Different customs and cultures are part of the experience when visiting another country.
But underestimating these differences in business, especially in relation to employment, can pose unexpected business risks, with labor issues often time-consuming, costly and damaging to a brand.
It’s on this basis that the Health, Labor and Welfare Ministry opened the free Tokyo Employment Consultation Center (TECC) in February for local and non-Japanese people planning to establish a company in Japan.
According to Akiko Yamakawa, a partner at the Japan branch of U.K. law firm Freshfields Bruckhaus Deringer and a lawyer at TECC, foreign companies were at a disadvantage if any labor issues arose if they failed to have documents, such as their employment contracts, in order.
“What’s interesting about this center is that it focuses on preventing troubles relating to employment before they happen,” because foreign firms usually turn to lawyers when troubles have occurred, Yamakawa said.
TECC, which is based in Tokyo’s Akasaka district and operated by consulting firm Dream Incubator Inc., provides consultations in Japanese, English, Spanish, Chinese and Korean.
The target clients are firms and entrepreneurs looking to launch local branches or already doing business in Japan, as well as their employees, in the national strategic economic zones designated by the government. The zone includes Tokyo’s nine wards, Kanagawa Prefecture and Chiba Prefecture’s Narita city.
It also has two other offices in Osaka and Fukuoka that provide the same service to help firms understand Japan’s labor culture and customs.
Among the differences that often need attention are that big Japanese companies still have a custom of lifetime employment, while U.S. and European companies hire people for shorter terms.
It is also seen as harder for Japanese companies to layoff workers, but such actions occur more often at U.S. and European firms. Many Japanese firms also provide overtime pay to white-collar employees, whereas Western firms usually do not.
Yamakawa said problems can occur when foreign firms assume their Japanese employees are familiar with their work environment. She said in some cases employees only realize they can actually be fired or are not entitled to overtime pay after they start working.
She said some firms also don’t spend enough time preparing employment contracts or work regulations that actually reflect their work culture.
“Some companies use the same employment contract as typical Japanese companies and work regulations” so they can quickly register a company to start a business, she said.
Yamakawa said some companies copy a labor ministry template for work regulations, though it does not always reflect the employment culture of that foreign firm.
She said in the event of a workplace dispute, foreign firms claim they have different employment systems, but their paperwork shows otherwise. It then puts the companies at a disadvantage in any court case.
“It is too late to realize (such differences in employment systems) after labor (troubles) have occurred. So it is better to learn about them when (foreign firms) come to Japan,” Yamakawa said.
She said it was important to remember that overseas firms did not necessarily have to follow a typical Japanese employment system.
“It’s a good thing for Japan to have various employment cultures. Some people prefer more merit-based companies rather than lifetime employment (with a seniority system),” she said, adding that the key was to match each firm’s customs with the local legal system.
Yamakawa also said it was vital for companies to thoroughly explain their culture to new hires through proper paperwork so that newcomers will know what to expect.
In that sense, companies can come to TECC to make sure that what they want to do is legal, she said.
Some firms have already asked for help.
Yoshinori Ishikawa, head of London-based Anvil Group’s Japan branch, came to TECC for assistance when the branch was established in March.
“I wanted to ask what we need to be careful about when we make our employment regulations,” said Ishikawa.
Anvil provides security services for businesspeople traveling abroad, especially to countries where the political situation is unstable.
If something happens to the clients, workers need to deal with situations at unusual hours due to time differences, so he wanted to know how the firm could arrive at an overtime pay system that would be satisfactory for the company and employees.
In addition, he sought advice on issues such as annual leave and possible job cuts given the Japanese employment culture doesn’t allow the latter practice easily.
Ishikawa, who used to work for a major Japanese firm and run its subsidiaries in Dubai and Indonesia, said the employment cultures in those countries were quite different, adding that regulations on layoffs were more lenient and yearly contracts without overtime pay more common.
“Just bringing the overseas styles to Japan won’t work,” he said.
Ishikawa said he wanted to make use of the labor ministry’s work regulations template, but also wanted to outline the details of the work environment at Anvil.
“I happen to be Japanese, so I don’t have a problem with communication, but I am not familiar with Japan’s employment system, so TECC was really helpful,” he said.
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