Termination and Contract Risk in Japan

Practicing entrepreneurs describe firing an employee in Japan as a system-level fact: it is almost impossible. Withholding pay for absences is allowed, but a full termination requires many formal procedures; violating them lets the employee go to the labor inspection office, win reinstatement, and expose the company to fines. Probation terms and dismissal conditions, even when written and signed by the employee, are not guaranteed to be enforceable — a court can void them if they conflict with labor law. In one real case, a company let go of four employees on fixed-term contracts by paying a one-month notice, two months' salary, and all statutory compensation; all four agreed to leave voluntarily. The lawyers who handled the case warned that if even one employee had refused, the dispute could have turned into 6–12 months of litigation with the company almost certain to lose — in their estimate, Japanese courts side with the employee in 99.9% of cases. In a related case, a former employee filed an unpaid-overtime claim with the labor inspection office a year after leaving; the claim failed because the contractual severance exceeded the calculated overtime amount and remote work during her absence from the office could not be proven. On probation periods, the law does not clearly define their length — everything rests on precedent, and companies set the term themselves in their work rules (shugyo kisoku). The common belief that probation is capped at two weeks is a myth; three months is typical, and up to six months is allowed for roles that need more time to evaluate (longer is not permitted). Practicing lawyers disagree sharply here: at one event a lawyer described the rules above, while at another event a different lawyer claimed the opposite — that even if an employer realizes within the first week that an employee is not a fit, dismissal during probation is still not legally possible. Because the law is vague in this area, get written advice rather than relying on verbal opinions. Fixed-term contracts (6 months to a year) that promise conversion to full employee (seishain) status on success are, in one lawyer's view, almost always a de facto way around probation-period limits: in court such an employee would be recognized as seishain from day one, and the formal contract offers no protection. The same risk applies to short, repeatedly renewed contracts (e.g., six months): if the arrangement is effectively open-ended in practice, a court will treat it as a permanent position, obligating the employer either to keep employing the person or to pay compensation (several months' salary plus extra payments). This does not happen automatically — it takes an actual lawsuit or a credible threat of one. A similar scheme uses haken (temp staffing agency) hiring on short contracts (from three months) to obtain a work visa: pay through the agency is usually more than half of the "real" salary, and after the three-way contract ends the worker can be left without a job but with a valid one-year work visa; a lawyer warned that courts may treat repeatedly renewed short haken contracts as de facto permanent employment. For informal, trust-based employment without a formal Employer of Record, the typical intermediary fee is reportedly around 40% of gross salary (an unverified chat estimate). The recommended legal path to a low-conflict dismissal is to formalize internal work regulations (shugyo kisoku), certify them with the labor committee, and have every employee acknowledge them in writing. If a company needs to part with someone, it can legally restructure a department or role (for example, moving someone from sales to warehouse work) when justified by a genuine business downturn, which tends to prompt the employee to leave on their own. In one real case, drafting such a work-regulations package (in Japanese and Russian) with a lawyer cost 300,000 yen; the rules must be announced at a general staff meeting rather than targeted at one person, and new hires sign acknowledgment of the rules when hired. An important nuance: work regulations introduced retroactively do not automatically apply to employees who never signed them — the company must notify staff of every rule change before it takes effect for them.