Any business that charges a fee for matching job seekers with employers needs a licence under Article 30 of the Employment Security Act. The first licence lasts three years and renewals five. Applicants must meet financial thresholds and have a qualified placement manager at each office. The market is crowded: around 30,600 licensed offices filed reports for fiscal 2024, although fewer than half made a placement that year.
Fees are paid by the employer. Agencies file a fee schedule with the authorities, and most charge a percentage of the hire's theoretical annual pay, meaning twelve months' salary plus expected bonus, on a contingency basis: no hire, no fee. Industry guides commonly put the rate at around 30 to 35%. Retained search, with part of the fee paid up front, is used for senior and confidential roles. Refund clauses, scaled by how soon a hire leaves, are standard.
The law also regulates conduct. An agency may not encourage someone it placed in an open-ended job to change jobs again for two years. Since 2018 agencies must publish their fee schedule, refund policy, number of placements and how many hires left within six months on a ministry website.
What it means for a foreign employer
- Agree the fee base in writing. "Annual pay" should state whether it includes bonus at target, allowances and sign-on payments. The base is often nenshu, not salary.
- Check the licence. Every licensed agency has a number, and the ministry's site lists it with the agency's published data.
- Negotiate the refund terms. Periods and percentages vary. Make sure they cover departures during probation.
- Match the model to the role. Contingency suits volume and visible roles. For a senior, confidential or hard-to-fill role, an agency paid to search the market systematically often does better than several working on speculation.
- Four agencies on contingency is not four times the coverage. Running every search as a competitive pitch maximises short-term options and minimises what any one firm invests in knowing your business. The candidates who fill senior searches fastest are usually ones a firm has known for years before the brief arrived.
Sources
- Employment Security Act, Articles 30 to 32-16.
- Ministry of Health, Labour and Welfare, guidelines under the Employment Security Act (Ministry of Labour Notice No. 141 of 1999), including the two-year rule on encouraging job changes.
- Ministry of Health, Labour and Welfare, summary of placement business reports for fiscal 2024.
- Fee guides published by Japanese recruitment firms, including BizReach and Pasona.