Can You Fire an Employee in Japan? How Dismissal Works, Explained by a Japan-Qualified Lawyer

Short answer: yes, but not in the way many foreign employers expect. Japan has no “at-will” employment. An employer can generally dismiss an employee only with a reason that a court would accept, and the bar is high. That is why most separations in Japan are not dismissals at all, but agreements.

I’m a Japan-qualified lawyer. When I review English offer letters and employment contracts prepared overseas for roles in Japan, the termination provisions are the part I most often need to tighten. Drafts frequently assume the employer can end employment with notice alone, or freely during probation. Japanese law generally does not work that way, and a contract clause cannot change that.

This article explains the general rules. It is not advice on any particular situation.

Why it is hard to dismiss someone in Japan

Two rules do most of the work.

1. A dismissal needs a valid reason. Under the Labor Contracts Act, a dismissal that lacks objectively reasonable grounds and is not considered appropriate in general societal terms is treated as an abuse of right and is invalid. This principle came from decades of court decisions before it was written into the statute, and courts apply it strictly.

2. Notice is required, but notice is not enough. Under the Labor Standards Act, an employer generally has to give at least 30 days’ notice of dismissal, or pay at least 30 days’ average wages in lieu (or a combination). But giving notice does not make a dismissal valid. A dismissal with proper notice can still be invalid if the reason does not hold up.

If a dismissal is found invalid, the employment is generally treated as having continued. That can mean reinstatement and back pay for the period in between. This is the risk that makes Japanese employers cautious, and it is why “we’ll give them a month’s notice” is not a termination plan.

What counts as a valid reason?

There is no fixed list, and every case depends on its facts. In general terms, the reasons courts look at fall into a few groups:

• Serious misconduct, such as fraud or serious violations of workplace rules. Disciplinary dismissal generally needs a basis in the company’s work rules (shugyo kisoku).
• Inability to do the job, for example because of poor performance or illness. Courts generally expect the employer to have tried to fix the problem first — feedback, training, a chance to improve, sometimes a different role — and to have documented it. A single bad review is rarely enough.
• Business reasons (redundancy). Dismissals for economic reasons are scrutinised particularly closely. Courts generally look at factors such as whether the reduction was really necessary, whether the employer tried to avoid dismissals, whether the people selected were chosen fairly, and whether the process involved proper explanation and consultation.

Across all three, documentation and process matter as much as the underlying reason.

Probation is not a free trial

Probation periods of three to six months are common in Japan. They give the employer somewhat more room to end employment than after probation, but the difference is smaller than many foreign employers assume.

• Ending employment at or before the end of probation is still generally treated as a dismissal, and it still needs a reason that is objectively reasonable.
• The notice rule generally applies once a probationary employee has been employed for more than 14 days.

A clause saying the employer may end employment “at any time during probation for any reason” does not give the employer that right under Japanese law.

Fixed-term contracts: not a simple workaround

Employers sometimes look to fixed-term contracts as a way around dismissal rules. Two points to know:

• Ending a fixed-term contract early is generally harder than dismissing a permanent employee. It typically needs an unavoidable reason.
• Not renewing a contract can also be restricted. Where a contract has been renewed repeatedly, or the employee has reasonable grounds to expect renewal, a refusal to renew can be treated much like a dismissal.

Japan also has a rule under which an employee whose fixed-term contracts with the same employer have been renewed beyond five years in total can generally request conversion to an indefinite-term contract.

How separations usually happen: agreement

Because unilateral dismissal is risky, most separations in Japan happen by mutual agreement. The employer explains its view and invites the employee to resign or agree to leave, often with a financial package. The employee is free to say no.

In general terms:

• Encouraging an employee to resign is lawful, but pressure that goes too far — repeated meetings, intimidation, isolating someone — can make the process unlawful.
• Packages are negotiated. There is no statutory severance pay in Japan, so the amount depends on the circumstances and the negotiation.
• The agreement should be written down, including what is paid and any release of claims.

Employees can also resign on their own initiative. For an employee on an indefinite-term contract, resignation generally takes effect two weeks after notice under the Civil Code, though in practice many employers ask for longer notice.

What this means if you use an employer of record

If you hire through an employer of record (EOR), the EOR is the legal employer in Japan, and these same rules generally apply. The EOR does not make a difficult dismissal easy. What changes is who runs the process and who bears which costs.

Before signing with an EOR, ask:

• Who decides on and handles a termination?
• How are separation packages and any disputes paid for?
• What do the Japanese employment contract and work rules say about termination?

I cover these and other Japan-specific questions in Employer of Record in Japan: What It Costs and What to Compare.

Practical points before you hire

The time to think about ending employment is before it starts.

• Write the job down. A clear role description and objectives make performance problems easier to identify and address.
• Use probation deliberately. Set expectations and review progress during probation, and record it.
• Make sure the contract and work rules fit Japanese law. A termination clause copied from another country’s template can mislead both sides.
• Budget for the possibility of a negotiated exit. It is part of the real cost of hiring in Japan, alongside the statutory contributions in The True Cost of Employing Someone in Japan.

Key points

• Japan has no at-will employment. A dismissal generally needs objectively reasonable grounds and must be socially appropriate, or it is invalid.
• At least 30 days’ notice (or pay in lieu) is generally required, but notice alone does not make a dismissal valid.
• Probation gives a little more room, not a free right to end employment.
• Fixed-term contracts do not reliably avoid these rules.
• Most separations happen by agreement, often with a negotiated package.
• The same rules generally apply when you hire through an EOR.

Sources

• Japanese Law Translation (Ministry of Justice): Labor Contracts Act
• Japanese Law Translation (Ministry of Justice): search for the Labor Standards Act and the Civil Code

English translations on Japanese Law Translation are for reference; only the Japanese text has legal effect.