When securing people for a Japan office, whether to hire them as full-time employees or contract with them as contractors is a hard call. Deciding by the form of the contract alone can create gaps with actual practice that need to be revisited later.
- The company wants to start with contractors and is unsure whether to convert them to employees later
- Even under contractor agreements, the actual way of working is close to that of an employee
- It is unclear which work to give to full-time employees and which to contractors
- The differences in responsibility and cost by contract type have not been explained to headquarters
This article explains how to choose between full-time employees and contractors when hiring for a Japan office.
Why the Contract Form Alone Cannot Decide
Full-time employees and contractors differ in how instructions are received, discretion over working hours and place, and scope of responsibility. Regardless of what the contract is called, if the actual way of working is close to employment, its treatment under labor laws and regulations may become an issue.
The choice of contract type should take into account the content and duration of the work, the depth of involvement required, and the business plan. When unsure, it is advisable to have a specialist check.
How to Decide Which to Use
Consider which suits each piece of work from perspectives like the following.
| Perspective | Cases for Full-Time Employees / Cases for Contractors |
|---|---|
| Continuity of the work | Work that continuously forms the core of the Japan business / Work limited in period or deliverable |
| Instruction and management | Work done daily under the company's direction / Work commissioned based on deliverables or results |
| Specialized expertise | Work where knowledge should build up inside the organization / Work needing a specific skill only for a set period |
| Business outlook | A stage of building the team over the mid to long term / A launch stage where the company wants to see how things go |
What to Watch After Signing
When contracting with a contractor, make the scope of work, deliverables, fee, and term clear, and run day-to-day practice in line with the contract. If practice drifts from the contract, it can lead to problems later.
As the business grows, there will be occasions to consider converting a contractor to an employee. Sorting out the approach to conversion in advance makes it go more smoothly.
Summary
- Decide based on the actual way of working, not just the name of the contract
- Consider continuity of work, instruction and management, expertise, and business outlook
- For contractors, make scope, deliverables, fee, and term clear and keep practice in line with the contract
- When the decision is hard, have a specialist check
Contact
JBN supports foreign companies' Japan offices, from organizing hiring arrangements through to preparing employment contracts.
To discuss organizing employment types, please contact us.