An employer of record (EOR) allows a company to hire employees in Japan without establishing its own Japanese legal entity. The EOR becomes the employee’s legal employer and handles employment contracts, payroll, taxes, social insurance, and other administrative requirements, while the company continues to manage the employee’s day-to-day work.
As Jeffrey Swartz, Country Manager for Japan at G-P, puts it, “An EoR helps a business expand overseas by allowing the company to hire in a different country immediately, in a compliant manner, without the need to set up an overseas entity or subsidiary.”
For companies looking to hire internationally, this can make expansion into a new country considerably simpler. Instead of establishing a subsidiary before making their first hire, they can use an EOR to employ people locally while testing or gradually building their presence in that market.
To understand how this works in practice, we spoke with four firms that provide EOR services—Deel, G-P, Papaya Global, and Velocity Global—as well as employers and employees who have used them.
What’s driving the adoption of EoRs?
Economics
With a premium being placed on attracting and retaining tech talent the world over, globally-aware, opportunistic firms are on the lookout for experienced tech talent they can bring into their talent ecosystem at different price points so more can get done with less. And one way to accomplish this is with the help of an EoR.
In Japan, government statistics put the average annual salary of software engineers at around ¥5.7 million. TokyoDev’s 2025 survey of English-speaking international software developers in Japan found considerably higher compensation, with a median of ¥9.5 million among respondents overall and ¥13.5 million among those working for companies without a Japanese entity. For overseas employers, that can make hiring developers in Japan financially attractive while still offering salaries well above the local market average. You can find a more detailed breakdown in our article on software developer salaries in Japan.
Median salary numbers for U.S. developers, for example, were around $120,730 in 2021, and $111,225 AUD (as of 2/27/2023) for engineering talent in Australia according to Talent.com.
Despite this opportunity for firms outside Japan to tap into Japan’s developer market, Swartz at G-P says the bulk of his effort is focusing on Japanese companies wanting to find overseas talent. “We have over 50 foreign companies coming into Japan to hire here but for outbound business from Japan, we are focusing on Japanese companies,” he says.
Clearly, even the weakened yen remains competitive when the talent pool is as wide as it can be when working with EoRs.
The Search for Talent
Talent acquisition is another big reason firms in Japan are seeking out the services of EoRs.
“Certain talent shortages can drive Japanese firms to look to EoRs for help,” says Deel’s Country Leader for Japan, Takayuki Nakajima.
And G-P’s Swartz says the use of EoRs in Japan, “echoes use cases in other countries,” and that “many companies are looking to hire skilled staff outside of Japan due to the dearth of talent in the country.”
Additionally, he says, “Some companies also want to create a follow-the-sun customer service model by hiring in several time zones.”
Market Expansion
The desire to expand into one or more multiple markets is an additional reason, and Japanese firms seeking a flexible and efficient way to pull that off might appreciate the advantage of working with an EoR.
Again, G-P’s Swartz: “Once a firm has traction in a market, it may indeed decide to set up an entity, which will often be 12-18 months later. Some companies may wish to send one of their own staff on a longer-term assignment to launch their presence in a new market as well,” he says.
Deel’s Nakajima tells us that in the past, given the complexity of setting up a legal entity in a new market, some companies would simply ask friends at firms already doing business in a new destination country to bring in expansion employees under that firm’s HR umbrella.
Since the arrival of EoRs, however, this sort of loophole-diving is hardly necessary.
He says it’s common to see companies “use an EoR to bring in business development talent at the outset of opening an overseas operation,” and also shares an interesting flip side to this equation.
“Sometimes companies may wish to withdraw a legal entity in a particular country, but retain the employees working there. Or, an employee may wish to relocate outside of Japan, but remain working for their firm established in Japan.”
What are EoR concerns for employers?
Concerns surrounding establishing an employer of record relationship, and working with talent outside one’s own country borders may seem intimidating, but trusting in the process can yield quick and positive results.
Typical hesitations revolve around understanding local employment agreements, compliance, local labor laws, IP protection, and visa sponsorship assistance. But with all the HR specialists and legal teams EoR providers tend to have on the ground, there is little to be fearful of, says G-P’s Swartz. “We’re always on top of privacy and labor regulations all over the world.”
Casey Abel, Co-founder of Japan’s HCCR and ZooKeep, who has more than once hired outside Japan using EoR providers Deel and Multiplier, had positive things to say about his experience working with EoRs.
“They allow you to tap into markets you couldn’t tap into before, and for the amount you might spend on salary for a single engineer in U.S. dollars, you can work with three engineers if you widen your hiring net just a bit more. Also, our costs for starting a firm used to be double given the relative salary differences in places like the U.S. and Japan, and then the costs for incorporation and the setup of a legal entity and administration would just add to that. Now, using an EoR allows us to unlock web devs anywhere.”
