Restructuring

What an exit costs in Japan

Enter the salary and the terms you would offer. The calculator adds notice pay, unused leave, the package, garden leave and outplacement, and shows what the employee keeps after tax. Rates as of October 2026.

Rates as of October 2026

The law requires 30 days’ notice or pay in lieu for the shortfall.

Negotiated exits in Japan commonly run three to six months; more for long service or senior roles.

Total cost of the exit—
In months of salary—
Lump sum the employee receives—
The employee keeps, after tax—

What the employee receives

Pay in lieu of notice uses average daily pay (annual pay over 365 days). Leave is paid at monthly salary over the working days entered. The package and any retirement allowance are treated as retirement income (退職所得), with the standard deduction by years of service and the half-rate, including the limit for five years’ service or less; the rule for company officers is not modelled. Pay in lieu and the leave payout are salary for tax; social insurance is charged on garden-leave salary only. Not included: legal fees, the cost of a replacement hire, or any claim if the exit is contested. Tax tables from the National Tax Agency; insurance rates from Kyokai Kenpo, the Japan Pension Service and MHLW.

The replacement hire has its own calculator: cost of hire. Changes to the rules on dismissal and negotiated exits are tracked in the Labour Law Tracker.

Tell me when the rates change
One email a week before health rates change (March), employment and accident insurance (April) and the income-tax tables (January). You confirm by email first and can stop at any time.

The numbers behind the restructuring: turnover by industry, this year’s pay rises and the HQ briefing on what the law now requires. When the seat has to be refilled, retained search at Makana Partners.

Questions

What must an employer pay when letting someone go in Japan?

The legal minimum is 30 days’ notice or pay in lieu for the shortfall (average daily pay times the missing days), plus salary to the last day. There is no duty to buy out unused paid leave, but negotiated exits almost always do. If the company has a retirement-allowance scheme, the scheme amount is owed. Everything else, the severance package, garden leave and outplacement, is not required by law; it is what buys agreement.

How big is a typical severance package in Japan?

Because dismissal must meet a strict standard of objective reasonableness, most exits are negotiated resignations (退職勧奨), and the usual terms are a package of three to six months’ salary plus the leave buyout and notice pay. Long service, age and a hard-to-replace specialism push it higher. For example, on ¥12,000,000 with eight years’ service and a four-month package, the employer’s total is ¥4,736,301 (5.7 months of salary), and the employee nets ¥3,323,433 from the lump sum plus the notice pay and leave payout.

Is a severance package taxed?

A lump sum paid as retirement income (退職金) is taxed separately: a deduction of ¥400,000 per year of service for the first 20 years (minimum ¥800,000) and ¥700,000 a year after that, then half of the remainder is taxed at the normal rates. That is far lighter than salary. With five years’ service or less, the halving does not apply above ¥3,000,000.

What is garden leave?

Paying the employee not to work for a period before the leaving date, once the handover is done or where the company wants them away from clients and competitors. Salary and the employer’s social insurance continue for those months.

How is pay in lieu of notice calculated?

Average daily pay is total wages over the previous three months divided by the calendar days in them, multiplied by the number of days short of 30. This calculator approximates it as annual pay over 365 days.

When do the rates change?

Social-insurance rates change each March and April and the tax tables with each reform. This page uses the rates as of October 2026 and is rechecked every April and January.