Japan Payroll Guide For Foreign Companies: How It Works, What It Costs, And What You Must Do Every Month (2026)

Japan payroll requires six separate deductions, four statutory insurance programs, and a hard monthly deadline that most foreign companies underestimate.

Employers withhold income tax every month using National Tax Agency tables, enroll every new employee in health and pension insurance within 5 days, and run a mandatory year-end tax reconciliation that has no real equivalent outside Japan.

Miss the wrong deadline and the National Tax Agency can assess a penalty, though a quick, voluntary correction often avoids or reduces it.

This guide walks through every deduction, every deadline, and every document that Japan payroll for foreign companies generates, from the first hire to the year-end close.

Japan payroll at a glance

How Japanese payroll works: the six deductions every employer calculates

Every payroll run in Japan applies six deductions to gross salary, in a fixed sequence. Getting this sequence right matters, because later deductions depend on earlier ones.

👉 For a full breakdown of the income tax brackets behind that 5-45% range, see our guide to Japan's income tax rates.

The child rearing support contribution (kodomo kosodate shien kin, 子ども・子育て支援金), the sixth row above, is the newest addition to this list. It's collected alongside health insurance rather than as a standalone line item, which means it's easy to miss in older payroll setups. Any system not updated for it since April 2026 is already out of compliance.

Employees over 40 also pay into nursing care insurance (kaigo hoken, 介護保険), a fifth social insurance component folded into the health insurance premium. This funds long-term care services and applies until age 65.

After all deductions, employees typically take home somewhere between 65% and 80% of gross salary. Lower and mid-range earners tend to sit at the higher end of that range; higher earners lose more to the progressive income tax brackets and land closer to 65%. A monthly salary of ¥500,000 nets roughly ¥375,000-¥400,000, depending on prefecture, age, and dependents.

The four statutory insurance programs every employer must provide

Japan's social insurance contributions system splits into two parallel programs, covering four types of insurance. Foreign companies hiring their first employee in Japan need to register for all four.

Shakai hoken (social insurance)

Shakai hoken (社会保険) is administered by the Japan Pension Service and local health insurance societies. It covers two programs.

• Health and pension insurance. Employees' health insurance (kenko hoken) covers medical expenses for the employee and any enrolled dependents. Premiums are based on standard monthly remuneration and split roughly equally between employer and employee. Enrollment must happen within 5 days of hire.
• Employees' pension insurance. This runs at a combined 18.3% of standard monthly remuneration, split evenly at 9.15% each. Premiums are capped once monthly remuneration passes ¥650,000; above that ceiling, the pension contribution stops increasing. This cap is scheduled to rise starting September 2027, so high earners' contributions will edge up in future years.

Rodo hoken (labor insurance)

Rodo hoken (労働保険) is administered separately by the Ministry of Health, Labor and Welfare. It also covers two programs.

• Employment insurance. Unemployment insurance provides benefits if an employee loses their job. For FY2026, employers pay 0.85% of total wages and employees pay 0.5%, for a combined 1.35% (general businesses; construction and agriculture carry slightly higher rates). Each new hire's enrollment goes to Hello Work by the 10th of the month following their start date.
• Workers' accident compensation insurance. This is employer-only, ranging from 0.25% to 8.8% of wages depending on industry risk classification. Employees pay nothing toward this program.

Enrollment deadlines: 5 days for social insurance, 10 days for your first labor insurance filing

Enrollment deadlines are unforgiving, and they don't all run on the same clock. Shakai hoken enrollment for each new hire goes to the Japan Pension Service within 5 days of their start date, every time.

Labor insurance works differently. The very first time a company hires anyone, it must file a one-time labor insurance registration (hoken kankei seiritsu todoke) within 10 days of that hire, establishing the company as a covered employer. After that, each individual employee's employment insurance enrollment follows a monthly cadence instead: by the 10th of the month following their start date, the same rhythm as withholding tax.

Late enrollment creates retroactive premium liability. The Japan Pension Service can assess back-dated social insurance premiums for up to 2 years, which turns a paperwork delay into a real financial exposure. (More on this in the common payroll mistakes section below.)

Monthly income tax withholding: the 10th-of-the-month deadline

Every month, Japan's payroll requires three steps for income tax. Employers calculate withholding, deduct it from pay, and remit it to the tax office.

