Labor Dispatching in Japan: Is an Employer of Record Legal? 7 Practical Steps
Yes, an employer of record is legal in Japan when it is set up as what it really is. If a Japanese company employs a person and your company directs that person’s daily work, Japanese law calls the arrangement worker dispatch (rōdōsha haken). Only a business licensed by the Ministry of Health, Labour and Welfare may provide it, some jobs are closed to it, and both the employing company and your company take on duties. The seven steps below show how to keep a Japan EOR hire on the right side of those rules.
How Japanese law looks at an employer of record
Japanese law has no category called “employer of record”. It looks at two facts: who employs the person, and who directs the work. Those two facts decide which of three models you are in.
| Model | Who employs | Who directs the work | Main rules |
|---|---|---|---|
| Direct employment | Your own Japanese company or branch | You | Labor Standards Act, Labor Contracts Act, social insurance |
| Worker dispatch | A licensed Japanese dispatch business | You, within the dispatch terms | All of the above, plus the Worker Dispatching Act |
| Contracting (ukeoi) | The contractor | The contractor, never you | The contractor must work independently and manage its own staff |
A typical EOR, in which your manager assigns tasks and reviews the work, is worker dispatch. Calling it a consulting or outsourcing contract does not change that.
1. Confirm the employing company holds a dispatch licence
Running a dispatch business needs a licence from the Minister of Health, Labour and Welfare under Article 5 of the Worker Dispatching Act. Licence numbers take the form 派13-123456, and every licensed business appears on the ministry’s public register. Ask the provider which Japanese company will employ your hire and for its licence number, and check it. Licences must be renewed, after three years and then every five, so check again at renewal.
2. Check that the role can be dispatched
- Dispatch is prohibited for port transport, construction and security work, and for most medical work in hospitals and clinics.
- Employment contracts of 30 days or less are banned for dispatch, except for listed specialist jobs, workers aged 60 and over, students and a few other groups.
- A person who was your direct employee in the past 12 months cannot be dispatched back to you.
3. Plan for the period limits
Two three-year limits apply to fixed-term dispatched workers. Your workplace can use dispatched workers for up to three years, and you can extend that by three years at a time after hearing your majority union or employee representative. Separately, the same person can work in the same organisational unit, such as a section, for up to three years, and that limit cannot be extended. A gap of more than three months restarts the count.
The limits do not apply to workers employed by the dispatch business on indefinite contracts, workers aged 60 and over, or cover for maternity, childcare or family-care leave. That is why the contract type should be agreed before the hire, not after.
4. Agree pay under the equal-treatment rules
A dispatched worker’s pay and conditions must follow one of two methods. Under the first, they are equal or balanced with your own comparable staff. Under the second, the dispatch business signs an agreement with its staff representatives and pays at least the benchmark wage the ministry publishes each year for the job. Either way, you must give the dispatch business information about how you treat comparable staff before the contract is signed, and dispatched workers get the same access to training, canteens and rest rooms as your own people.
5. Put the dispatch terms in writing
The dispatch agreement between the employing company and your company sets out the work, the place, the supervisor on each side, working days and hours, safety and how complaints are handled. The employee receives written working conditions from the employer and a notice of the dispatch terms. Since April 2024 written working conditions must also state how the workplace and duties may change and, for fixed-term contracts, any limit on renewals.
6. Set up your own duties as the client
- Name a supervisor on your side (派遣先責任者) for every 100 dispatched workers at a workplace, unless the workplace has five or fewer people.
- Keep a dispatch register (派遣先管理台帳) with dates, hours and work done, and keep it for three years.
- Keep working time within the employing company’s 36 Agreement. Overtime beyond it is a breach for which you, as the client, are responsible.
- Prevent harassment and keep the workplace safe, including for staff working from home.
7. Avoid disguised contracting, and know the consequences
MHLW Notice No. 37 sets the test for genuine contracting: the contractor must direct and manage its own staff, including their hours and discipline, and do the work independently with its own funding, equipment or expertise. If you direct someone supplied under a contract that does not meet this test, the arrangement is treated as dispatch.
What happens if it goes wrong. Under Article 40-6 of the Act, a client that receives workers from an unlicensed business, uses them in prohibited work, breaches the period limits or uses disguised contracting is deemed to have offered the worker direct employment on the same terms, unless it neither knew nor should have known. Operating an unlicensed dispatch business is punishable by up to one year’s imprisonment or a fine of up to ¥1 million.
How NNRoad structures a Japan EOR hire
Before we propose a hire, we confirm in writing which Japanese company will employ the person and the legal basis for the arrangement, and we check the role against the steps above. We agree the contract type with you, and set up your supervisor and how hours are recorded and approved within the employer’s 36 Agreement. If a role does not fit, we say so and suggest another lawful route. Read how the service works on our employer of record in Japan page.
Questions about labour dispatch and EOR in Japan
Is an employer of record the same as worker dispatch in Japan?
In most cases, yes. When a Japanese company employs the person and your company directs the work, the arrangement is worker dispatch, whatever the contract is called.
Does the three-year limit apply to every EOR employee?
No. It applies to fixed-term dispatched workers. Workers employed on indefinite contracts by the dispatch business, and workers aged 60 and over, are outside it.
Can we move an existing employee into an EOR?
Not someone who was your own direct employee in the past 12 months; they cannot be dispatched back to you. The exception is a worker aged 60 or over who retired at the mandatory age.
What happens if a dispatch arrangement is unlawful?
The client can be deemed to have offered the worker a direct job under Article 40-6, and the provider faces penalties and loss of its licence. Check the licence and the structure before you sign.
Can we hire the employee directly later?
Yes. Many companies move the employee to their own Japanese company once it is set up, with the employee’s agreement. Agree in advance how notice and service will be handled.
Want your Japan role reviewed?
Tell us about the role and how your team will work with the person. We will check it against the dispatch rules before any offer.