This is the final installment of the 6-part series “Thai Companies Entering Japan.” Part 1 covered the entry vehicle, Part 2 the Foreign Exchange and Foreign Trade Act, Part 3 incorporation, Part 4 the Business Manager visa, and Part 5 tax. This final article addresses Japanese-side labor matters that arise when Thai companies start hiring Japanese employees and running operations on the ground, with reference to the differences from the Thai Labour Protection Act.
Important note This article describes the framework as of April 2026. For the latest information, please always check with the relevant government authorities.
What this final installment covers
The labor issues that arise in the operating phase fall into eight layers:
- The structure of Japanese labor law (Labor Standards Act, Labor Contract Act, Minimum Wage Act, social and labor insurance) compared with the Thai Labour Protection Act
- Employment contracts and the obligation to specify working conditions (Article 15 of the Labor Standards Act)
- The Rules of Employment — when they must be drafted and filed (Article 89)
- Statutory working hours, the Article 36 agreement, and the cap on overtime
- Wages, premium pay, and the minimum wage (October 2025 revision)
- The four social and labor insurance schemes — health insurance, employee pension, employment insurance, workers’ accident compensation insurance
- Dismissal regulation, the four-element test for redundancy, the doctrine on non-renewal, and the conversion of fixed-term to indefinite-term contracts
- Recent reforms (2024-2026): equal pay for equal work, amendments to the Childcare and Family Care Leave Act, harassment prevention, and the Freelance Protection Act
1. Structure of Japanese labor law
Japanese labor law is built around the Labor Standards Act (“LSA”) setting minimum standards, the Labor Contract Act (“LCA”) providing the rules of contract, the Minimum Wage Act, and the social and labor insurance laws. The LSA is a floor; any contractual term below the LSA standard is void and replaced by the statutory minimum (Article 13).
Table 1: Main Japanese labor-related laws
| Area | Main law |
|---|---|
| Minimum working conditions | Labor Standards Act |
| Contractual rules | Labor Contract Act |
| Wages | Minimum Wage Act / Wage Payment Assurance Act |
| Health and safety | Industrial Safety and Health Act |
| Anti-discrimination | Equal Employment Opportunity Act |
| Part-time / fixed-term | Part-Time and Fixed-Term Workers Act |
| Dispatch | Worker Dispatching Act |
| Childcare / family care | Childcare and Family Care Leave Act |
| Social insurance | Health Insurance Act / Employees’ Pension Insurance Act |
| Labor insurance | Employment Insurance Act / Industrial Accident Compensation Insurance Act |
| Harassment | Labor Policy Comprehensive Promotion Act / Equal Employment Opportunity Act |
| Freelance | Specified Subcontract Worker Protection Act (effective November 2024) |
| Older / disabled workers | Act on Stabilization of Employment of Elderly Persons / Act on Promotion of Employment of Persons with Disabilities |
Thai labor law centers on the Labour Protection Act B.E. 2541 and the Social Security Act B.E. 2533, a more consolidated structure than Japan’s. Designing HR practices on the assumption that “compliance with the Labour Protection Act is enough” can readily lead to violations in Japan, where multiple individual statutes apply concurrently.
2. Employment contract and notice of working conditions (Article 15 of the LSA)
Article 15 of the LSA requires the employer to specify in writing (or, with the employee’s consent, electronically) the principal working conditions — wages, working hours, and so on — at the time the employment contract is concluded. From April 2024, the following three additional items must be specified for fixed-term contracts:
- Whether and on what terms the contract may be renewed
- The opportunity to apply for indefinite-term conversion
- The working conditions after conversion to an indefinite-term contract
Employment contracts in Thai, English, or Japanese are all legally valid, but disputes are adjudicated in Japanese. Standard practice is to use Japanese as the master text and append an English or Thai translation for Thai expatriates.
3. Rules of Employment (Article 89 of the LSA)
A workplace that regularly employs ten or more workers must draft Rules of Employment and file them with the relevant Labor Standards Inspection Office (Article 89). The filing must be accompanied by a written opinion from the workers’ representative — the majority union or, if none, a representative chosen by a majority of workers (Article 90) — and the rules must be made known to employees after adoption or amendment (Article 106).
Mandatory items include working hours, wages, and matters relating to retirement; if the employer establishes rules on retirement allowances, bonuses, occupational safety, accident compensation, awards, or disciplinary measures, those must be set out as well.
Section 108 of the Thai Labour Protection Act imposes a similar drafting obligation on workplaces with ten or more employees, so the structures are comparable. Japan, however, treats the Rules of Employment as a regulator of the contract itself under Article 7 of the LCA, and Article 10 invalidates unreasonable disadvantageous changes. The contractual force is therefore stronger than in Thailand.