The process:

1. Calculate each employee's withholding tax using the NTA's monthly withholding tax tables (gensen choshu zeigaku hyo), based on post-insurance salary and declared dependents.
2. Deduct the withheld amount from the employee's net pay.
3. Remit the total tax withheld to the tax office by the 10th of the following month.

Are there penalties for missing the deadline?

A late withholding tax remittance triggers the fuunofu kasanzei (不納付加算税), set at 10% of the unpaid tax. That rate drops to 5% if the employer pays voluntarily, before the tax office issues a notice.

The penalty is waived entirely if the payment is made within one month of the deadline and there's no late payment on record from the prior year, a real cushion for a one-off mistake. On top of any penalty, delinquency interest (entaizei) accrues separately, at 2.8% per annum for the first two months and 9.1% per annum after that, at 2026 rates.

What is the small company exception?

Companies with 10 or fewer employees can apply for semi-annual withholding remittance (納期の特例) instead of monthly filing. Under this arrangement, withheld tax goes to the tax office twice a year: July 10 for January-June and January 20 for July-December. A one-page application to the local tax office sets this up, and it meaningfully cuts the monthly administrative load for small foreign-owned KKs and GKs.

Note: The application form is the 源泉所得税の納期の特例の承認に関する申請書—available from your local tax office or the NTA website. Approval is typically granted within one to two months of submission.

Resident tax (juminzei): how the one-year lag works

Resident tax (juminzei) runs on a one-year lag. The amount deducted starting in June is based on income earned the prior calendar year, not the current one.

The annual cycle:

• January-March: Employers complete the year-end adjustment for the prior year's income.
• May-June: Each municipality sends employers a resident tax determination notice.
• June-May: Employers deduct monthly installments from salary through special collection (tokubetsu choshu, 特別徴収).
• 10th of the following month: Deducted amounts get remitted to the municipality.

New employees who have never paid resident tax in Japan owe nothing in their first year. The bill lands in year two, based on year one's earnings.

For example, a foreign employee who joins in April and earns ¥6 million that year receives a roughly ¥600,000 resident tax bill the following June, collected in ¥50,000 monthly installments through the following May.

Warn new foreign employees about this in advance. Employers who skip that conversation face real HR complaints every June, often from staff who assumed their take-home pay had permanently dropped.

The year-end adjustment (nenmatsu chosei): Japan's employer-run tax reconciliation

Most countries leave annual tax reconciliation to the employee. Japan hands that job to the legal employer instead. The year-end adjustment, nenmatsu chosei (年末調整), runs alongside the December payroll.

The process:

1. Collect deduction declarations from each employee, covering dependents, life insurance premiums, earthquake insurance, and housing loan credits from year two onward.
2. Recalculate each employee's annual income tax using actual full-year income and declared deductions.
3. Compare that figure to total monthly withholding collected from January through November.
4. Refund any over-withholding through the December payslip, or collect any shortfall.

What documents does Japan's year-end adjustment generate?

The year-end adjustment produces two required documents.

• The gensen choshuhyo (源泉徴収票). A gensen choshuhyo is a withholding tax certificate that goes to each employee by January 31. It also gets submitted to the NTA for regular employees earning over ¥5 million, and for company directors and officers earning over ¥1.5 million, a much lower threshold that catches most director-level pay in a foreign-owned KK or GK. Employees need this document for tax returns, job changes, visa renewals, and mortgage applications.
• The kyuyo shiharai hokokusho (給与支払報告書). A kyuyo shiharai hokokusho is a salary payment report that goes to each employee's municipality by January 31. Municipalities use this report to calculate the following year's resident tax assessment.

👉 The salary payment reports submitted by January 31 feed directly into your annual corporate tax position—for a full breakdown of how corporate tax works for KK and GK owners, see our guide to corporate tax in Japan.

Who falls outside this process?

Employees who changed jobs mid-year, those with side income over ¥200,000, and anyone earning over ¥20 million annually must file their own annual tax return (kakutei shinkoku). They still receive a gensen choshuhyo, but the employer's obligation stops there.

👉 Looking for a job in Japan? See our guide to jobs in Japan for foreigners for a breakdown of which roles are actively recruiting and what visa each requires.

