Worker Dispatch License in Japan: Requirements, Process and Fees

Starting a worker dispatch business (労働者派遣事業) requires a license from the Minister of Health, Labour and Welfare. You apply to the prefectural labor bureau with jurisdiction over your head office and must meet asset requirements, including base assets of at least 20 million yen, as well as requirements for a dispatch manager and office premises. Applicants are advised to file roughly three months before the date they want the license.

What worker dispatch is and why a license is required

Worker dispatch means sending workers employed by your company to another company to work under that company’s direction and supervision. Under the Worker Dispatching Act, carrying this out as a business requires a license.

Previously, a “specified worker dispatch business” that dispatched only regularly employed workers needed only a notification. An amendment in force from 30 September 2015 abolished this category, and all dispatch businesses now require a license.

How it differs from contracting and recruitment

• Contracting and outsourcing: the contractor directs its own workers. If the client gives instructions directly, the arrangement may be treated as dispatch in substance and become unlicensed dispatch (so-called disguised contracting).
• Recruitment: the agency mediates an employment contract between a job seeker and a hiring company. A separate license under the Employment Security Act is required. For details, see the fee-charging employment placement license.

Work for which dispatch is prohibited (excluded work)

Even with a license, workers cannot be dispatched for the following work:

• Port transport work
• Construction work
• Security work
• Medical work at hospitals, clinics and similar facilities (with some exceptions, such as temp-to-perm dispatch and cover for maternity leave)

In addition, the work of licensed professionals such as attorneys and certified tax accountants is in principle not subject to dispatch. Day-labor dispatch with an employment period of 30 days or less is also prohibited, with certain exceptions. When drawing up your business plan, check that your clients’ work does not fall into these categories.

License requirements for a worker dispatch business

The asset requirements are assessed on financial statements

The asset requirements are assessed on the balance sheet for the fiscal year ending immediately before the application. For a newly established company, they are checked against the balance sheet at incorporation or similar documents. Cash and deposits are evidenced by a balance certificate. If you meet the requirements through a capital increase after the year-end, you may also be assessed on interim or monthly financial statements audited by a certified public accountant.

When setting up a new company, the reliable approach is to design the share capital above the requirements from the outset. Paying incorporation costs and the office security deposit reduces net assets and deposits, so share capital set just at the threshold may fall short.

Dispatch manager

The dispatch manager handles dispatched workers’ complaints and coordinates with client companies. The person must complete the dispatch manager training course specified by the Minister of Health, Labour and Welfare within a set period before the application. Choose someone who can actually work at the office in Japan. The experience requirement includes at least three years of employment management experience after reaching adulthood, among others. One person cannot cover multiple offices, so secure a manager for each office.

Career development support and training

Dispatching companies are obliged to support the career development of dispatched workers. In the application, you set out a plan for staged, systematic education and training and a career consulting contact point. Training is expected to be provided on a paid basis and free of charge to the worker.

Main documents for the license application

Check the labor bureau’s guide for the latest forms and number of copies. The main documents are as follows.

If any directors are foreign nationals, you may need documents in place of the residence record, as well as translations. Consulting the labor bureau in advance reduces rework.

Application process and costs

1. Preparation: confirm share capital and assets, secure an office, have the dispatch manager complete training, and prepare work rules and other documents
2. Application: submit the business plan, financial documents, certificate of registered matters and other documents to the prefectural labor bureau with jurisdiction over the head office
3. Review: document review and an on-site inspection of the office
4. After hearing the opinion of the Labour Policy Council, the Minister of Health, Labour and Welfare grants the license
5. Start the business after the license certificate is issued

The fee is paid by affixing revenue stamps to the application and is not refunded once the application is accepted. The registration and license tax is paid in cash, not with revenue stamps, and the original receipt is submitted. Labor bureau materials advise applying roughly three months before the date you want the license. Work backwards from your planned start date and allow ample time.

Points for foreign-owned companies and dispatching foreign nationals

Incorporation and directors

Foreign-owned companies are reviewed against the same criteria as Japanese companies. Confirm that neither the company nor its directors fall under any grounds for disqualification, and prepare translations of certificates for foreign directors. Include the worker dispatch business among the business purposes in the articles of incorporation.

Limits on dispatch to group companies

Some overseas parent companies set up a dispatch company to send staff to their related companies in Japan. However, the proportion of dispatch to group companies must be kept to 80% or less of the total (calculated by working hours). Dispatching a person to their former employer within one year of leaving is also prohibited. If the main purpose is to move staff within the group, also compare secondment and direct employment.

Employing foreign nationals as dispatched workers

Foreign dispatched workers need a status of residence that permits work. In addition, the work at the client must fall within the scope of that status. For example, under Engineer/Specialist in Humanities/International Services, they cannot take on work consisting mainly of simple tasks. Under Specified Skilled Worker, dispatch is limited to agriculture and fishing. For the requirements of each status, see hiring foreign employees and work visas.

Main rules to follow after licensing

• Equal pay for equal work (from April 2020): determine treatment either by ensuring equal and balanced treatment with the client’s workers, or by setting wage levels and other terms in a labor-management agreement
• Dispatch period limits: dispatch to the same office or the same organizational unit is in principle limited to three years
• Employment stabilization measures: for a person expected to be dispatched to the same organizational unit for three years, take measures such as asking the client to hire them directly
• Contracts and disclosure of terms: conclude a dispatch agreement with the client and disclose working conditions and treatment to dispatched workers in writing or by similar means
• Information disclosure and reporting: publish the margin rate and other information, and submit a business report and other documents to the labor bureau every year
• Social insurance and labor insurance: enroll dispatched workers who meet the requirements. Coverage and deadlines are explained in social insurance and labor insurance obligations for employers

How TIMOA can help

A worker dispatch license is granted after meeting the asset, dispatch manager and office requirements and passing the labor bureau’s review. Share capital design and office premises are fixed at the incorporation stage, so plan early.

Working with partner labor and social security attorneys and administrative scriveners, TIMOA supports you from incorporation and share capital design through license application preparation to checking the status of residence of foreign staff. For details, see our Permits & Financial Licenses page.