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What is a contractor? What is the difference between an independent contractor or a contract employee in Japan?

In our previous article, we discussed the myths of contract hiring for employers, covered the perceptions of contract workers and freelancers for job seekers and also found a growing demand for contract recruitment where a more flexible approach to hiring and working has been more frequently adopted than before. But the various contract solutions can often be quite confusing. In this article, we will list out the differences to help you understand contract recruitment and contract working models in Japan.


What is a contractor?

The definition of a contractor varies depending on a country as each country has their own set of labour laws and employment models. In Japan, technically all employees who work on a non-permanent basis can be classified as a contractor. However, the term contractor can also include contract employees, temporary staff, and independent employees (also known as independent contractors) such as freelancers.


Types of contractors in Japan

The actual services offered by contractors yet again vary from country to country. Below are the three main types of contract employment that we support in Japan:


Temporary staff (Haken)

Haken refers to a temporary worker who is not employed directly by the company they are working for, but through an agency who sent them – a form of “indirect employment”. Their salary is based on hourly rates and transport costs are often included in this hourly rate. Because of the nature and scope of the work for haken employment, you will usually specialise within a particular remit and often will have a related scope of work associated with permanent employment.

If you end up working for the same company for more than three years, you will need to move into a direct employment contract i.e. You will become an employee of the company you’re working for (either permanent or contractual) rather than a temporary worker through an agency.


Temp to Perm (Shokai Yotei Haken)

Temp to Perm is a temporary staffing system which is based on the premise of “switching from indirect employment to direct employment”. This is a progress from Haken as discussed above. The maximum period of employment for temporary workers with a single contract is six months, during which the company you’re working for would decide if they wanted to employ you directly. This is similar to a long-term probation or internship.

The biggest advantage for both employers and employees is the opportunity to find the right fit, resulting in less of a mismatch for both parties. Employees get to see how the job actually works and how they fit with the company instead of basing the role off a job description.


Independent Contractor (Gyomu Itaku)

Outsourcing to an independent contractor is not an employment but a partnership. As an independent contractor, you function like an agency and partner with the company you’re working with. Many freelancers and sole traders work for companies on an outsourcing basis as an independent contractor and thereafter receive remuneration for the work agreed. While haken workers are protected by labour laws with set maximum number of working hours and minimum wages, these don’t apply for independent contractors as they are not considered employees.


Is there a difference between a freelancer, a sole trader and an independent contractor?

Freelancers are individuals who don’t belong to any specific company or agency, and earn an income by undertaking work independently. Sole traders belong to a sole proprietorship which is a classification under tax law. If you have submitted a notification of opening your business to the tax office, you are treated as a sole proprietor, and there are various forms of sole proprietorship depending on whether you have a business name or if you’re working under your own name, and whether you are registered.

Independent contractor includes anyone who is working based on a contract or agreement, not based on employment. As such, both freelancers and sole traders are a type of independent contractor.

There are two general types of outsourcing contracts namely “contract” which is an agreement where independent contractors are paid upon their deliverables and “Inin Keiyaku” which is a mandate contract for any legal issues and candidates are paid simply for the service they provide where no deliverables are required.

At Computer Futures, we mainly support “Jyun Inin Keiyaku” which is a quasi-mandate contract. This is a mandate contract for non-legal issues where you are paid for the work or service itself, as opposed to a contract where you are paid for the deliverables. In other words, you are contracted legally and paid to, for example, manage an internal system, provide IT helpdesk services or manage a project for a specific period of time. 


Why consider contract employment?

Although there are differences in the types of employment and contractors, few of the main advantages include flexible working, ensuring your skills are utilised and that relevant skill sets are being developed. In fact, you even get to pick up new skills that can be in great demand or work on exciting projects that are only available to contractors because of the nature of the role.


Why consider contractors?

For employers, it is also a more efficient human resource strategy for securing specific skills and enjoy cost savings in the long run as you’re only hiring based on the needs of a project, in which all of these can have a significant impact.

You can find out more about the other benefits by clicking here.


Find an experienced agency to help you with contract recruitment in Japan

Computer Futures is part of the larger SThree group, in which a strong record in contract recruitment can be seen. 74% of SThree’s revenue come from the contract recruitment business. Those who work on a contractual basis, whether as temporary workers or as freelancers are called contractors.


See our strength in details 


It is important to note that the laws and regulations governing contract recruitment vary from country to country, which is why it’s so important to work with a specialist consultant to draw on their knowledge and experience. We have a team of dedicated specialist consultants who possess a wealth of experience within contract recruitment in Japan and are extremely familiar with the legal and labour landscape to help you with any contractual issues.

Find out more by meeting our team here


Contact Computer Futures for more information

If you are looking for a cost-effective recruitment strategy to grow your business, or if you are looking for a more flexible, skilled and well-paid opportunity for your career path, we can help. Our LinkedIn page is also a great resource for both employers and job seekers. Please see our latest contract opportunities below.



Our latest contract jobs