How to read a Japanese payslip (kyuyo meisai)

Every full-time employee and most permanent employees in Japan receive a monthly payslip, kyuyo meisai (給与明細). For foreign employees who don't read Japanese, it's a wall of unfamiliar terms and numbers.

The standard payslip has three sections:

Net pay (差引支給額, sashihiki shikyu gaku) sits at the bottom, and it's the actual amount paid directly to the employee's bank account.

A worked example. Take an employee over 40 (so nursing care insurance applies), in their second year at the company (so resident tax applies), with a ¥400,000 monthly base salary and no dependents. Their payslip typically breaks down like this:

The exact figures shift with prefecture, age, and dependents, but this example sits toward the higher end of the typical 65-80% net pay range, since a ¥400,000 salary hasn't yet hit the steeper progressive income tax brackets that pull higher earners toward the lower end.

Commuting allowance (通勤手当, tsukin teate) is exempt from income tax up to ¥150,000 per month, but it still counts toward the social insurance calculation. Employers who explain this upfront save themselves repeated payslip questions.

👉 For broader context on how Japanese employees experience salary, overtime expectations, and workplace culture, our guide to Japanese salaryman culture covers what foreign employers often underestimate when managing Japanese staff.

Common payroll mistakes foreign companies make in Japan

These five mistakes show up again and again among foreign-owned KKs and GKs handling their own Japan payroll.

1. Missing the 10th-of-the-month deadline. Gensen choshu remittance is due every month without exception. Founders running payroll themselves often miss it in the first few months after their first hire. A quick, voluntary catch-up can avoid or reduce the penalty, but repeated misses add up fast.
2. Late shakai hoken enrollment. The 5-day enrollment window is easy to miss when a company is focused on other launch priorities. Retroactive assessments cover up to 2 years, and the Japan Pension Service actively pursues foreign-owned entities on this point.
3. Skipping the resident tax warning. Not telling new foreign employees about the year-two resident tax bill creates genuine financial hardship. It also creates a wave of HR complaints every June that a five-minute conversation could have prevented.
4. Using the wrong payroll software. Payroll platforms built for other markets don't natively handle shakai hoken, nenmatsu chosei, or the resident tax collection cycle. Running Japan payroll on a US or European system is a compliance risk, not a convenience. If you're not yet ready to run your own Japan payroll, an employer of record handles statutory compliance on your behalf — but comes with its own limitations worth understanding before you commit.
5. Storing documents incorrectly. Payslips, gensen choshuhyo, shakai hoken enrollment confirmations, and premium payment receipts must be retained for 7-10 years under the Companies Act and the Electronic Bookkeeping Act (denshi chobo hozon ho). Since the January 2024 end of its grace period, paper and digital records both need a searchable, tamper-resistant storage format.

What Japan payroll generates: the document and compliance trail

Running payroll doesn't end once net pay hits an employee's bank account. Every payroll cycle produces a trail of official documents and follow-up obligations.

Monthly:

• Payslip (kyuyo meisai) for each employee, physical or digital
• Shakai hoken premium remittance receipt to the Japan Pension Service
• Gensen choshu remittance receipt to the tax office, due by the 10th
• Premium payment confirmation notices, arriving by post

Semi-annually (for small company exception filers):

• Bulk withholding tax remittance on July 10 and January 20

At year-end:

• Year-end adjustment documentation collected from every employee
• Gensen choshuhyo issued to each employee and submitted to tax authorities by January 31
• Kyuyo shiharai hokokusho sent to each employee's municipality by January 31

When employees join or leave:

• Shakai hoken enrollment or withdrawal notifications
• Employment insurance notifications through Hello Work
• My Number data registration, which carries strict data handling requirements

Every one of these documents arrives by post or requires storage in a compliant digital system. For a foreign business owner managing a Japan entity from a head office overseas, tracking this trail across the tax office, the Japan Pension Service, Hello Work, and each employee's municipality adds up fast.

Note: My Number must be collected from each employee at hire and recorded on all tax and social insurance submissions. Employers must store My Number data in a dedicated, access-controlled system—it cannot be kept alongside general employee records. Failure to handle My Number data correctly is a separate compliance risk from payroll accuracy.

Payroll compliance support for foreign KKs and GKs in Japan

MailMate does not calculate gross-to-net pay or run payroll software. That job belongs to a dedicated payroll platform or to a payroll outsourcing firm.

What MailMate handles is everything payroll generates afterward.

