Japan HR Payroll Outsourcing
A Star Studded Family
Blue Ribbon Medal of Honour from the Emperor
The Le Cheminant Partner in Japan is in fact the oldest individual accounting firm in Japan, established in 1927 by the present Managing Partner’s grandfather, one of he first Japanese accountants to be awarded a CPA license, and a co-founder of the Japanese certified tax account system.
His son, is a former vice-president of the Japan Institute of Certified Public Accountants, and was awarded a Blue Ribbon Medal of Honour from the Emperor in 2010 for his long term CPA service and achievement.
His granddaughter, and present Managing Partner, has continued in the family tradition. Working with her British business partner, and combining their love of business and entrepreneurial flair, they have created a client driven, dynamic, international business
The Japanese Managing Partner
is a Certified Public Tax Accountant (Zeirishi) and Administrative Attorney (Gyoseishoshi), with previous Big 4 experience. The British partner has an MBA and 20 years international business consulting experience; together they have created a company specializing in advising foreign clients on the complexities of establishing and running companies in Japan. Japanese thinking on the way of doing business is very different from the West; it is highly regulated and complex, but presents unique opportunities. The heart of the business is the Tax and Accounting Office, and the core competencies contained here ensure clients have peace of mind through the knowledge that they have full and complete legal compliance in all business matters
It provides both domestic and foreign companies with:
- initial guidance on the choice and establishment of the optimal corporate entity,
- employment options,
- social insurance and HR,
- efficient tax structuring,
- payroll administration, employer of record (EOR) services, and
- overall compliance.
Japanese Life Insurance Brokerage
An arm of the company is licensed by the Japan Ministry of Finance as a Japanese Life Insurance Brokerage. This enables it to advise and establish Retirement Allowance Schemes for employees of Japanese companies, both Japanese and foreigners, providing a tax efficient solution for both company and employee, to the problem of providing for employees’ retirement. With ongoing support in terms of monthly accounting, tax return preparation and filing, and the outsourcing of all other back office functions, including payroll management and visa applications as the backdrop, the company is able to offer innovative, sound and solid business consulting in these areas.
The Japanese Managing Partner is a Certified Public Tax Accountant (Zeirishi) and Administrative Attorney (Gyoseishoshi), with previous Big 4 experience. The British partner has an MBA and 20 years international business consulting experience; together they have created a company specializing in advising foreign clients on the complexities of establishing and running companies in Japan. Japanese thinking on the way of doing business is very different from the West; it is highly regulated and complex, but presents unique opportunities. The heart of the business is the Tax and Accounting Office, and the core competencies contained here ensure clients have peace of mind through the knowledge that they have full and complete legal compliance in all business matters
"We are looking to hire an employee in another Japan. We currently only have employees in U.S. Can someone direct me as to how I might go about hiring him in another country, and paying him? We use ADP, and I believe they have a solution for global pay.">
We answered by e mail recommending TWO partner companies in Japan and adding a document saying how to set up staffing in a new country.
IF YOU WANT TO HAVE STAFF IN A NEW COUNTRY.
Five methods
Don’t forget-whatever method you adopt, the employees will be subject to local labour law, taxes, and social security. The Employer social charges will be a % of gross salary per month but (in some countries) will be “capped” at a certain maximum remuneration so any remuneration after that level is free of employer social charges.
A—You can have a local company in the country concerned to Employ staff on your behalf...called an Employer of Record Service (EOR) or in USA a Professional Employment Organisation (PEO). There will be a set up cost and there would be a fee for the service of course, plus a deposit would be needed. So, it might seem expensive, but the management of the employee would not be your problem. If you plan to have 1-5 employees, this is cost effective. There are a lot of companies that offer this service; I would recommend that you make the effort to contact and choose LOCAL companies in each country. It is tempting to work through an international company but you will pay a lot more.
B-- You can register a legal entity in the country and employ the employee through that entity. Unless you are planning to have a lot of staff in a particular country, and you are sure that the business there is long term we would not recommend this; you will be creating a taxable presence and will need an accounting service. Many accounting companies in the various countries can assist in this.
C-- You can register your organisation just as an employer in the country concerned and employ the employees directly -but they will be under the country labour law of course. Again a local accounting company in each country will arrange this and also administer the payroll and ensure that the employee and the taxes and social security are routinely paid. This is the least expensive method of employing the individual, but there is always the risk that the tax or social security authorities will declare that your company is a de facto “Permanent Establishment”. There is a lot of initial bureaucracy. You will have to:
- Sign up an employment contract specific to the country,
- Send to the authorities a Certificate of Incorporation of your organisation in your home country -e.g. USA, China, Brazil etc,
- Sign Powers of Attorney,
- There are country specific documentation requirements that vary from country to country.
- And there may be a need for passport copies of the HR or General Counsel to be notarized….
Country based accounting companies will help but ultimately your organisation will be legally responsible for the HR. In many countries e.g. Germany, Poland, - a foreign company registered just as an Employer can withhold and pay Employee social security but cannot withhold and pay taxes on behalf of the employee.
This method is available for most European countries – but not Russia, Ukraine, Romania, Switzerland, and Balkan countries. It is also possible in India, Singapore, Australia, New Zealand,
However Spanish/Italian/Portuguese/Greek authorities insist that there must be a local based person (any nationality), to act as the tax representative. You can get the employee to fulfil this role, but we don’t recommend it. The local payroll firm can provide the “Fiscal Representative” service, but it costs a lot -€200 per month is common. I challenged our Spanish payroll firm about this, and they pointed out that if a problem arose with taxes, it would be the Spanish payroll manager who goes to court/jail. Our Italian partner has stopped providing the service, reckoning it was too risky.
D-- You can have them as independent consultants and contract with them and pay them directly.
E-- You can have them as independent consultants but have another organization contract with the individuals and pay them so as to put some distance between your company and the individual
NOTE
Consultants are increasingly frowned upon by tax authorities, but the structure is possible if the posts are really short term. It is important if you have a consultant that you state in your agreement with the individual that he or she can work for other companies at the same time as working for your company. If the consultant is 100% full-time with your company, then you run the risk that tax authorities will deem that a de facto employment relationship exists.
One of the drawbacks of having a consultant is that you can’t guarantee that he or she will pay their taxes. Tax authorities will penalize the consultant of course. But then they may look for the organization that has the “deepest pockets”- the company using the consultant. Tax authorities cheerfully demand penalties and taxes with up to 7 years of retroactivity. Different countries have different levels of tolerance/aggression in their tax departments.