4. Statutory working hours, the Article 36 agreement, and overtime cap
4-1 Statutory hours, breaks, days off
Article 32 of the LSA sets the statutory working hours at 40 per week and 8 per day. Breaks of at least 45 minutes (for a workday over 6 hours) or 60 minutes (over 8 hours) must be given mid-shift (Article 34). Days off must be at least one per week, or four in any four-week period (Article 35).
The Thai Labour Protection Act sets a 48-hour week as the principle (varying by industry), so Japan is 8 hours shorter per week. As of April 2026, Thailand is debating a 40-hour-week bill, but the 48-hour standard remains in force.
4-2 The Article 36 agreement and the cap on overtime
To require work beyond statutory hours or on statutory days off, the employer must conclude a labor-management agreement under Article 36 (the “Article 36 agreement”) and file it with the Labor Standards Inspection Office. From April 2019 (April 2020 for SMEs), an upper limit with criminal penalties has been in force.
Table 2: Cap on overtime
| Category | Cap |
|---|---|
| Default | 45 hours per month, 360 hours per year |
| With special clause | 720 hours per year, an average of 80 hours per month over multiple months, less than 100 hours in any single month, and the default cap may be exceeded only in 6 months per year |
| Construction, drivers, doctors | Fully applied from April 2024 (with industry-specific carve-outs) |
A special clause requires an unforeseeable substantial increase in workload — generic seasonal busy periods will not qualify.
5. Wages, premium pay, and the minimum wage
5-1 Five principles of wage payment (Article 24 of the LSA)
Wages must be paid in currency, directly to the worker, in full, at least once a month, and on a fixed date (Article 24). Bank transfers require the worker’s consent. The statute of limitations for wage claims, amended in 2020, is currently three years and is scheduled to become five years (Article 115).
5-2 Premium pay (Article 37 of the LSA)
Table 3: Premium pay rates
| Type | Rate |
|---|---|
| Overtime | 25% or more |
| Late-night work (22:00-05:00) | 25% or more |
| Statutory holiday work | 35% or more |
| Overtime exceeding 60 hours per month | 50% or more (also applicable to SMEs since April 2023) |
Where the categories overlap (overtime at night, holiday at night, and so on), the premiums are stacked.
5-3 Regional minimum wage (revised every October)
Regional minimum wages are revised every October by prefecture. The revision in October 2025 brought the national weighted average to JPY 1,121 per hour (an increase of JPY 66, the largest hike since the target system began). The Tokyo regional minimum wage is JPY 1,226 per hour (effective 3 October 2025). Latest amounts for other prefectures are available from each Prefectural Labor Bureau or the Ministry of Health, Labour and Welfare’s national list.
Thailand also has province-specific minimum wages, but Japan’s regional minimum wage is mandatory law with criminal penalties: any agreed wage below the floor is void and replaced by the statutory minimum.
The above figures are accurate as of April 2026. The next revision is scheduled for October 2026. Please confirm the latest amounts with the Prefectural Labor Bureau.
6. Annual paid leave (Article 39 of the LSA)
Article 39 of the LSA grants 10 working days of annual paid leave to a worker who has been continuously employed for six months and has worked at least 80% of all working days. The entitlement increases with tenure up to a maximum of 20 working days. For workers entitled to 10 or more days, the employer must designate the timing of at least 5 days per year (designation duty, effective April 2019).
The Thai Labour Protection Act, Section 30, provides 6 working days of annual paid leave only after one year of service. Japan is more generous in both the number of days and the designation duty. Importing a Thai parent’s HR rule unchanged is a typical source of unlawful annual-leave shortfalls in Japan.
7. The four social and labor insurance schemes
Corporate workplaces are mandatorily covered by four schemes: health insurance, employees’ pension insurance, employment insurance, and workers’ accident compensation insurance.
Table 4: Overview of the four schemes
| Scheme | Statute | Coverage | Burden | Main contact |
|---|---|---|---|---|
| Health insurance | Health Insurance Act | Mandatory for corporate workplaces | Equal split between employer and employee | Japan Health Insurance Association etc. |
| Employees’ pension | Employees’ Pension Insurance Act | Same | Equal split (rate fixed at 18.3% since September 2017) | Japan Pension Service |
| Employment insurance | Employment Insurance Act | Workplaces using workers | Both sides (rate by sector, revised annually) | Hello Work |
| Workers’ accident insurance | Industrial Accident Compensation Insurance Act | Same | Employer in full (rate by industry, revised every 3 years) | Labor Standards Inspection Office |
For the Japan Health Insurance Association, health insurance rates differ by prefecture and are revised every March. Workers aged 40-64 also pay long-term care insurance on top. Standard monthly remuneration is determined annually based on April-June wages and revised on the fly when fixed wages change materially.
