Full explanation of salary system in a Japanese company

What is the most important criteria to look for when deciding a job? Is it the company's vision? Employees' personalities? or the actual job material? For many, we believe that salary is also a critical point to look at since it is an indispensable asset in order to live. In this post, we would like to give a full explanation of the salary situation in a Japanese company so that it will be easier for you to determine which company might fit into your desired salary range.

1. What is the actual "salary" in Japan?
2. Let's compare salaries of new graduates and mid-career recruitment!
3. Is it better to have graduated from graduate school?
4.Low salary actually bring you benefits?
5. Promotion raise system in a Japanese company
6. Final notes

1.What is the actual "salary" in Japan?
When you might start working in Japan, you might be surprised or even shocked to see the actual amount which is transferred to your bank account. The reason for this lies in what is called “After-tax income” which is basically the total amount of salary paid by the company minus the numerous tax.

Thus the amount of money may be less than what you were told by the company when you have just started your job. A detailed explanation of the relations between tax and salary will be given by the next article so stay tuned!

2.Let's compare salaries of new graduates and mid-career recruitment!
While many might not be familiar with the notion of new graduates recruitment and mid-career recruitment, in Japan, numerous Japanese companies make great differences in terms of how to deal with these two types of newcomers to the company, including the amount of salary.

According to Japan’s Ministry of Health, Labor, and Welfare, the average salary that new graduates gain for one month is 228,500 yen. (https://www.mhlw.go.jp/toukei/itiran/roudou/chingin/kouzou/z2022/) From this, we can calculate that on average, new graduates gain around 2 to 2.5 million yen per year.

On the other hand, for mid-career recruitment, which refers to a person who has at least three years experience in a particular field, since the applicant already has some background skills and knowledge, they can get around 1 to 1.5 million yen more of yearly income than that of new graduates.  

3. Is it better to have graduated from graduate school?
    In terms of the difference of annual salary which one gets from those who have graduated from university and those who have graduated from graduate school, those who have graduated from university have gained 362.8000 yen per year whereas students from graduate school have gained 464.2000 yen per year. (reference:https://www.mhlw.go.jp/toukei/itiran/roudou/chingin/kouzou/z2022/dl/03.pdf)

Therefore, it is safe to say that from looking at the average wage, higher educational background leads to higher salary. While on salary wise, having graduated from graduate school would lead to higher salary, the chances of promotion or bonus usually do not change for most companies in Japan.

4. Low salary actually brings you benefits?

As we have explained in the post on the Reality of Working in Japan even if a company does not meet your expectations in terms of salary, they might offer you great welfare which can boost up your quality of life.

Moreover, you must not worry even if the company which you are interested in is not a big corporation. For example, a venture company called Career Design Center have introduced a vacation program called "Scholarly Training", which entitles employees to 250,000 funds and 10 days of vacation for every five years of service. The basic condition of the program is to "go abroad," with the aim of broadening employees' perspectives and fostering their emotional development overseas.

Another example is a “synergy cafe”, incorporated by the GMO internet group where the company has hired a nutritionist who provides a healthy delicious meal for the employees. Since the meals are free, employees can save both time and money to go out to find restaurants and pay extra money for their meals.

These two companies are just a few examples of Japanese companies regardless of their size which install unique and effective benefits to their employees. Furthermore, foreign applicants might be worried about the low wage in the rural areas of Japan, compared to big cities like Tokyo.

However, one must not worry since in rural areas like Shikoku area, rent is much cheaper, and one can often live in a larger house for the same amount of money as one would have had to pay in Tokyo. Despite the relatively low wage, living in a large house surrounded by the beautiful nature of Japan is a great merit of living in the rural areas which one cannot miss.

Therefore, we highly recommend for you to not only look at the salary but also take a peek into the benefits which the company offers.

5.Promotion raise system in a Japanese company

Getting a promotion is something which everyone will try to aim for in order to rise to a higher position and gain a bonus.Some may have the notion that in a large Japanese corporation, a seniority-based pay system is still prevalent which is a personnel system that increases positions and wages based on length of service and age.

However, this system has been decreasing, and many corporations are now making an effort to switch to a performance-based personnel system, which is a  personnel system in which wages and positions are determined by an individual's ability and contribution to the company, regardless of age or length of service. In the performance-based personnel system, most companies have an evaluation meeting with the supervisor once in a half year.

This evaluation determines promotions and bonuses for the employees. Concerning how much an employee can get in a bonus, while this depends on the size and industry of the company, according to the preliminary results of the "Monthly Labor Survey" conducted by the Ministry of Health, Labour and Welfare for September 2022 and February 2023, the average summer bonus for 2022 was 389,331 yen and the average winter bonus was 392,975 yen. Generally, one bonus is equivalent to approximately one to two months of base salary. ( reference: https://www.mhlw.go.jp/toukei/itiran/roudou/monthly/r05/2302p/2302p.html, https://www.mhlw.go.jp/toukei/itiran/roudou/monthly/r04/2209p/2209p.html)

6. Final notes

All in all, we hope that we were able to turn your negative image of Japanese salary into a positive one and give you insight into how you might be able to evaluate Japanese companies concerning their salary. As we highlighted above, it is crucial to look not only at the numbers, but also the various unique benefits which the company gives to the employees and think about the overall advantage that one might gain from joining the company. If you ever get lost in trying to assess which company might meet your desired conditions, please do not hesitate to contact Connect Job agents where we can assist you in finding the companies which suit you best.