---
title: Hiring in Japan Through an EOR Before You Have an Entity
description: Japan treats an employer of record as worker dispatch. Check the license, know the deemed offer rule and 3-year limit, and plan your own entity early.
image: https://nobusato.jp/hubfs/covers-2026-10/eor-before-setting-up-in-japan-cover-en-2026-10.png
---

[Nobu Sato](https://nobusato.jp/en?hsLang=en)

[Profile](https://nobusato.jp/en/profile?hsLang=en) [Method](https://nobusato.jp/en/blog/method?hsLang=en) [Articles](https://nobusato.jp/en/blog?hsLang=en) [Glossary](https://nobusato.jp/en/blog/glossary?hsLang=en) [Contact](https://nobusato.jp/en/contact?hsLang=en)

[日本語](https://nobusato.jp/ja/blog/eor-before-setting-up-in-japan)[English](https://nobusato.jp/en/blog/eor-before-setting-up-in-japan)[中文](https://nobusato.jp/zh/blog/eor-before-setting-up-in-japan)

Launching in Japan

In this article

1. [What is an EOR under Japanese law?](https://nobusato.jp/en/blog/eor-before-setting-up-in-japan#s1)
2. [Why the license is your problem](https://nobusato.jp/en/blog/eor-before-setting-up-in-japan#s2)
3. [Can a contractor or a temp agency do the job instead?](https://nobusato.jp/en/blog/eor-before-setting-up-in-japan#s3)
4. [When you have to set up your own entity](https://nobusato.jp/en/blog/eor-before-setting-up-in-japan#s4)
5. [What the employee worries about on transfer day](https://nobusato.jp/en/blog/eor-before-setting-up-in-japan#s5)

1. [Home](https://nobusato.jp/en?hsLang=en)
2. [Articles](https://nobusato.jp/en/blog?hsLang=en)
3. [Launching in Japan](https://nobusato.jp/en/blog/tag/launching-in-japan)

# Hiring in Japan Through an EOR Before You Have an Entity

Plan the move to your own entity on day one

[Nobu Sato](https://nobusato.jp/en/profile?hsLang=en)8 min read

Contents5

1. [What is an EOR under Japanese law?](https://nobusato.jp/en/blog/eor-before-setting-up-in-japan#s1)
2. [Why the license is your problem](https://nobusato.jp/en/blog/eor-before-setting-up-in-japan#s2)
3. [Can a contractor or a temp agency do the job instead?](https://nobusato.jp/en/blog/eor-before-setting-up-in-japan#s3)
4. [When you have to set up your own entity](https://nobusato.jp/en/blog/eor-before-setting-up-in-japan#s4)
5. [What the employee worries about on transfer day](https://nobusato.jp/en/blog/eor-before-setting-up-in-japan#s5)

In Japan, an employer of record is a staffing arrangement, and the law treats it that way. The EOR signs the employment contract, you tell the person what to do each day, and Japan's Worker Dispatch Act has a word for exactly that: dispatch. That is fine. It just means the rules for dispatch apply to you, and the most important ones are about when you have to stop using it.

## What is an EOR under Japanese law?

Most likely a worker dispatch arrangement. A company employs someone and sends them to work under another company's direction. Since the 2015 amendment, every worker dispatch business in Japan needs a license from the Minister of Health, Labour and Welfare. The ministry describes it as unifying dispatch "into a license system."

Calling the contract a services agreement does not change this. Japan looks at how the work actually runs. Notice No. 37 of 1986, issued by what was then the Ministry of Labour, sets out what a genuine contractor has to do: give its own staff their work instructions and evaluations, set their working hours and overtime, decide discipline and placement, fund the work itself, carry the legal liability, and do more than supply labor. Miss any of these and the arrangement is treated as dispatch.

You hire your first person in Japan because you want to talk to them every morning about what matters today. That is direction. So the first question to an EOR provider is a plain one. Do you hold a worker dispatch license, and what is the number?

## Why the license is your problem

Because when dispatch goes wrong, Japan's remedy lands on the company that used the worker. Under the deemed offer rule in force since October 2015, a client that accepts dispatched workers in any of four situations is deemed to have offered that worker an employment contract on the same terms the dispatcher gave them. The four are: work in prohibited fields, dispatch from an unlicensed business, dispatch beyond the time limits, and disguised contracting meant to avoid the Act.

