Keiyaku shain means contract employee, and in practice it means fixed term. Companies use it for specialists hired for a project, for staff re-employed after retirement, for roles they are unsure they will keep, and sometimes as an extended trial before offering regular status. Pay can be high, but the contract usually comes without the retirement allowance and promotion track that seishain receive.
The Labour Standards Act caps a single fixed-term contract at three years, or five years for highly specialised workers who meet set criteria and for workers aged 60 or over. There is no cap on the number of renewals, but the Labour Contract Act gives renewed staff real protection. Under Article 19, if a contract has been renewed so often that ending it looks like a dismissal, or the employee has a reasonable expectation of renewal, the employer needs objectively reasonable grounds not to renew. Ending a contract before its term is even harder: Article 17 requires "unavoidable reasons", a stricter test than for dismissing a regular employee.
After a total of more than five years, the five-year conversion rule lets the employee demand an open-ended contract.
What it means for a foreign employer
- A fixed term is not a clean exit. After several renewals, or after a manager has said the role is long-term, a non-renewal can be challenged much like a dismissal.
- Do not plan to end it early. Terminating mid-term needs unavoidable reasons. A three-year contract is close to a three-year commitment.
- State renewal terms from the start. Since April 2024 the written terms must say whether there is a cap on renewals or total length. Adding a cap later, without explanation, invites a dispute.
- Senior candidates resist it. Offering a fixed-term contract to a manager leaving a regular job narrows the field. If you must, compensate with pay or a written route to regular status.
Sources
- Labour Standards Act, Article 14.
- Labour Contract Act, Articles 17, 18 and 19.
- Ordinance for Enforcement of the Labour Standards Act, Article 5, as amended in force April 2024.