Abel brought up the idea of IP as well. “Some firms will need, and want to control IP as you certainly don’t want your code-base going elsewhere.” He added that “having legal remedies is important” for when dicey situations might arise—something Amazon’s IT and legal teams were dealing with in recent weeks when it was discovered employees were running code through Open AI’s ChatGPT.
How much does an employer of record cost in Japan?
Given the behind-the-scenes complexities of an EoR agreement, it is by nature a bespoke service, so what things cost tend to remain equally bespoke. As such, most EoR firms charge their clients monthly. A variety of additional fees might then be folded into this operational expense depending on what other services are required. Visa fees, in particular, vary from country to country and from person to person depending on circumstance.
“If the employee requires a work permit, we can assist with that as well and charge a one-time visa processing fee. Renewal fees can also be covered if needed at a later point due to local requirements,” say Velocity Global’s Brauner. “The total amount a company will pay us per month also includes the employee’s compensation, any allowances or supplemental benefits (if applicable) as well as the employer burden—as we handle all payroll items as well as benefits and more. Employers cover 100% of the cost and there is no cost-splitting with employees.”
At Deel, the fee for an EoR is $599 per month in any country according to Nakajima. “However the employer cost (which includes social security) depends on the country. Some countries are 5% but some countries are more than 30% against employee compensation,” he says. Deel also offers a useful employee cost calculator in this regard to help with some initial planning.
Papaya Global publishes their rates online.
What are EoR concerns for employees?
Concerns from employees tend to center on the employee experience. Providers tell us employees want expert support in their own language, payroll that is accurate and timely, and an assurance that all their benefits (health insurance, pension, taxes, etc.) are taken care of.
“It’s as if the talent were working for a Japanese company,” says G-P’s Swartz. “EoR providers can also arrange for expense reimbursements and confirmations of an annual salary, should a credit card company or potential landlord inquire regarding income.” Swartz adds: “And for non-Japanese, we offer visa sponsorship.”
Over at Papaya Global, their Center of Excellence team says they generally see few concerns raised from workers on the EoR model. “What is important is that they understand the EoR Partner is the legal employer, whilst the hiring company is the day-to-day supervisor of tasks and performance.” This simple understanding, keeps things flowing in the right direction, just as if an employee were engaged in a typical remote relationship with an employer.
Velocity Global’s Brauner puts a final bow on this aspect of things: “Employees will be fully integrated with the company who engaged them and all topics related to their day-to-day work will be managed by that company. The EoR provider, on the other hand, is there to ensure that the work engagement is compliant in the local market and that all tax remittances and payroll are on time and accurate.”
Equity
What about equity? The firms we spoke with had a different take on the temperature of this particular benefit, and given the complexity of providing equity to a distributed, international workforce, it’s not a surprise.
Regulatory frameworks vary, and a firm’s patience in dealing with such offerings has as much to do with the personality of those at the hiring firm, as it does the desire to hire a particular candidate. Still, with increasing pressure to ferret out talent and keep talent onboard, there are indeed possibilities. For Velocity’s Brauner, an “increased demand from employers and employees—especially in fast-growing, competitive industries” seems to be afoot. And, to meet that apparent demand, in January of 2023, the firm unveiled a “global equity program” that has Velocity partnering with legal advisory firms “to offer compliant, locally tailored equity plans in countries across the globe.”
According to Brauner, Velocity handles “the full lifecycle of equity issuance including assisting with withholding rates, payroll processing, supplemental reporting, plan registrations, etc.”
G-P’s Swartz on the other hand, says that because of how unwieldy offering equity can be to a distributed workforce, he sees a number of companies preferring to avoid it altogether. Alternatively, Swartz says he sees a two growing trends: one where companies try to avoid giving stock options to international employees altogether, instead “tying a cash bonus to the value of the company” or offering to “give cash compensation based on shadow stock schemes.”
“We can’t put stock options in our platform,” says Swartz. “But many customers choose to give options through a side agreement between them and the professional.” Gains, if there are any, he says, “can be run through our payroll, and in general, are not taxed until the employee actually generates revenue from them—typically far into the future.”
What can go wrong in working with an EoR provider?
According to everyone we spoke with, what can go wrong is running afoul of compliance issues—and that comes from not working with an experienced and reputable firm.
A good way to ensure you are working with a reputable firm is to follow the activities of measurement organizations like NelsonHall and Everest Group. Both of which conduct regular research on EoR providers and provide rankings based on a wide variety of metrics.
Deel’s Nakajima zeroed in on what’s known as permanent establishment risk—a situation where a government could decide business dealings in a foreign country qualify as taxable because the business appears to be operating a permanent establishment in that country.