The Thai Social Security Act uses a tripartite contribution structure (employee / employer / government), which differs fundamentally from Japan’s two-party split. Thinking in terms of the lighter Thai split can lead to underestimating the actual employer cost in Japan.
Please verify current rates with the Japan Health Insurance Association, Japan Pension Service, and Ministry of Health, Labour and Welfare publications as of April 2026.
8. Dismissal regulation — the most important Japan-specific issue
For owners and managers of Thai companies, the most counterintuitive aspect of Japanese law is dismissal regulation.
Article 16 of the LCA provides that “a dismissal that lacks objectively rational grounds and cannot be considered socially appropriate is treated as an abuse of right and shall be void” (the doctrine of abuse of dismissal rights, confirmed in Nihon Shokuen Seizo, Supreme Court, 25 April 1975).
For dismissals based on managerial reasons (redundancy), the case law applies a four-element test:
- Necessity of personnel reduction
- Effort to avoid dismissal
- Reasonableness in selecting employees for dismissal
- Procedural propriety (explanation and consultation with employees and unions)
In addition, Article 20 of the LSA requires 30 days’ advance notice or payment of at least 30 days’ average wage in lieu, and Article 19 prohibits dismissal during periods of medical leave for work-related injuries and during maternity leave plus 30 days afterward.
Table 5: Fundamental difference between Japan and Thailand on dismissal
| Aspect | Japan | Thailand |
|---|---|---|
| Freedom of dismissal | Dismissal lacking objective grounds and social appropriateness is void | Dismissal is in principle possible in exchange for severance pay |
| Severance | No statutory scheme (voluntary) | Statutory severance pay by length of service (up to 400 days’ wages) |
| Advance notice | 30 days’ notice or 30 days’ average wage in lieu | At least one wage period in advance |
A “we can let them go as long as we pay severance” approach — natural in a Thai context — risks judgments declaring dismissal void with reinstatement and back-pay (compensation for the dismissal period) in Japan.
9. Fixed-term contracts, indefinite-term conversion, and the non-renewal doctrine
Article 18 of the LCA provides that when a fixed-term contract is repeatedly renewed and the total contract period exceeds five years, the worker can apply for conversion to an indefinite-term contract (the indefinite-term conversion rule, effective April 2013). An interruption of six months or more (cooling-off period) resets the count.
Article 19 codifies the non-renewal doctrine: where a repeatedly renewed fixed-term contract is in substance equivalent to an indefinite-term contract (the substantively-indefinite type, Toshiba Yanagicho Plant, Supreme Court, 22 July 1974) or where there is a reasonable expectation of renewal (the reasonable expectation type, Hitachi Medico, Supreme Court, 4 December 1986), the doctrine of abuse of dismissal rights is applied by analogy to the non-renewal.
From April 2024, employers must additionally specify, when concluding a fixed-term contract, the renewal cap, the opportunity to apply for indefinite-term conversion, and the post-conversion working conditions (Article 15 of the LSA).
10. Equal pay for equal work (Part-Time and Fixed-Term Workers Act)
Article 8 of the Part-Time and Fixed-Term Workers Act prohibits unreasonable disparities in treatment between part-time / fixed-term workers and regular workers (balanced treatment). Article 9 prohibits discriminatory treatment of part-time / fixed-term workers whose job content and the scope of changes in job content and assignment are identical to those of regular workers (equal treatment).
The reasonableness of disparities is assessed item by item — basic salary, bonus, allowances, retirement allowance, welfare benefits — by reference to the nature and purpose of each item (Osaka Medical and Pharmaceutical University, Supreme Court, 13 October 2020; Metro Commerce, same date).
11. Recent reforms (2024-2026)
Table 6: Recent reforms to keep in mind
| Reform | Effective | Summary |
|---|---|---|
| Full application of overtime cap | April 2024 | Construction, drivers, doctors fully covered |
| Specified Subcontract Worker Protection Act (Freelance Protection Act) | 1 November 2024 | Written terms, payment within 60 days, harassment prevention |
| Childcare and Family Care Leave Act amendment (Stage 1) | April 2025 | Expansion of childcare-related leave, telework as effort obligation, individual notification and intention check for elder care |
| Childcare and Family Care Leave Act amendment (Stage 2) | October 2025 | Promotion of male childcare leave, flexible-work options for children aged 3 to school entry |
| Increase in statutory disability employment ratio | July 2026 | From 2.5% to 2.7% for private companies |
In addition, the obligation to take measures to prevent power harassment under the Labor Policy Comprehensive Promotion Act has applied to SMEs since April 2022. Together with the obligations to prevent sexual harassment and maternity harassment under the Equal Employment Opportunity Act, and the recently issued guidelines on customer harassment, employers are expected to put in place a comprehensive harassment prevention regime.
