dismiss, but the extent and methods are different. Generally speaking, Japan’s dismissal system is stricter than China’s, making it more difficult to fire employees.

In China, the Labor Contract Law stipulates several circumstances under which labor contracts can be terminated, such as serious disciplinary violations by employees, inability to perform their jobs, and major changes in company operations. However, the employer must provide sufficient evidence to justify the dismissal. In addition, employees may not be dismissed under certain special circumstances (such as pregnancy, work injury, etc.). If the employer unlawfully dismisses the employee, he may be required to pay compensation or reinstate the employment relationship.

Japan’s dismissal system is stricter. Japanese courts have long formed the legal doctrine of “abuse of dismissal rights”, that is, dismissal is invalid unless there is an objective and reasonable reason and it is deemed appropriate by society. This makes it extremely difficult for Japanese companies to lay off employees. Usually, Japanese companies will choose to adjust personnel through negotiated resignation or early retirement rather than direct layoffs.

In terms of the economic compensation system, Chinese law stipulates that in many cases (such as non-renewal of contracts upon expiration, termination of contracts through negotiation, etc.), employers need to pay economic compensation to employees, with the standard being one month’s salary for each year of work. Japan does not have a statutory economic compensation system, but in practice, many Japanese companies will provide voluntary severance subsidies or severance pay during labor negotiations to encourage employees to voluntarily leave their jobs.

These differences reflect the different balances between stability and flexibility in labor relations in the two countries. The Japanese system places more emphasis on employment stability, while the Chinese system not only protects the rights and interests of employees, but also provides companies with a certain degree of employment flexibility.

8.4 Differences in social insurance

There are significant differences in coverage and payment ratio between the social insurance systems of China and Japan. These differences reflect the different social welfare concepts and economic development stages of the two countries.

In terms of coverage, China’s social insurance system includes pension insurance, medical insurance, unemployment insurance, work-related injury insurance and maternity insurance, collectively referred to as the “five insurances”. This system covers most urban workers, but its coverage of rural residents and informal workers is not comprehensive enough. In recent years, China has been working hard to expand social security coverage and promote urban and rural coordination.

Japan’s social insurance system is more comprehensive, mainly including health insurance, pension insurance, nursing care insurance, work-related injury insurance and employment insurance. Japan’s system covers almost all citizens, including the self-employed and informal employees. Especially in terms of medical insurance, Japan has achieved universal coverage, and everyone can obtain basic medical protection.

In terms of payment ratio, China’s social insurance payment ratio is generally higher than Japan’s. Taking pension insurance as an example, Chinese companies need to pay 16% of employees’ wages and individuals pay 8%; while for Japan’s pension insurance, companies and individuals each pay 9.15%. In terms of medical insurance, Chinese enterprises usually pay between 6% and 12%, and individuals pay about 2%; Japanese health insurance is equally shared by enterprises and individuals, with each paying about 5%.

China’s social insurance payment base is usually based on the actual salary of employees, but it must not be lower than the local minimum wage, nor higher than 300% of the local average wage. Japan determines the payment amount based on standard remuneration levels, which to a certain extent reduces the burden on high-income earners.

These differences reflect the two countries’ different strategies in managing social welfare and labor costs. China’s high payment ratio is aimed at quickly accumulating social security funds to cope with the challenges of an aging population, while Japan maintains its mature social welfare system through a more balanced payment ratio and comprehensive coverage.

8.5 Differences in the handling of labor relations

There are obvious differences in the handling of labor relations between China and Japan, which are mainly reflected in the role of trade unions and labor dispute resolution mechanisms. These differences stem from the two countries’ different political systems, economic models and cultural traditions.

In terms of the role of trade unions, China’s trade union system is a unified organization led by the All-China Federation of Trade Unions, which has strong political and administrative overtones. The main functions of China’s trade unions include safeguarding the legitimate rights and interests of employees, assisting enterprises to improve production efficiency, and participating in the democratic management of enterprises. However, in actual operations, Chinese trade unions often play more of a coordinator role between enterprises and employees rather than being pure labor representatives.

In contrast, Japan’s trade union system is more pluralistic and independent. Japan’s trade unions are mainly divided into three levels: enterprise trade unions, industrial trade unions and federation of trade unions. Among them, enterprise trade unions play a central role in Japanese labor relations. Japanese labor unions are more inclined to safeguard employee rights and interests through consultation and negotiation with corporate management, including wage negotiations and improvement of working conditions. Japanese trade unions are relatively independent and can represent labor interests more directly.

In terms of labor dispute resolution mechanism, China mainly resolves labor disputes through three stages: labor dispute mediation, arbitration and litigation. When workers encounter disputes, they usually first seek internal mediation. If mediation fails, they can apply for labor arbitration. If you are not satisfied with the arbitration result, you can also file a lawsuit in court. This process can be lengthy and often somewhat confrontational.

Japan’s labor dispute settlement mechanism places more emphasis on negotiation and mediation. Japan has a specialized labor committee, which is responsible for handling labor disputes. The labor committee resolves disputes through adjustment and arbitration, emphasizing communication and compromise between both parties. In addition, Japan has a unique “collective bargaining” system that allows labor unions to negotiate with companies on behalf of employees. This method can effectively prevent and resolve potential labor conflicts.