“This risk is dependent on the tax office in each country as well as the employee’s job description,” says Nakajima. “so clients need to consider the risk of PE (Permanent Establishment). There are a number of variables to consider when it comes to PE, so speaking with your accounting team, can help you plan in advance.
Outside of compliance, Velocity Global’s Brauner says there can be potential pitfalls when it comes to communication. “Poor communications strategy between the employer and the employee, and failing to integrate the employee properly into the corporate structure and culture” can cause issues.
“This is not unlike some of the challenges companies faced when they first embraced remote work and had to develop strategies to ensure employees felt engaged as isolation from headquarters or team members can result in low employee morale.”
To the Center of Excellence team at Papaya Global, communication is also a key element to a successful integration. “We have not come across many pitfalls. What is crucial is that workers ensure to keep Papaya, the EoR partner and the hiring company up to date on life cycle events so that correct actions are taken when need be.”
How involved does the employee get in the EoR process?
If you’re wondering how much work there is to do on the employee end of things, you may be happy to know, that like the role of the hiring firm, your involvement in the hiring process is minimal, and in fact, your experience will likely feel similar to onboarding at any company with which you’ve worked before.
“Employees don’t need to do anything out of the ordinary with regard to taxes, etc. We take care of all the benefits and conduct the year-end tax adjustment on their behalf, as is standard here in Japan,” says G-P’s Swartz.
Velocity Global’s Brauner agrees. “The beauty of working with an EoR provider is that what usually could create a huge headache for an individual will be taken care of for them. Under an EoR relationship, talent is being hired as a legal employee of the EoR’s local entity, and the EoR provides immigration services and work-visa processing if needed, and all payroll taxes will be remitted to the local authorities as required.”
What about moving to Japan to code?
For programmers working outside Japan, but at a firm with Japanese roots, or a firm simply open to the idea of doing what it takes to retain talent, fulfilling a dream to live and work in Japan might now be closer than ever.
“We do occasionally see companies using EoR as a talent retention strategy,” says G-P’s Swartz, “where an existing employee wants or needs to live in another country and their company uses us to compliantly employ that employee fairly long-term in that new country. It could be that they’ve been away from their family for 2-3 years due to the pandemic or perhaps they need to be close to older parents, etc. Occasionally, they may want to be a digital nomad.”
How to negotiate an EoR with an employer considering hiring you
Velocity Global’s Brauner suggests “If you find yourself in a situation where you think the only thing standing between you and your potential employer [is an awareness of EoRs], it could be worth mentioning this option in a conversation.” In doing so, he says, you’ll want to “acknowledge and highlight the opportunity and key benefits for the employer,” perhaps mentioning how using an EoR allows a firm to hire the right talent for the job instead of one just physically near, and that using an employer of record can allow them to “employ talent wherever they might be or want to be.”
Clearly, putting your sales hat on here would be beneficial. And, if you can help hiring managers visualize a clear path to recruiting you, despite unfamiliar pathways, it could open doors for you much in the way it did for Scott Rothrock, a senior backend engineer living outside Tokyo hired by a U.S. firm in July of 2022. Before hopping on a call with the company, Rothrock went to work beefing up on how a company outside Japan might hire a software developer inside Japan, and landed on the idea of EoRs.
Fresh off this research, Rothrock was able to bring up the idea of working with an EoR as a way to hire him despite the fact that he lived in Japan. Reassuring the CTO of the ease involved in working with an EoR was instrumental in him getting the job.
Rothrock tells us how the relationship started: “I had a post on HackerNews stating I was open to work and got an email from a firm in America interested in my background. The CTO was proactive and positive, and the CEO was already aware of remote.com, so the suggestion struck a chord. In the end, the monthly EoR support fee was minimal, and so they thought… why not do it?”
Comfort is the big key with all of this for employees and employers. “The realization that things are not as difficult as they seem was a big selling point for both me and the hiring company,” says Rothrock. “There’s something to be said for the psychological confidence you get in knowing an experienced firm is setting things up for you.”
Which EORs can sponsor work visas in Japan?
We confirmed that the following providers support working visas:
- Eos Global Expansion. Visa processing fee starts at ¥150,000.
- Kreston Proworks. Work visa processing fee starts at ¥220,000. There are no additional monthly fees for providing a visa above their standard fee for EoR services.
- Deel. Visa processing fee starts at 6,000 USD. There is an additional fee of 300 USD per month, in addition to their normal EoR fee.
- Express Global Employment / Acumen International. Would not give us a quote for the price.
- Globalization Partners. Would not give us a quote for the price.
- Papaya Global. Would not give us a quote for the price.
- Velocity Global. Would not give us a quote for the price.