There is an exception if the client did not know the dispatch was illegal and was not negligent in not knowing. Asking for the license number and keeping a record goes a long way. Not asking makes ignorance hard to claim.

Here is my own reading, which you should check with a lawyer. If you have no entity in Japan, the "client" in that rule looks like your overseas head office itself. An EOR chosen to keep Japan at arm's length could end up making headquarters the deemed employer.

Start with an EOR if you like. Japanese law sets several of the dates for moving to your own entity

Rules that apply at each stage when one person in Japan is employed through an EOR and directed by an overseas head office. MHLW (Worker Dispatch Act, Notice No. 37), Ministry of Justice (Companies Act Art. 818), Civil Code Art. 625. As of November 2026

1. Before signingCheck the EOR's dispatch licenseDirecting the person makes it dispatch. Unlicensed dispatch or disguised contracting means you are deemed to have offered employment
2. First dealsRegister before trading continuouslyA foreign company cannot carry on transactions in Japan until it registers; at least one representative in Japan must live in Japan
3. 3 yearsIndividual limit per organizational unitThe same dispatched worker can stay in the same unit for 3 years. Not applicable if the EOR employs them indefinitely or they are 60 or older
4. TransferGet consent, put tenure in writingEmployment cannot move to a new company without the worker's consent. Paid leave starts after 6 months, so uncounted tenure starts the clock again

An EOR gets the person in the door early. Plan the exit on the day you sign the EOR contract.

Figure 1. When hiring a first employee in Japan through an EOR, confirm the provider's dispatch license before signing, register as a foreign company before carrying on transactions in Japan (Companies Act Art. 818), expect a 3-year limit for the same worker in the same unit, and get the worker's consent and written tenure terms when moving them to your own entity.

## Can a contractor or a temp agency do the job instead?

Partly. Each has an edge you should know.

A contractor works when the deliverable is defined: a market study, a set of translations, three months of distributor interviews. You accept the result and stay out of their hours. Once you hold stand-ups, assign tasks and approve their days off, you are back inside Notice No. 37. I went through that line in [Contractors instead of employees in Japan: does it hold?](https://nobusato.jp/en/blog/contractors-instead-of-employees-in-japan?hsLang=en)

An ordinary staffing agency is a sensible choice for administrative work. The rules are the same as for an EOR. The same person can work in the same organizational unit, roughly a section, for three years at most. People the agency employs on open-ended contracts, and people aged 60 or over, are outside that limit. So ask your EOR whether the person's contract with them is fixed-term or open-ended.

All of these borrow someone else's status as employer. The longer you borrow it, the more the person is really your employee, and the less you can use the tools a real employer has: your own work rules, your own review cycle, your own equity plan.

## When you have to set up your own entity

The law draws some hard lines. Business draws a softer one first.

The first hard line is trading. The Ministry of Justice is blunt about it: a foreign company that wants to carry on transactions in Japan must register, and cannot do so until it has (Companies Act Art. 818(1)). At least one of its representatives in Japan must have an address in Japan (Art. 817(1)). If your first hire starts signing contracts and issuing invoices in the company's name, you are there. Registration can take the form of a representative, a branch or a subsidiary, which is a separate decision.

The three-year limit is another. Visas are a third: bringing in a manager from headquarters on a Business Manager visa needs a business and an entity in Japan, and since October 2025 also ¥30 million in capital and one full-time local employee. I covered that in [Japan's Business Manager Visa: ¥30 Million, One Local Hire](https://nobusato.jp/en/blog/business-manager-visa-30-million-yen?hsLang=en). Whether the setup creates a permanent establishment for tax is a question for a tax accountant. I won't answer it here.

The soft line is headcount. I know of no statistic for it, but the arithmetic is simple. EOR fees are charged per person, so the total grows with every hire. Most of the cost of running your own entity (registration, bookkeeping and tax filing, outsourced payroll) is fixed. Past some headcount, the entity is cheaper. Put the EOR quote next to a yearly estimate for running an entity and you can find that point with your own numbers. Two costs that never appear on an invoice also grow with headcount: approvals that bounce between several companies, and the employee's unease about whose employee they really are.

## What the employee worries about on transfer day

Losing something. Moving from an EOR to your new entity is legally the end of one employment and the start of another. Japan's Civil Code Art. 625 says an employer cannot hand its rights over to a third party without the worker's consent. You talk to each person and get their agreement. There is no shortcut.

