---
title: "What one hire in Japan really costs: 1.2x to 1.5x salary"
description: A ¥6m hire in Japan costs about ¥7.1m a year from year two and ¥9.2m in year one with an agency. Employer social insurance, commuting pay, bonuses and fees.
image: https://nobusato.jp/hubfs/covers-2026-11/true-cost-of-hiring-in-japan-cover-en-2026-10-m.png
---

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

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Launching in Japan

In this article

1. [The national average: 1.22x cash pay](https://nobusato.jp/en/blog/true-cost-of-hiring-in-japan#s1)
2. [Employer social insurance is about 15.7% of pay](https://nobusato.jp/en/blog/true-cost-of-hiring-in-japan#s2)
3. [Worked example: a ¥6 million hire](https://nobusato.jp/en/blog/true-cost-of-hiring-in-japan#s3)
4. [How to set a first-year headcount budget](https://nobusato.jp/en/blog/true-cost-of-hiring-in-japan#s4)

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)

# What one hire in Japan really costs: 1.2x to 1.5x salary

A ¥6 million hire costs ¥9.24 million in year one with an agency, ¥7.14 million from year two

[Nobu Sato](https://nobusato.jp/en/profile?hsLang=en)5 min read

Contents4

1. [The national average: 1.22x cash pay](https://nobusato.jp/en/blog/true-cost-of-hiring-in-japan#s1)
2. [Employer social insurance is about 15.7% of pay](https://nobusato.jp/en/blog/true-cost-of-hiring-in-japan#s2)
3. [Worked example: a ¥6 million hire](https://nobusato.jp/en/blog/true-cost-of-hiring-in-japan#s3)
4. [How to set a first-year headcount budget](https://nobusato.jp/en/blog/true-cost-of-hiring-in-japan#s4)

Budget 1.5x salary for a new hire's first year in Japan, and 1.2x from year two.

That is the rule of thumb I give headquarters. A foreign company I worked with started by asking me about registration and visas. Those weren't what held them up. The first employee was. Who to hire, what to pay, how to interview. What to pay turned out to include a question they hadn't asked. What does the company pay on top?

## The national average: 1.22x cash pay

Japan's labor ministry surveys total labor cost every few years. In the latest survey (January 2021, covering 2020), companies spent an average of ¥408,140 a month per regular employee. Cash pay was ¥334,845 of that, or 82%. The other 18% went to social insurance, retirement benefits, welfare, recruiting and training.

That is 1.22x cash pay.

Large companies with generous retirement plans sit above the average. A young foreign subsidiary usually has no retirement plan and few extras. It still can't avoid statutory social insurance.

## Employer social insurance is about 15.7% of pay

For a typical service company in Tokyo in fiscal 2026 (April 2026 to March 2027), the employer's share looks like this.

| Item | Total rate | Employer pays |
| --- | --- | --- |
| Health insurance (Kyokai Kenpo, Tokyo) | 9.85% | 4.925% |
| Employees' pension | 18.3% | 9.15% |
| Child-rearing support levy (from April 2026) | 0.23% | 0.115% |
| Child-rearing contribution (employer only) | 0.36% | 0.36% |
| Employment insurance | 1.35% | 0.85% |
| Workers' accident insurance (employer only) | 0.3% | 0.3% |
| Total, employee under 40 |  | ~15.7% |
| Long-term care insurance (ages 40 to 64) | 1.62% | 0.81% |

For an employee under 40 the employer pays about 15.7%. From 40 it is about 16.5%.

Two things headquarters usually misses.

Bonuses are not exempt. If a quarter of annual pay comes as bonus, the same rates apply to it.

Commuting allowance counts too. It is free of income tax, yet it is part of the base for social insurance. Almost every company in Japan pays full commuting costs, so you pay roughly 15% on top of that as well.

For high earners the multiple drops a little, because the pension contribution stops rising once monthly pay passes ¥650,000.

## Worked example: a ¥6 million hire

Take an employee under 40 on ¥6 million a year: ¥400,000 a month, ¥1.2 million in bonuses, ¥15,000 a month in commuting pay. These are assumed numbers.

A ¥6 million hire costs ¥7.14 million a year from year two, and ¥9.24 million in year one with an agency

Annual cost to the company, built up (¥ million). Assumed example: under 40, Tokyo, service sector, 35% agency fee, FY2026 rates

**Year two onward**　pay and statutory costs

- Salary¥400,000 a month + ¥1.2m bonus

  6.00
- \+ Commuting pay¥15,000 a month

  6.18
- \+ Employer social insuranceabout 15.7%, also on bonus and commuting pay

  7.14 · 1.19x

**Year one**　hiring cost on top

- \+ Agency fee35% of annual pay: ¥2.10m

  9.24 · 1.54x

The 0.3x gap between year one and year two is almost all hiring cost. Budget 1.5x salary for year one and 1.2x after that.

