---
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/true-cost-of-hiring-in-japan-cover-en.png
---

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

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

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

![What one hire in Japan really costs: 1.2x to 1.5x salary](https://nobusato.jp/hs-fs/hubfs/true-cost-of-hiring-in-japan-cover-en.png?width=1200&height=630&name=true-cost-of-hiring-in-japan-cover-en.png)

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. What actually held them up was the first employee: 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. What it can't avoid is 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, but 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.

The multiple drops for high earners. 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.

6.00+0.18+0.967.14 · 1.19x+2.109.24 · 1.54xSalaryCommuteEmployer SIYear 2+Agency feeYear 1¥ million

**Fig.1**A ¥6 million hire costs the company about ¥7.14 million a year from year two (1.19x) and about ¥9.24 million in year one with an agency fee (1.54x). Assumes under 40, Tokyo, service sector, 35% fee.

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. Agency fees in Japan run at roughly 30% to 35% of annual pay for a normal role, in my experience. 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, and 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, but count the time. 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).

## Where I'm not sure

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 time 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.

---

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## More in this column

- ### [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)
  
  HQs hire sales first in Japan. Then customers ask for Japanese materials, a local contract, a support promise, and ...
- ### [What foreign companies struggle with most in Japan](https://nobusato.jp/en/blog/what-foreign-companies-struggle-with-in-japan?hsLang=en)
  
  JETRO 2025: the top challenges for foreign companies in Japan are currency, communication and hiring. Paperwork ranks ...
- ### [Picking the wrong competitors is worse than having none](https://nobusato.jp/en/blog/picking-the-wrong-competitors?hsLang=en)
  
  A competitor list ranked by fame is an encyclopedia, not a decision input. Three reasons put a company on it: talent ...

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