• Monthly withholding tax administration. MailMate's Tax Retainer plan manages the 10th-of-the-month gensen choshu deadline, the single most commonly missed date in Japan payroll, so it never slips.
• Document capture and compliant storage. Every payroll-related document, from Japan Pension Service confirmations to tax office receipts, arrives at your registered Japanese address. MailMate scans it, labels it, and links it to your bookkeeping ledger in a format that meets Electronic Bookkeeping Act requirements.
• Commuting allowance and expense reconciliation. Commuting allowances, business trip costs, and reimbursements all sit next to payroll deductions on the payslip. MailMate's expense management service captures receipts as they come in, so nothing gets miscategorized at reconciliation.
• On-time payments to your payroll vendors. Payroll outsourcing fees, software subscriptions, and sharoshi (labor and social insurance attorney) invoices are recurring payments most companies track manually. MailMate's AP automation flags them before they're due, so a missed vendor payment never turns into its own compliance problem.

Compare MailMate's bookkeeping, expense, and AP automation plans →

Frequently asked questions

What is gensen choshu in Japan?

Gensen choshu is the legal term for payroll income tax withholding: the employer, not the employee, is responsible for calculating and remitting it each month. Think of it as Japan shifting the tax-collection workload from the individual onto the company, with the NTA's monthly tables doing the math and the year-end adjustment squaring up any difference.

What is shakai hoken in Japan?

Shakai hoken (社会保険) is Japan's mandatory social insurance system for employees, covering health insurance and pension insurance. Combined premiums run at roughly 28-30% of standard monthly remuneration, split equally between employer and employee. New hires must be enrolled within 5 days.

What is nenmatsu chosei?

It's Japan's version of tax season, except your employer does the paperwork instead of you. Once a year, the employer squares up everyone's actual annual tax bill against what was withheld monthly, settles the difference in the December paycheck, and most employees never have to file anything themselves.

What is the payroll deadline in Japan?

The main monthly deadline is the 10th of the following month, when withheld income tax must reach the tax office. Social insurance premiums are due by the end of the following month. Companies with 10 or fewer employees can apply for semi-annual remittance instead, filing on July 10 and January 20.

What happens if I miss the Japan payroll remittance deadline?

A late remittance triggers the fuunofu kasanzei penalty: 10% of the unpaid withholding tax, cut to 5% if paid voluntarily before the tax office notices. First-time, quickly-corrected mistakes (paid within a month, no prior late payment) are often waived entirely. Delinquency interest applies separately regardless, at 2.8% per annum for the first two months and 9.1% after that, at 2026 rates.

What is the new child-rearing contribution in Japan payroll?

The child rearing support contribution (子ども・子育て支援金) is a payroll deduction introduced in April 2026, set at 0.23% of standard monthly remuneration and split evenly between employer and employee. It rises to 0.4% combined by 2028 and replaces part of an earlier child allowance levy. Every payroll system needs updating to reflect it.

Do I need payroll software to run payroll in Japan?

Payroll can technically be calculated by hand using National Tax Agency tables, but it rarely stays accurate that way. Japan's parallel insurance systems, monthly government submissions, and the year-end adjustment make manual payroll slow and error-prone. Domestic platforms like SmartHR, freee HR, and MoneyForward Payroll handle Japanese statutory requirements natively, while global platforms need Japan-specific configuration to manage shakai hoken, nenmatsu chosei, and resident tax correctly.

How often are employees paid in Japan?

Most companies pay employees monthly, as required under Japanese labor law and the Labor Standards Act. Summer and winter bonuses are common additional payments for full time employees, though bonus payments are not legally mandated and get reviewed annually based on company performance.

In closing

Japan payroll asks foreign employers to do more than calculate a monthly salary. It asks them to run two parallel insurance systems, hit a tax office deadline every month, and manage a document trail that touches four separate government agencies.

The most valuable thing a foreign company can do is treat the 10th-of-the-month deadline, the 5-day shakai hoken window, and the June resident tax cycle as fixed, unmissable dates from day one.

MailMate doesn't run your payroll, but it makes sure the paperwork payroll generates never falls through the cracks. From withholding tax administration to compliant document storage and year-end bookkeeping, MailMate's Tax Retainer and bookkeeping plans exist to keep foreign-owned KKs and GKs compliant while you focus on running your core business.