Figure 1. A ¥6 million hire costs the company about ¥7.14 million a year from year two (1.19x), after ¥0.18 million in commuting pay and about ¥0.96 million in employer social insurance, and about ¥9.24 million in year one (1.54x) once a ¥2.10 million agency fee is added.

Pay plus commuting is ¥6.18 million. Employer social insurance adds about ¥0.96 million. From year two the company spends about ¥7.14 million a year, 1.19x salary, close to the 1.22x national average.

Year one adds recruiting. In my experience, agency fees in Japan run at roughly 30% to 35% of annual pay for a normal role. At 35% that is ¥2.1 million, which takes year one to about ¥9.24 million, or 1.54x.

For a country manager the fee rate is higher. The search often takes six months to a year.

None of this includes a laptop, a desk, software seats or onboarding.

## How to set a first-year headcount budget

Use 1.5x salary per role for the first year and 1.2x after. The 0.3x gap is mostly the recruiting fee.

You can save the fee by hiring directly. Count the time, though. In Japan the people you want rarely apply on their own. [Japan's job-change rate](https://nobusato.jp/en/blog/japan-job-change-rate?hsLang=en) explains why.

For the salary level itself, see [Japan's wages since 1945](https://nobusato.jp/en/blog/japan-wages-since-1945?hsLang=en). For who to hire first, see [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). And for what it costs when work rules aren't up to Japanese standard, see [the labor tribunal numbers](https://nobusato.jp/en/blog/japan-labor-tribunal-cases?hsLang=en).

The rates move every year. In fiscal 2026 Tokyo's health insurance rate fell from 9.91% to 9.85% while the new child-rearing levy was added, so the net change is close to zero. Over the longer run I expect the total to keep rising.

This is a Tokyo, service-sector calculation. Health insurance rates differ by prefecture, and accident insurance is much higher in manufacturing and construction, which pushes the multiple up.

What multiple does your company use for a first-year hire in Japan?

Sources

- [Ministry of Health, Labour and Welfare: General Survey on Working Conditions 2021, total labor cost ¥408,140 (Japanese)](https://www.mhlw.go.jp/toukei/itiran/roudou/jikan/syurou/21/dl/houdou.pdf)
- [Kyokai Kenpo: FY2026 health insurance rates by prefecture (Japanese)](https://www.kyoukaikenpo.or.jp/about/business/insurance_rate/rate_prefectures/r08)
- [Japan Pension Service: employees' pension contribution tables (Japanese)](https://www.nenkin.go.jp/service/kounen/hokenryo/ryogaku/ryogakuhyo/20200825.html)
- [MHLW: FY2026 employment insurance rates (Japanese)](https://jsite.mhlw.go.jp/tokyo-hellowork/list/tachikawa/kyushokusha/koyouhokenryouritu08.html)
- [MHLW: workers' accident insurance rate table (Japanese)](https://www.mhlw.go.jp/content/11601000/001183361.pdf)

Rates as of October 2026. The agency fee range is my own working figure.

The same structure seen from the candidate's side: [Read your offer in three tracks](https://nobusato.jp/en/blog/read-your-offer-in-three-tracks?hsLang=en).

Related: [Why your first-year budget in Japan runs over by half](https://nobusato.jp/en/blog/first-year-budget-overrun-in-japan?hsLang=en) · [Don't staff the Japan entity to exactly enough](https://nobusato.jp/en/blog/dont-staff-the-japan-entity-to-exactly-enough?hsLang=en) Agency fees loom large in the budget, yet agencies place under a tenth of Japan's job changers. See [How People in Japan Actually Find Jobs: Recruiters Are 9%](https://nobusato.jp/en/blog/japan-hiring-channels?hsLang=en). For what share of value added that fully loaded labor cost normally takes in Japan, by company size, see [Japan's Labor Share: 47% at Big Firms, 82% at the Smallest](https://nobusato.jp/en/blog/labor-share-by-industry-japan?hsLang=en).

Losing people is now costing small Japanese firms more than failing to hire them: Teikoku Databank counted 427 labor-shortage bankruptcies in 2025, with resignation-driven cases growing fastest ([what the 427 actually count](https://nobusato.jp/en/blog/labor-shortage-bankruptcies-record?hsLang=en)).

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)

## Read next

1. 01[Why your first-year budget in Japan runs over by half](https://nobusato.jp/en/blog/first-year-budget-overrun-in-japan?hsLang=en)5 min
   
   In one market-entry survey, over half budgeted under 50M yen and 65% later needed 1.5x or more. The gap is people cost, ...
2. 02[What it costs to let someone go in Japan](https://nobusato.jp/en/blog/cost-of-letting-someone-go-in-japan?hsLang=en)7 min
   
   Japan has no pay-to-dismiss rule, yet most disputes end in money: median 1.5 million yen at a labor tribunal, 3 million ...
3. 03[Don't promote your best salesperson to country manager](https://nobusato.jp/en/blog/dont-promote-your-best-seller-to-country-manager?hsLang=en)6 min
   
   The Peter principle: promotion rewards the old role's equipment while the new role runs on patterns and conditions. A ...

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