Japan: Amendment to Worker Dispatch Act

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Japan: Amendment to Worker Dispatch Act

[co-author: Aki Tanaka – Kitahama Partners]

Japan lately amended the staff member Dispatch Act, simplifying rules governing temporary workers (“dispatch workers”). Amongst other things, the amendment, which required effect September 30, 2015, loosened existing limitations on employing dispatch workers, especially limitations on the amount of time they might be employed.

Background: Is Japan still a “lifetime employment” Country?

Japan is famously considered a “lifetime employment” country, meaning japan employment plan anticipates employment for the whole working existence from the worker except where certain specific and extreme conditions require otherwise. Japanese law distinguishes between “regular” employees (individuals employed indefinitely) and “irregular” contingent workers (individuals useful for a restricted term, part-time, or as dispatch workers).

One singular and important trend would be that the quantity of irregular employees has elevated each year during the last several decades, reaching, in 2014, an unparalleled 37.4% from the Japanese workforce.1 Irregular workers don’t benefit from the same “lifetime” employment protections as regular employees.

What exactly are Dispatch Workers in Japan?

In 2014, dispatch workers constituted 2.2% of employees in Japan,2 and nearly 11% of Japanese employers retained dispatch workers. The data technology industry employs the greatest number of dispatch workers (26.9%) as the finance industry employs the 2nd greatest percentage (19.1%). Unsurprisingly, the bigger employers in Japan generally have more dispatch workers than smaller sized employers as reflected because 80.5% of employers with a minimum of 1,000 employees use dispatch workers.3

Dispatch workers’ employment contracts are joined directly having a staffing company, instead of using the entity to whom the employees render services. This entity is known as the “client company.” The staffing company dispatches the dispatch workers towards the client company with different service agreement between your staffing company and also the client company. The customer company, as opposed to the staffing company, directly controls and instructs the dispatch workers.

Client companies choose to use dispatch workers, in large measure, since the client companies enjoy greater versatility with regards to terminating these workers. Japanese labor law sets a higher threshold for employers to warrant unilaterally terminating a normal worker. But, these thresholds don’t affect dispatch workers because client companies don’t have any employment hire the dispatch worker.

Brief Good reputation for the staff member Dispatch Act

The Staff Member Dispatch Act, first enacted in 1986, continues to be amended many occasions. The amendments have expanded ale employers to make use of dispatch workers. Simultaneously, there is strong public opinion that companies shouldn’t be allowed to retain dispatch workers, since the relationship endangers the workers’ benefits and employment.

This Year, the Democratic Party of Japan (the ruling party at that time) passed an amendment towards the Worker Dispatch Act that tightened rules on these plans. In 2015, however, the Liberal Democratic Party (the present ruling party) has tried to undo a few of the 2012 rules by simplifying and loosening the guidelines, in support of employer versatility. The amendments ignored strong objection in the opposition, despite its failure within the last two sessions of Congress.

Previous Rules around the Term of Dispatch Workers

Formerly, there wasn’t any time period limit about how lengthy a customer company could employ dispatch workers who fit inside the scope from the Act’s professional “26 business areas.”4 The reasoning was these 26 areas were regarded as professional groups, and for that reason there is little chance of replacing lifetime employees with dispatch workers.

When the dispatch worker’s job didn’t fit within the identified 26 areas, the dispatch worker was restricted to a phrase of 1 to 3 years, with respect to the consent from the employees from the client company. Calculating this term was complicated. The word wasn’t calculated on the per-person basis, but instead on the position basis. Quite simply, if your dispatch worker labored for 2 many was substituted with another dispatch worker for that third year, the 3-year term could be considered completed and also the client company could no more use dispatch workers for your position.

Changes towards the Worker Dispatch Act

The current amendments abolished the “26 business areas,” rather allowing the following new rules relevant to any or all regions of business:

  • A phrase limit of 3 years per person calculation from the term starts over if your new dispatch worker replaces a previous dispatch worker.
  • A phrase limit of 3 years per position for dispatch workers, which may be restored for an additional 3 years, susceptible to the consent from the employees having a client company. There’s no-limit to the amount of occasions the word might be restored.

All staffing companies certainly be needed to acquire licenses. Formerly, some have been needed to supply only “notifications” towards the government. Additionally, staffing companies must now take measures to secure employment possibilities for dispatch workers who finish their term.

Risks Connected with Non-Compliance

In case the client company doesn’t stick to the new rules for dispatch workers, the Act provides the employment relationship might be considered to exist directly between your dispatch worker and also the client company. The customer company can also be susceptible to administrative orders and fines.5 Quite simply, the customer company is going to be considered to possess hired the dispatch workers directly and can lose the formerly enjoyed versatility to terminate their employment.

Action Items

In case your Japanese subsidiary maintains any dispatch workers from the staffing company, the next steps are suggested:

  • See whether your dispatch workers is going to be taught in new law and rules. Some dispatch workers, for example individuals who’ve an limitless term employment hire their staffing company, is going to be exempt.
  • In case your dispatch personnel are not exempt, review their job descriptions within the service agreement using the staffing company and see whether your dispatch personnel are inside the prior 26 business areas.
  • When the dispatch personnel are inside the prior 26 business areas, you might have expected to ensure that they’re lengthy term. Underneath the new rules, however, you won’t be effective in keeping these dispatch workers beyond 3 years within the same position. Accordingly, should you still the specific dispatch worker within the same position, you have to directly employ her or him, or switch the dispatch worker with a brand new dispatched worker.
  • When the dispatch personnel are not inside the “26 business areas,” individuals dispatch workers still remain susceptible to the 3-year limitation underneath the prior form of the Act however, you’ll are in possession of more versatility to make use of new dispatch workers within the same position because of the new way of calculating term limits.
  • Seek advice from the staffing company to make sure they’ve the right license and they are ready to take appropriate measures to secure employment possibilities to conform using these new laws and regulations and rules.


1 Research result around the current practice and problems with irregular employment printed by Secretary of state for Health, Labor and Welfare in 2014, offered at http://world wide web.mhlw.go.jp/stf/seisakunitsuite/bunya/0000046231.html.

2 Id.

3 Research results around worker dispatch by Secretary of state for Health, Labor and Welfare 2012, offered at http://world wide web.mhlw.go.jp/toukei/itiran/roudou/koyou/haken/12/index.html.

4 These areas include: 1)design, creation, development or upkeep of computer or programs 2) style of gadgets or appliances or devices 3)operation of broadcasting equipment 4)production of broadcast program 5)operation of computers, telex, typewriters along with other equipment for your office 6)translation or interpretation 7)secretaries to managing or supervisory employees 8)classification or filing of documents 9)marketing research 10)preparation of monetary statements or profit and loss statements 11)preparation of documents needed for imports and exports 12)demonstration or explanation regarding computers, automobiles along with other gadgets 13)tour performing work 14)cleaning of structures 15)operation or upkeep of building equipment 16)receptionist 17)R&D 18)planning and establishment of economic 19)creation and editing of books 20)design and planning of advertisement 21)interior coordinators 22)newscasters 23)computer application instructor 24)sales via telemarketing 25)sales of engineering or lending options and 26)production of stage occur broadcasting.

5 Using the revision from the Worker Dispatch Act this year, an immediate employment offer will be regarded as supplied by the customer Company towards the dispatch workers when you will find illegal products within the worker dispatch arrangement, including breach from the term limit, that has taken effect in October 2015 (Article 40-6 from the Workers Dispatching Act).



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