They will do some arithmetic. Paid leave in Japan starts only after six months of continuous service with at least 80% attendance: ten days, rising to a maximum of twenty after six and a half years. If the new company ignores their EOR years, they wait six months again. Will there be a new probation period? Does the pay or the title change? Are they being treated like a new hire?

The fix is cheap. Offer terms at least as good as before. State in writing that EOR service counts as tenure and carry their leave over. Skip the probation period. Show them the new offer before anyone announces anything. Everyone you hire after them will watch how the first person was moved.

Who that first person should be is a different question, and my answer is in [Your first hire in Japan should not be a salesperson](https://nobusato.jp/en/blog/first-hire-in-japan-should-not-be-sales?hsLang=en). An EOR only decides whose payroll they sit on. Which trigger makes you incorporate, who has the transfer conversation, how tenure carries over: none of that is in the EOR contract, so write it down yourself before the person starts.

This article is general information, not legal, tax or immigration advice. Whether a particular EOR contract counts as worker dispatch, disguised contracting or a permanent establishment depends on the contract and how it runs in practice; consult a Japanese lawyer, labor and social security attorney (sharoushi) or tax accountant. The point that the overseas head office may be the deemed client is the author's reading of the rules and has not been tested in court. As of November 2026.

Sources (as of November 2026)

- [Ministry of Health, Labour and Welfare, checklist for client companies three years after the 2015 Worker Dispatch Act amendment (time limits, deemed offer rule, license system)](https://www.mhlw.go.jp/file/06-Seisakujouhou-11650000-Shokugyouanteikyokuhakenyukiroudoutaisakubu/0000196406.pdf)
- [MHLW, Standards for distinguishing worker dispatch from contracting (Ministry of Labour Notice No. 37, 1986)](https://www.mhlw.go.jp/file/06-Seisakujouhou-11600000-Shokugyouanteikyoku/0000046903.pdf)
- [MHLW, Amendment of the Worker Dispatch Act](https://www.mhlw.go.jp/stf/seisakunitsuite/bunya/0000077386.html)
- [Ministry of Justice, registration of foreign companies (Companies Act Art. 818)](https://www.moj.go.jp/MINJI/minji07_00275.html)
- [MHLW, guidelines on business transfers and mergers, explanatory leaflet (Civil Code Art. 625)](https://www.mhlw.go.jp/content/12600000/000477352.pdf)
- [MHLW, annual paid leave obligations (entitlement rules)](https://www.mhlw.go.jp/content/000350327.pdf)

---

Author

[Nobu Sato](https://nobusato.jp/en/profile?hsLang=en)

Launching in Japan, starting with people and systems. I write about building organizations, sales teams and technology organizations in Japan, in English, Japanese and Chinese.

[Profile](https://nobusato.jp/en/profile?hsLang=en)[Contact](https://nobusato.jp/en/contact?hsLang=en)

## More in this column

1. 01[How Foreign Companies Decide to Shrink in Japan](https://nobusato.jp/en/blog/how-foreign-companies-decide-to-shrink-japan?hsLang=en)7 min
   
   Japanese labor law puts dismissal last when a foreign company shrinks its Japan business. The four-factor test, ...
2. 02[Before HQ Gets Japan Employee Data: APPI Transfer Rules](https://nobusato.jp/en/blog/appi-employee-data-transfer?hsLang=en)7 min
   
   Under Japan's APPI, an overseas parent is a foreign third party. Pick consent or a conforming system before go-live and ...
3. 03[Why Japanese Enterprise Buying Is Slow: It's the Queues](https://nobusato.jp/en/blog/why-japanese-enterprise-buying-is-slow?hsLang=en)7 min
   
   In a 2026 survey, 76% said half or more of the stamps on a Japanese approval form only confirm. How ringi, PoCs and ...

[Column guide: Launching in Japan](https://nobusato.jp/en/blog/guide-launching-in-japan?hsLang=en) · [Glossary](https://nobusato.jp/en/blog/glossary?hsLang=en) · [The method behind the articles](https://nobusato.jp/en/blog/method?hsLang=en)

[← All articles](https://nobusato.jp/en/blog?hsLang=en)

## Writing about launching in Japan, in three languages.

[Profile](https://nobusato.jp/en/profile?hsLang=en) [Get in touch](https://nobusato.jp/en/contact?hsLang=en)

Nobu Sato

Writing about launching in Japan, in three languages.

