Contractors in Japan
When you wish to grow your company, you may hire globally to support your goals. Independent contractor relationships can support various project needs, but you must understand how to hire this type of worker.
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When you wish to grow your company, you may hire globally to support your goals. Independent contractor relationships can support various project needs, but you must understand how to hire this type of worker.
Hiring independent contractors in Japan
While you may be ready to hire an independent contractor in Japan, you should first know the laws surrounding contractors.
Employees vs. contractors
Japanese law defines an independent contractor as any entity or person that provides services free of supervision from the client. These individuals or entities:
- Have the freedom to reject or accept projects.
- Determine how and when a project is completed.
- Acquires any funds necessary to complete a project.
- Assumes responsibility for damages caused by performance.
- Report earnings as business income, not salary.
Employees generally have permanent relationships with employers and provide ongoing labor that’s required to run the business. These individuals also have to abide by the employer’s performance requirements, including working hours.
Penalties for misclassification
If you hire an individual as a contractor but treat them like a employee, you can face:
- Hefty fines
- Criminal charges
- Damaged reputation
How to hire independent contractors in Japan
The contractor hiring process should involve three key steps.
1. Carefully conduct interviews
Advertising your need for a contractor will look generally the same as an employee search. You should include your request for a contractor in the job description, so contractors know what they’re applying for.
The interview process will be a little different than the process for employees. Rather than asking questions about character traits, you should focus your interview entirely on skills and experience. You do not need to know how a contractor will integrate with your company’s culture. You only need assurance they can complete your project.
2. Create a service agreement
While there is no obligation to provide benefits to independent contractors, creating a contract of service will clarify any terms and reduce legal risks. Your contract agreement should include:
- Termination conditions
- Payment schedule and method
- A description of the project and what signifies its completion
3. Introduce necessities
Training programs are not recommended for contractors because it may appear you are telling your contractors how to do their job. A brief introduction is a better way to help them adjust to your company without overstepping. Introduce your contractor to key people, workflows, and tools within your organization that will assist them as they work.
How to pay independent contractors in Japan
Contractors often receive pay on a project basis, but they may agree to weekly or monthly payment schedules. Independent contractors should receive consumption tax from you in addition to the service fee. If a contractor is a legal entity, you are not responsible for withholding income tax. If they are an individual, you should withhold income tax from their payment.
Terminating independent contractors
Termination for independent contractors falls under the Civil and Commercial Code. There are no minimum or maximum notice periods, and your contract of service can establish conditions for termination. Without justifiable cause laid out in your contract of service, your contractor may have the power to call for unlawful termination.
Turn to Globalization Partners when hiring independent contractors in Japan
As an extension of Globalization Partners’ Global Employment Platform™, G-P Contractor allows companies to hire anyone, anywhere, for both short- and long-term projects. Whether you’re hiring employees or contractors, we streamline the process with a single solution for your global workforce. Contact us to learn more.}
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THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Globalization Partners does not provide legal or tax advice and the information is not tailored to the specific situations of your company or your workforce. Globalization Partners makes no representations or warranties concerning the accuracy, completeness or timeliness of this information. Globalization Partners shall have no liability arising out of, or in connection with, the information, including any loss caused by use of, or reliance on, the information.