No HR Staff at Your Japanese Entity? How Foreign Companies Can Build an HR and Labor Management Structure in Japan

You have set up a Japanese entity, but headcount is still small and there is no dedicated HR person. Or you want to hire one but cannot find the right candidate. This is common among foreign companies that have just entered Japan. With a few to a dozen or so employees, the typical dilemma is: "There isn’t enough work to justify a full-time HR hire in Japan, but payroll, social insurance and onboarding/offboarding still have to be handled."

Not having an HR person does not mean you must hire a dedicated one. What matters is to identify the HR and labor functions required in Japan and clearly divide responsibilities between in-house staff and external providers. This article explains the problems that tend to arise when a Japanese entity has no HR staff, and how to build an HR and labor structure that runs reliably even in a small organization.

1. Does a Japanese Entity Need a Dedicated HR Person?

There is no legal requirement to appoint a dedicated HR person. At a small Japanese entity right after incorporation, the Country Manager, Finance Manager or administrative staff may well handle HR alongside their other duties.

The problem is not the absence of an HR person, but that necessary tasks and procedures may be neglected as a result. Once you employ staff in Japan, you must handle disclosure of working conditions, payroll, attendance management, and social and labor insurance procedures, among other things. The rules on disclosing working conditions, for example, continue to be updated.

• When concluding an employment contract, employers must disclose wages, working hours and other working conditions to the employee in writing or by other prescribed means.
• Since April 2024, the "scope of possible changes" to the place of work and duties has been added to the items that must be disclosed.
• From October 2026, when hiring part-time or fixed-term employees, employers must also disclose that the employee may request an explanation of the content of, and reasons for, any differences in treatment compared with regular employees.

The question of whether to appoint a dedicated HR person should therefore be considered separately from whether the necessary HR and labor functions are in place.

2. Three Common Situations Where Japanese Subsidiaries Lack HR Staff

(1) Just entered Japan with few employees

Right after incorporation, a business may start with just a few people, such as the Country Manager and sales staff. Hiring a dedicated HR person at this stage may create fixed costs out of proportion to the size of the organization. Yet as soon as there is even one employee, employment administration is required. Rather than assuming that HR management is unnecessary because headcount is small, consider an approach that suits a small organization.

(2) The Country Manager or a one-person back office covers HR

When the Country Manager, Finance Manager or Office Manager handles HR, they may manage interviews and employee communication, but accurately understanding Japan’s social insurance system, payroll and labor laws is not easy. As the business grows, their core responsibilities also increase. HR work may be pushed aside, or operations may become person-dependent—for example, "payroll still runs on an Excel file built by a predecessor."

(3) Unable to hire an HR person

Japanese subsidiaries often look for candidates who combine Japanese labor expertise with English communication skills for working with headquarters and an understanding of global policies. Searching for someone who meets every requirement can prolong the period without HR. In that case, rather than waiting until someone is hired, consider securing the necessary functions by other means in parallel with recruitment.

3. Problems That Commonly Arise Without HR Staff

(1) It becomes unclear who handles payroll

Once you employ staff, salaries must be calculated correctly and paid on the designated date every month. Payroll involves not only base salary but also attendance, overtime, absences, allowances and social insurance premiums. Even if headquarters manages payroll data, Japan-specific social insurance and working-hour rules mean it cannot necessarily be processed the same way as overseas. In Japan, employers must also prepare a wage ledger for each workplace and record the required details each time wages are paid. Decide in advance who runs payroll, who reviews it and who gives final approval.

(2) Onboarding, offboarding and social insurance filings are missed

Hiring and departures trigger a range of procedures, starting with social insurance. For example, the health insurance and employees’ pension eligibility acquisition notification must in principle be filed within 5 days of the event. If everyone assumes "someone will take care of it," information gathering and filings may be delayed. Because it is hard for headquarters to see which procedures arise in Japan and when, it is important to designate a responsible person and workflow on the Japanese side.

(3) Headcount grows but the management structure stays the same

A company that started with five people in Japan may grow to 20 or 30 within a few years. The risk is that the HR structure remains "the way we did it with five people." For example, a workplace that regularly employs 10 or more workers must prepare Rules of Employment (shugyo kisoku) and file them with the competent Labor Standards Inspection Office; headcount is determined in principle per workplace, not for the company as a whole. Review your HR structure regularly as hiring increases.

4. Structural Options When There Is No HR Staff

Without a dedicated HR person, the options broadly fall into the following categories.

The best option cannot be determined by headcount alone. Also consider hiring frequency, the complexity of the pay structure, reporting required by headquarters and the need for English support.

(1) Consider options other than hiring one HR person

It is tempting to think, "We have no HR person, so let’s hire one." But it is worth breaking down the work to see whether a full-time HR person is really needed. For example, management can own recruitment policy, performance evaluation, organization building and employee communication, while specialized routine work such as payroll and social insurance is handled by external professionals. While headcount is still small, assigning the best-suited party to each function is often more rational.

(2) Separate what to outsource from what to keep in-house

Using HR outsourcing does not mean outsourcing all of HR.

In other words, the key is not whether you have an HR person, but designing who performs each necessary HR function. This shift in thinking makes it easier to maintain essential HR and labor functions even during periods when you cannot hire a dedicated person.

(3) Clarify roles between headquarters and Japan

Foreign companies should also define the division of roles with headquarters HR. For example, headquarters may set global HR policies while the Japanese side handles Japan-specific labor practices. The key is to leave no area that nobody owns.

In particular, when the Employee Handbook or employment terms are based on headquarters templates, care is needed to ensure consistency with Japanese laws and practices. Policies common overseas cannot always be applied as-is in Japan. Separate "Global Policy" from "Japan Local Requirements," and decide who reviews and operates each.

5. Checklist for Japanese Entities Without HR Staff

If you cannot answer any of the following, it is worth reorganizing your HR and labor structure.

• Who runs monthly payroll, and who reviews it?
• When someone joins or leaves, who knows which procedures are required?
• How are attendance and annual paid leave managed?
• Who reviews employment contracts and working conditions?
• Who keeps track of changes in Japanese law?
• Who answers employees’ labor-related questions?
• Who reports the necessary HR and payroll data to headquarters?
• Can operations continue if the Country Manager is absent?
• At what point will the structure be reviewed as headcount grows?

No single person needs to handle everything. What matters is making clear who is responsible for each function, so that the entity does not depend on any one individual.

6. Summary: Even Without a Dedicated HR Person, HR Functions Are Essential

Newly established or small Japanese subsidiaries of foreign companies sometimes start operations without a dedicated HR person. The usual problem is not the absence of HR staff itself, but procedures being postponed because no one has been assigned. Identify the functions needed to employ staff in Japan, such as payroll, social insurance, attendance management and onboarding/offboarding, and clarify whether the Japanese entity, headquarters or an external professional is responsible for each. By keeping HR functions tied to management decisions in-house while outsourcing payroll and labor administration, you can build an HR structure without adding fixed headcount.

RSM Shiodome Partners provides HR outsourcing, including payroll and social insurance services, to Japanese subsidiaries of foreign companies. For companies without dedicated HR staff in Japan, or that are building their back office after entering Japan, we support the design and operation of HR and labor structures that reflect Japan-specific rules and practices as well as coordination with headquarters. If you are unsure whether to hire an HR person in Japan, your Country Manager is also covering HR, or you want a structure that works without in-house HR staff, please contact RSM Shiodome Partners.

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