Japan’s industrial relations management emphasizes negotiation, compromise and long-term stability, while China’s system relies more on legal and administrative means. Japan’s model can help build more harmonious labor relations, but it may be lacking in efficiency; China’s model may be more conducive to quickly resolving disputes, but it may also lead to increased antagonism in labor relations.

These differences reflect the two countries’ different strategies and cultural backgrounds in balancing labor relations, protecting workers’ rights, and maintaining social stability. Understanding these differences is crucial for companies operating in both countries to better manage human resources and handle labor relations.

Suggestions and precautions for Chinese enterprises

After an in-depth analysis of the main differences in employment laws between China and Japan, we can provide some important suggestions and considerations for Chinese companies planning to do business in Japan or have already entered the Japanese market. These suggestions are designed to help Chinese companies better adapt to Japan’s legal environment, avoid potential legal risks, and establish harmonious labor relations.

First, Chinese companies need to fully understand the rigor and complexity of Japan’s employment legal system. Japan’s labor regulations include not only statutory law but also a large amount of case law and administrative guidance. Therefore, when companies first enter the Japanese market, they should hire professionals or legal consultants who are familiar with Japanese labor laws to fully understand relevant laws and regulations, and formulate human resources policies and systems that comply with Japanese legal requirements. This not only includes basic labor contract management, but also involves working time arrangements, salary system design, social insurance payment and other aspects.

Secondly, Chinese companies should pay special attention to Japan’s strict restrictions on dismissal. Compared with China, Japan’s dismissal system is stricter, making it difficult for companies to lay off employees based solely on business needs. Therefore, when formulating human resources strategies, companies should pay more attention to long-term planning, recruit carefully, and establish a complete performance evaluation system. When faced with the need for personnel adjustments, priority should be given to internal job transfers, training or negotiated separation, rather than direct dismissal. At the same time, companies should also establish an effective employee retention mechanism to attract and retain talents through a good working environment, reasonable salary and benefits, and career development opportunities.

Third, Chinese companies need to pay full attention to Japan’s trade union system and collective bargaining mechanism. Although the rate of union organization in Japan has declined in recent years, enterprise unions still play an important role in labor relations. Chinese companies should actively communicate with labor unions, establish good cooperative relations, and conduct regular labor consultations. This not only helps prevent labor disputes, but also improves the company’s social image. When facing major decisions or changes, such as salary adjustments, work system changes, etc., you should proactively negotiate with the labor union and listen to employees’ opinions to reach a solution acceptable to both parties.

Fourth, in terms of working time management, Chinese companies need to pay special attention to Japan’s strict restrictions on overtime. In recent years, the Japanese government has increased its supervision of excessive overtime and proposed policies such as “working style reform”. Chinese companies should establish a scientific working hour management system, strictly control overtime hours, and ensure that overtime pay is paid in accordance with regulations. At the same time, you can also consider introducing flexible working methods such as flexible working systems or remote working, which can not only improve work efficiency, but also help employees achieve work-life balance.

Fifth, in terms of social insurance, Chinese companies need to fully understand Japan’s social insurance system and ensure correct and timely payment of various social insurance for employees. Although Japan’s social insurance payment ratio is generally lower than that of China, its coverage is wider, including nursing care insurance and other items that are not yet popular in China. Enterprises should carefully study the payment standards and procedures of different insurances to avoid illegal risks caused by negligence. At the same time, you can also consider providing additional commercial insurance or benefits to enhance employees’ sense of security and belonging.

Sixth, Chinese companies should fully understand and respect Japanese corporate culture and labor habits. For example, Japanese companies usually pay more attention to collectivism and long-term employment relationships, and have high employee loyalty. Chinese companies can appropriately absorb Japanese management concepts while maintaining their own characteristics, such as implementing a seniority system, creating a harmonious working atmosphere, and paying attention to employee training and career development. This helps companies better integrate into Japanese society and attract and retain local talents.

Finally, Chinese companies should establish sound internal communication mechanisms and dispute resolution procedures. Japan’s labor dispute resolution mechanism is more inclined to mediation and negotiation. Companies should cultivate internal communication and negotiation capabilities and establish smooth employee feedback channels. When labor disputes occur, priority should be given to resolving the problem through internal consultation or seeking mediation from professional organizations such as labor committees, and avoiding direct resort to legal means. This not only saves time and costs, but also helps maintain good labor relations and the enterprise. reputation.

In general, Chinese companies need to adopt more prudent and long-term human resource management strategies when doing business in Japan. This is not just a matter of complying with the law, but also the key to sustainable corporate development. By in-depth understanding of Japan’s employment laws and labor culture and formulating human resources policies that are consistent with local realities, Chinese companies can establish stable labor relations in the Japanese market and lay a solid foundation for their long-term development. At the same time, these experiences can also feed back the human resources management practices of enterprises in China and other countries, and promote the improvement of the overall management level of enterprises. As globalization deepens today, cross-cultural human resource management capabilities will undoubtedly become an important advantage for Chinese companies to participate in international competition.