Retirement Pay in Japan: Leave at 15 Years, Get a Fifth

When you offer a mid-career person at a large Japanese company a 20% raise, the comparison in their head includes a number that appears on no payslip. In the Central Labour Relations Commission's 2023 survey of large firms, the model retirement allowance for a university graduate on the career track is 28.6 million yen at mandatory retirement. After 15 years of service, at age 37, it is 5.9 million. Most of the money is earned in the years the person has not worked yet, and it is only earned by staying.

What each survey counts

This article draws on three surveys that count different things, so here they are one at a time.

The first is the Ministry of Health, Labour and Welfare's General Survey on Working Conditions (就労条件総合調査), 2023 edition. It asks about retirement benefits roughly once every five years, and 2023 is the most recent round. It covers private companies with 30 or more regular employees: 6,421 sampled, 3,768 valid responses. It tells you how many companies have a retirement benefit plan and what people who retired were paid. The payment figures only cover retirees with 20 or more years of service who were 45 or older. Someone who left after eight or ten years is not in them.

The second is the retirement survey inside the Central Labour Relations Commission's Comprehensive Survey of Wage Conditions (賃金事情等総合調査), as of the end of June 2023. It looks only at large companies, with capital of 500 million yen or more and 1,000 or more employees: 380 selected, 194 tabulated. It reports a "model" allowance, which is what the company's rules pay someone who joined straight from school and was promoted at the standard pace, if they leave at the company's initiative at each length of service. Where a company also has a corporate pension, its present value is included. These are amounts under the rules, and they are different from averages of what was paid.

The third is the Tokyo Metropolitan Government's survey of wages and retirement allowances at small and medium companies, 2024 edition. It covers companies in Tokyo with 10 to 299 employees: 659 valid responses, an 18.8% response rate. It is also a model allowance, and it helpfully lists voluntary resignation (自己都合) and company-initiated separation (会社都合) side by side.

Does every Japanese company pay a retirement allowance?

No, and the share is falling. Among companies with 30 or more employees, 74.9% had a retirement benefit plan in 2023, down from 80.5% in 2018. It is 90.1% at companies with 1,000 or more employees and 70.1% at those with 30 to 99. In Tokyo's survey of companies with 10 to 299 employees, 64.2% had one and 34.4% did not.

So the size of this issue depends on where your candidate is coming from. Nine in ten large companies have a plan. One in three small ones has none.

The form matters too. Of companies with a plan, 69.0% pay a lump sum only, 9.6% have a pension only, and 21.4% have both. Half of the companies with a pension plan (50.3%) use a corporate defined contribution plan, and at companies with 1,000 or more employees that rises to 70.9%. Defined contribution money sits in the employee's own name, and the ministry's guide says the assets can be moved to another plan under certain conditions when someone changes jobs. The part that does not travel is what the company accrues internally under its own rules.

How much does resigning cost compared with being let go?

In Tokyo's small-company model, resigning pays roughly 80% of the company-initiated amount. A university graduate with 10 years of service gets 1.448 million yen on company-initiated separation and 1.125 million on resignation. At 15 years it is 2.559 million against 2.093 million, at 20 years 4.081 million against 3.468 million, and at 25 years 6.156 million against 5.073 million.

There is a threshold before that. A ministry panel document from July 2026, citing the same General Survey on Working Conditions, shows that 71.8% of companies set the minimum service for a lump sum on resignation at three years or more.

The ministry's payment data shows a gap as well, but it needs careful reading. Among university graduates in managerial, clerical and technical jobs who left with 20 or more years of service at 45 or older, the average was 18.96 million yen for mandatory retirement, equal to 36.0 months of monthly pay, and 14.41 million for resignation, or 30.3 months. That is a difference of 4.55 million yen. The two groups have different lengths of service to begin with, so it cannot be read as a 4.55 million yen penalty for quitting. Among leavers in this group, 31.7% resigned, up from 22.8% in the 2018 survey.

Leave after 15 years and you have earned a fifth of the retirement allowance

Model retirement allowance at large companies (company-initiated separation), university graduates on the career track, in million yen; bar length is the share of the amount at mandatory retirement. Central Labour Relations Commission, Comprehensive Survey of Wage Conditions 2023, 194 companies with capital of 500 million yen or more and 1,000+ employees

• 10 yearsage 32
  ¥3.1M
• 15 yearsage 37
  ¥5.9M
• 20 yearsage 42
  ¥10.2M
• 25 yearsage 47
  ¥14.9M
• 30 yearsage 52
  ¥20.5M
• 35 yearsage 57
  ¥25.4M
• Retirement
  ¥28.6M

The curve is flat early and steep late. Someone who moves after 15 years leaves the other four fifths behind.

The real loss is the back half of the curve

The resignation discount is the small part. The large part is that the allowance grows slowly at first and fast later, so a person who moves in mid-career leaves the steepest stretch with the old employer.

The large-company model runs like this: 3.057 million yen at 10 years, 5.851 million at 15, 10.216 million at 20, 14.875 million at 25, 20.545 million at 30, 25.395 million at 35, and 28.584 million at mandatory retirement.

Turn that into yen per year. Over the first ten years it averages about 300,000 a year. Between year 15 and year 25 it is about 900,000 a year. Between year 20 and year 30, about 1.03 million.

A 37-year-old with 15 years of service is 40% of the way through a career and has earned 20% of the allowance. If they stay, roughly 900,000 yen a year accrues for the next decade, off the payslip. When you quote a salary, my guess is they subtract that before comparing it with what they have now.

Tax points the same way. The National Tax Agency's rule is that the deduction against retirement income is 400,000 yen per year of service up to 20 years and 700,000 yen per year beyond that, which comes to 15 million yen for 30 years. The tax-free amount grows faster the longer someone stays. Seniority is written into the tax code too.

What should the hiring side do with this?

Here is how I would handle it. I would leave what the candidate has already accrued alone, and price in what they will stop accruing. That is my own approach.

The past portion gets paid by the old employer when they resign, less the resignation discount. In Tokyo's model that discount runs from a few hundred thousand yen to about a million. If I did cover it, I would use a one-time payment at joining. Folded into salary, it can never come back out.

The future portion is what the offer has to face. If your company has no retirement plan, and one in three companies with 10 to 299 employees in Tokyo's survey does not, then the same salary figure looks smaller to a candidate from a large Japanese company. In the large-company model the gap is about 900,000 yen a year between years 15 and 25 of service, roughly from the late thirties to the late forties. Whether you put that into salary or set up a defined contribution plan of your own is a pay design decision. The three tracks I describe in Three-track pay have no slot for a retirement allowance. It is a separate account, which is why it gets forgotten.

Before talking terms, I would ask the candidate for two numbers: what they would receive if they resigned today, and roughly what they would receive at retirement. Many have never worked it out. Better to have both numbers on the table than to have the candidate read the rulebook at home afterward and change their mind.

This matters most for people who have spent 15 to 25 years at one large company. It barely exists for someone with a few years of service: the large-company model at five years is 1.213 million yen. In How Long Do People in Japan Stay at One Company? I looked at how tenure is distributed. The curve above is one reason the group past ten years is hard to move.

A model is still a model. It assumes someone who joined out of school and rose at the standard pace, and a mid-career hire is not on that line. Some companies have switched to points-based plans or moved entirely to defined contribution, where the curve is much flatter. Use the table for the order of magnitude. For a specific candidate, the only number that counts is the one in their own company's rules, and if you don't know it, you are negotiating against a figure only the candidate can see.

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