Gyomu itaku is an umbrella term for contracts to outsource work, covering both contracts to deliver a result and contracts to perform a service. Because it is not employment, the Labour Standards Act, overtime pay, paid leave and employee social insurance do not apply. That is the appeal, and the risk.
Status is decided by how the relationship works, not by what the contract is called. The test still used dates from a 1985 report by a Labour Standards Act study group. It asks whether the person can refuse assignments, whether the client directs how the work is done, whether their hours and place of work are controlled, whether someone else could do the work in their place, and whether pay is really for time worked. If the answers point to employment, the person is a worker under Article 9 of the Labour Standards Act, with all that follows.
The Freelance Act, in force from 1 November 2024, adds a separate layer for individuals and one-person companies without employees. A business that engages one must set out the work, the fee and the payment date in writing or electronically straight away. A client with employees of its own must also pay within 60 days of receiving the deliverable and take measures against harassment, and longer engagements carry more duties: for one month or more, a ban on unilateral fee cuts and similar practices; for six months or more, 30 days' notice of termination. The Japan Fair Trade Commission and the labour ministry enforce it, and the commission issued its first formal recommendations in 2025.
What it means for a foreign employer
- Pre-entity hires carry misclassification risk. Engaging a senior person in Japan on a service contract before you set up an entity is common. If you set their hours and direct them like staff, expect claims for overtime and unpaid social insurance.
- Do not manage a vendor's staff directly. Giving daily instructions to people supplied under an outsourcing contract is disguised dispatch, which can create a deemed offer of employment.
- Paper even small engagements. The Freelance Act applies to a single consultant, regardless of how senior or well paid.
- It suits some senior people. Advisers and former executives often prefer a service contract, especially alongside other roles.
Sources
- Act on Ensuring Proper Transactions Involving Specified Entrusted Business Operators (Freelance Act), in force 1 November 2024.
- Labour Standards Act, Article 9.
- Labour Standards Act Study Group report on the concept of "worker", 1985.
- Japan Fair Trade Commission, enforcement announcements under the Freelance Act, 2025.