The first question is not "who is the EOR" — it is "who gives the instructions"
Overseas companies entering Japan almost always open with the same request: find us an Employer of Record. It is useful shorthand, but it does not map onto Japanese law. No Japanese regulator issues an "EOR" licence, and no statute uses the term. What Japanese law regulates is the relationship — specifically, whether the company receiving the work is also the company directing the person doing it. Answer that one question and everything else follows: which structure is lawful, which licence the supplier needs, and which party carries the risk if it is wrong.
Three lawful structures, one test
- Fee-charging employment placement (有料職業紹介) — the agency introduces a candidate and you employ them directly. You direct the work and you are the employer. The agency needs a placement licence.
- Worker dispatch (労働者派遣) — the provider employs the person, you direct their daily work. This is what most "EOR in Japan" offers actually are in legal terms. The provider needs a worker dispatch licence.
- Contracted services or subcontracting (業務委託・請負) — the provider both employs and directs the person, and owes you a defined deliverable. No dispatch licence is required, but only if the provider genuinely directs the work.
The dividing line is direction and supervision (指揮命令). It is not the title of the contract, not the wording on the invoice, and not whether the person sits in your office. If your manager assigns the day's tasks, approves the output, sets the working hours and gives the performance feedback, the arrangement is worker dispatch regardless of what the paperwork calls it.
Article 40-6: this is a client-side risk, not a vendor-side risk
Since 1 October 2015 the Worker Dispatch Act has contained a deemed labour-contract offer rule. Where a client company receives dispatched workers in one of five unlawful situations, the client is deemed to have offered that worker a labour contract on the same working conditions the worker already had with the dispatching company. The deemed offer cannot be withdrawn for one year, and if the worker accepts within that window an employment relationship with the client is formed. Note where the consequence lands: on the company that received the workers, not only on the supplier that provided them.
- Having a dispatched worker perform work where dispatch is prohibited — port transport, construction, security services and certain medical work.
- Receiving dispatched workers from a provider that does not hold a worker dispatch licence.
- Receiving dispatch beyond the establishment-level period limit.
- Receiving dispatch beyond the individual-level period limit.
- Disguised contracting — using a services or subcontract label to escape the Dispatch Act while in practice directing the workers yourself.
There is an exception: the rule does not apply where the client neither knew, nor was negligent in not knowing, that the arrangement was unlawful. In practice that exception is thinner than it sounds. A buyer who never asked for a licence number, never verified it, and never wrote the direction-and-supervision boundary into the contract will find it difficult to argue that there was no negligence.
Verifying a supplier takes about five minutes
- Ask for the actual numbers. A worker dispatch licence looks like 派13-318670; a fee-charging placement licence looks like 13-ユ-317654. A supplier that will not put them in writing has answered your question.
- Check them against the Ministry of Health, Labour and Welfare's human resources services portal (jinzai.hellowork.mhlw.go.jp), which lists licensed dispatch and placement businesses.
- Confirm the legal name on the licence matches the entity that will actually sign your contract. Group companies are not interchangeable here.
- For temp-to-perm (紹介予定派遣), confirm the supplier holds both licences. One is not enough — the model is dispatch plus placement.
- Write into the contract who directs the work. If you are buying outsourcing, the supplier must be the one instructing its own staff, and the contract and the day-to-day reality have to agree.
The period limits buyers forget
Two separate three-year clocks run at once. At establishment level, a client site may keep receiving dispatched workers for three years, extendable only if the client consults the majority union or the employee representative before the deadline. At individual level, the same person may be received in the same organisational unit — normally a department — for up to three years. Exceeding either limit is one of the five Article 40-6 situations, so this is a calendar item, not a footnote.
What the employer actually has to run
When the provider is the employer, a real set of obligations moves with that role. Any supplier quoting you a rate should be able to confirm it covers all of the following, because these are not optional in Japan.
- An employment contract and the statutory written notice of working conditions.
- Monthly payroll, income and residence tax withholding, and the year-end tax adjustment (年末調整).
- Social insurance: health insurance and employees' pension enrolment and contributions.
- Labour insurance: workers' accident compensation insurance and employment insurance.
- Work rules, working-time records, and an Article 36 agreement filed with the Labour Standards Inspection Office before any overtime.
- Equal pay for equal work for dispatched staff, under either the labour-management agreement method or the client-parity method, with the required explanation to the worker.
- Statutory annual paid leave, and the full separation process including the separation certificate.
- For foreign nationals, confirming a status of residence that actually permits the work in question.
Employer cost is not the salary
Health insurance, employees' pension, employment insurance, workers' accident insurance and the child-care contribution together come to roughly 15–16% of monthly remuneration on the employer side. The exact figure moves with the year, the prefecture and the industry rate, so treat any single percentage you are quoted as an estimate to be confirmed rather than a constant. Budget it explicitly: it is the difference between a headcount plan that survives contact with finance and one that does not.
A short checklist for procurement
- Which structure are we actually buying — placement, dispatch, temp-to-perm or outsourcing?
- Does the supplier hold the licence that structure requires, and have we verified the number?
- Does the legal entity on the contract match the licence holder?
- Who directs the work day to day, and does the contract say so?
- Are the three-year period limits tracked, and who owns that date?
- Does the rate include the statutory employer burden, or is it quoted on top?
- For foreign nationals, who confirms the status of residence, and before or after the offer?
Where TAC fits
Tech Alliance Co., Ltd. (Tech Alliance株式会社) holds both Japanese licences: worker dispatch 派13-318670 and fee-charging employment placement 13-ユ-317654. Holding both is what makes lawful temp-to-perm possible from a single supplier, and it means we can propose the structure that fits the work rather than the one structure we happen to be licensed for. Contracts and invoices for work performed in Japan are issued by the Japanese entity in yen; where a buyer needs the contracting party outside Japan, the Singapore, Hong Kong and China group entities are available.
This article is general information about engaging people in Japan and is not legal advice on any specific matter. Whether a given structure is lawful depends on the actual scope of work and how it is operated in practice. Confirm each engagement with your own counsel or a licensed labour and social security attorney (社会保険労務士).