The label is recorded on the separation notice that the employer files with Hello Work, which the employee receives as a separation slip. It matters most for employment insurance. People who leave for company reasons, including dismissal, redundancy, bankruptcy and resignations that followed an employer's encouragement to leave, qualify with six months of insured employment in the past year, receive benefit after the standard seven-day waiting period, and are entitled to between 90 and 330 days depending on age and years insured. People who resign for their own reasons need twelve months in the past two years, normally wait a further month before benefit starts, since April 2025, and receive 90 to 150 days. Some personal departures, such as leaving for health reasons or because a fixed-term contract was not renewed against the employee's wishes, are treated more favourably.
The label also drives the retirement allowance. Many company schemes apply a lower factor to people who resign voluntarily, so the same tenure can produce a noticeably different lump sum. On the employer side, company-reason separations can cost the employer government employment subsidies. Many of the labour ministry's subsidies exclude employers that have dismissed staff or encouraged them to resign around the relevant date. Under the Career Up Subsidy for converting fixed-term staff to regular employment, for example, one such separation at the workplace in the period from six months before the conversion to six months after makes the employer ineligible, as does a share of leavers counted as company-reason recipients above 6% of insured employees, unless there were three or fewer.
Because so much turns on it, the classification is often part of exit negotiations. An employee asked to leave will usually insist on company reasons. The employee can also dispute the employer's classification at Hello Work, which decides on the facts, not on the form.
What it means for a foreign employer
- Record it truthfully. If you encouraged the departure, it is a company-reason separation. Recording it as personal to protect a subsidy or a headcount metric invites a dispute.
- Make it part of the package. In a negotiated exit, agreeing to company reasons costs you little and is often worth a lot to the employee.
- Know what your hire is giving up. A candidate who resigns to join you is leaving for personal reasons and may take a lower retirement allowance rate. Include it in the cost-of-move analysis.
- Directors are different. Board directors are generally outside employment insurance, so the label matters less for them than for employees.
Sources
- Employment Insurance Act, Articles 13, 22, 23 and 33 (eligibility, benefit days and the restriction for voluntary leavers, as amended in force 1 April 2025).
- Ministry of Health, Labour and Welfare and Hello Work, guidance on specified eligible recipients and benefit days.
- Ministry of Health, Labour and Welfare, Career Up Subsidy payment guidelines (April 2026), regular employment conversion course.