[info@nobusato.jp](mailto:info@nobusato.jp) [Substack](https://nobusato.substack.com)[Newsletter](https://www.linkedin.com/newsletters/the-japan-entry-memo-7519750783555518464/)[Medium](https://medium.com/@nobusato5888)[LinkedIn](https://www.linkedin.com/in/realnobusato/)[X](https://x.com/nobusato5888) [RSS](https://nobusato.jp/en/blog/rss.xml?hsLang=en)

[Profile](https://nobusato.jp/en/profile?hsLang=en)[Method](https://nobusato.jp/en/blog/method?hsLang=en)[Articles](https://nobusato.jp/en/blog?hsLang=en)[Glossary](https://nobusato.jp/en/blog/glossary?hsLang=en)[Contact](https://nobusato.jp/en/contact?hsLang=en)

Views here are my own and don’t represent any organization I work or have worked for.

© 2026 Nobu Sato. All rights reserved.·[Privacy and disclaimer](https://nobusato.jp/en/privacy?hsLang=en)

```json
{
  "@context" : "https://schema.org",
  "@type" : "BreadcrumbList",
  "itemListElement" : [ {
    "@type" : "ListItem",
    "item" : "https://nobusato.jp/en",
    "name" : "Home",
    "position" : 1
  }, {
    "@type" : "ListItem",
    "item" : "https://nobusato.jp/en/blog",
    "name" : "Articles",
    "position" : 2
  }, {
    "@type" : "ListItem",
    "item" : "https://nobusato.jp/en/blog/tag/launching-in-japan",
    "name" : "Launching in Japan",
    "position" : 3
  }, {
    "@type" : "ListItem",
    "item" : "https://nobusato.jp/en/blog/eor-before-setting-up-in-japan",
    "name" : "Hiring in Japan Through an EOR Before You Have an Entity",
    "position" : 4
  } ]
}
```

```json
{
  "@context" : "https://schema.org",
  "@id" : "https://nobusato.jp/en/blog/eor-before-setting-up-in-japan",
  "@type" : "WebPage",
  "about" : {
    "@type" : "Thing",
    "name" : "Launching in Japan"
  },
  "author" : {
    "@id" : "https://nobusato.jp/#person"
  },
  "description" : "Japan treats an employer of record as worker dispatch. Check the license, know the deemed offer rule and 3-year limit, and plan your own entity early.",
  "inLanguage" : "en",
  "isPartOf" : {
    "@id" : "https://nobusato.jp/en/blog",
    "@type" : "Blog",
    "name" : "Articles"
  },
  "keywords" : "Launching in Japan",
  "name" : "Hiring in Japan Through an EOR Before You Have an Entity",
  "url" : "https://nobusato.jp/en/blog/eor-before-setting-up-in-japan"
}
```

```json
{
  "@context" : "https://schema.org",
  "@id" : "https://nobusato.jp/#person",
  "@type" : "Person",
  "alternateName" : [ "佐藤伸明", "Nobu Sato", "左滕" ],
  "description" : "Japan market launches: organization, sales and technology",
  "knowsAbout" : [ "Japan market entry", "Organization design", "Talent acquisition", "Sales organization building", "Technology organization building", "Japanese labor law" ],
  "name" : "Nobu Sato",
  "sameAs" : [ "https://www.linkedin.com/in/realnobusato/", "https://x.com/nobusato5888" ],
  "url" : "https://nobusato.jp/en/profile"
}
```

```json
{
  "@context" : "https://schema.org",
  "@type" : "BlogPosting",
  "author" : {
    "@type" : "Person",
    "name" : "Nobu Sato",
    "url" : "https://nobusato.jp/en/blog/author/nobu-sato"
  },
  "dateModified" : "2026-11-12T11:18:29.516Z",
  "datePublished" : "2026-11-12T11:18:29.000Z",
  "headline" : "Hiring in Japan Through an EOR Before You Have an Entity",
  "image" : [ "https://nobusato.jp/hubfs/covers-2026-10/eor-before-setting-up-in-japan-cover-en-2026-10.png" ],
  "mainEntityOfPage" : {
    "@id" : "https://nobusato.jp/en/blog/eor-before-setting-up-in-japan",
    "@type" : "WebPage"
  },
  "publisher" : {
    "@type" : "Organization",
    "logo" : {
      "@type" : "ImageObject",
      "url" : "https://nobusato.jp/hubfs/seo/logo-nobusato-2026-10.png"
    },
    "name" : "nobusato.jp"
  }
}
```