12. Ten points where Thai and Japanese labor law decisively differ
Table 7: Decisive differences
| # | Issue | Japan | Thailand |
|---|---|---|---|
| 1 | Dismissal | Doctrine of abuse of dismissal rights (void in principle) | Dismissal possible with severance pay |
| 2 | Severance | No statutory scheme (voluntary) | Statutory severance pay (up to 400 days’ wages) |
| 3 | Statutory working hours | 40 hours per week | 48 hours per week (40-hour-week bill in progress) |
| 4 | Premium pay | 25% / 35% / 50% as set out above | 1.5x for overtime, 3x for holiday work, etc. |
| 5 | Rules of Employment | Filing with Labor Standards Inspection Office for 10+ workers | Drafting required for 10+ workers |
| 6 | Annual paid leave | 10 days after 6 months (max 20) plus 5-day designation duty | 6 days after 1 year |
| 7 | Social insurance contribution | Two-party split (employer / employee) | Three-party split (employer / employee / government) |
| 8 | Indefinite-term conversion | Article 18 LCA — convert at 5-year mark | No equivalent provision |
| 9 | Equal pay for equal work | Detailed regulation under Part-Time and Fixed-Term Workers Act | Patchwork of individual provisions |
| 10 | Wage claim limitation | 3 years currently (5 years in due course) | Different framework under Section 193 of the Labour Protection Act |
13. Summary of the entire series
To close, here is a phase-by-phase map of all six installments.
Table 8: Phase-by-phase quick reference
| Phase | Part | Main issues |
|---|---|---|
| Decision-making | Part 1 | Entry vehicle (subsidiary / branch / representative office / joint venture) |
| Regulatory compliance | Part 2 | Inward FDI regulation and prior FEFTA notification |
| Incorporation | Part 3 | Articles, capital, registration, bank account, tax-office filings |
| Personnel placement | Part 4 | Business Manager visa (post-October 2025 reform) |
| Operating tax | Part 5 | Corporate tax, consumption tax, Japan-Thailand tax treaty |
| Organizational operation | Part 6 (this article) | Employment contract, Rules of Employment, Article 36 agreement, social insurance, dismissal |
The issues are interconnected, and considering them together at the planning stage prevents costly course corrections later. For example, choosing a branch in Part 1 leads to PE taxation issues under Part 5; setting capital at JPY 30 million or more under Part 3 aligns with the new Business Manager requirements in Part 4 and feeds into social insurance application in Part 6.
Closing words
Thank you for reading the “Thai Companies Entering Japan” series through to its final installment. Entering Japan is a substantial project that traverses corporate vehicle selection, regulatory clearance, incorporation, immigration, tax, and labor matters. We hope this series serves as a map that helps Thai executives and operating managers grasp the overall landscape and consult with specialists more efficiently.
Related articles
- Thai Companies Entering Japan Part 1: Choosing the Entry Vehicle
- Thai Companies Entering Japan Part 2: Inward FDI Regulation and the Foreign Exchange and Foreign Trade Act
- Thai Companies Entering Japan Part 3: Practical Aspects of Incorporation
- Thai Companies Entering Japan Part 4: Business Manager Visa — October 2025 Major Reform
- Thai Companies Entering Japan Part 5: Tax
This article is provided for general informational purposes on Japan’s labor and tax framework as of April 2026 and does not constitute legal or labor advice. The Labor Standards Act, the Labor Contract Act, the Minimum Wage Act, the Equal Employment Opportunity Act, the Part-Time and Fixed-Term Workers Act, the Worker Dispatching Act, the Childcare and Family Care Leave Act, the Industrial Safety and Health Act, the Employment Insurance Act, the Industrial Accident Compensation Insurance Act, the Health Insurance Act, the Employees’ Pension Insurance Act, the Specified Subcontract Worker Protection Act, the Labor Policy Comprehensive Promotion Act, and related notifications, circulars, and case law are amended frequently. The rates, minimum wages, caps, and periods cited herein are based on information publicly available at the time of writing; please confirm the latest figures with the Ministry of Health, Labour and Welfare, the Prefectural Labor Bureaus, the Japan Pension Service, the Japan Health Insurance Association, the Labor Standards Inspection Office, and lawyers. For specific labor decisions — including dismissal and amendment of Rules of Employment — please consult a qualified professional. Our firm works in collaboration with JTJB International Lawyers’ Thai-qualified attorneys and Tono, Tanami & Kosada Law Office’s Japanese-qualified lawyers.