Referral hiring リファラル採用

Hiring through recommendations from current employees. Also written referral recruitment, employee referral.

Hiring through personal connections is old in Japan, but the modern referral programme, with a defined process and a bonus for a successful hire, spread mainly through start-ups and foreign companies. It is now common at large Japanese employers too, partly because agency fees are high.

The legal point is specific to Japan. Article 40 of the Employment Security Act prohibits anyone recruiting workers from paying remuneration to the people doing the recruiting, with exceptions that include ordinary wages paid to the employer's own staff. A referral bonus is therefore safe when it is written into the work rules or pay rules as part of wages and paid through payroll. A cash gift outside payroll, or a payment to someone who is not an employee, sits outside the exception. Large, repeated payments to the same employee can also start to look like an unlicensed placement business.

Because the bonus is wages, it is taxed and treated like other pay.

What it means for a foreign employer

Sources

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General information for employers, not legal advice. Thresholds and dates are checked against the sources listed and dated above; confirm anything you act on with a Japanese employment lawyer or a licensed labour and social security attorney.