How to Dismiss an Employee in Japan 2026: Lawful Grounds, 30‑day Notice, Severance & Employer Compliance Steps

Understanding how to dismiss an employee in Japan is critical for every employer operating in the country, because Japanese labour law imposes some of the strictest termination protections in the OECD. The Labour Standards Act requires a minimum 30‑day advance notice (or payment in lieu), while the Labour Contract Act demands that every dismissal be supported by “objectively reasonable grounds”, a standard Japanese courts interpret narrowly. With the 2026 targeted amendments to the Labour Standards Act introducing expanded employer disclosure and reporting obligations, the compliance burden has increased further.

This guide provides an actionable, 12‑step dismissal procedure updated for 2026, together with statutory references, sample templates for notices and warnings, and a detailed FAQ to help HR managers, in‑house counsel and business owners reduce litigation risk.

Quick Answer: How to Dismiss an Employee in Japan (2026 Summary)

To lawfully dismiss an employee in Japan, an employer must establish objectively reasonable grounds, follow a fair process including investigation and hearings, and provide at least 30 days’ advance written notice or 30 days’ average wage in lieu under Article 20 of the Labour Standards Act. Failure to meet any element can render the dismissal void.

Every employer should confirm the following before acting:

• Lawful ground exists. Misconduct (gross or ordinary), incapacity/poor performance, or genuine business necessity, each documented with contemporaneous evidence.
• Procedure is exhausted. Warnings issued, improvement plans offered, disciplinary hearing held, and the employee given a meaningful opportunity to respond.
• Notice or pay delivered. Thirty calendar days’ written notice, or 30 days’ average wage paid in lieu, compliant with Article 20 of the Labour Standards Act.
• Written dismissal notice (解雇通知書 / kaiko tsuchisho) issued. Stating effective date, reasons and the employee’s right to request a certificate of dismissal reasons under Article 22 of the Labour Standards Act.
• Post‑termination steps completed. Final payroll settled, social insurance notifications filed, and records retained for the statutory period.

Industry observers expect that the 2026 amendments, which broaden employer reporting duties on dismissal statistics, will make courts even more scrutinising of employers who cannot demonstrate procedural rigour.

Legal Framework: Key Statutes and 2026 Changes Employers Must Know

Japan’s dismissal law rests on two primary statutes, supplemented by case law doctrine that heavily favours employees. The 2026 targeted amendments to the Labour Standards Act add new transparency obligations that employers must integrate into existing processes.

Labour Standards Act, 30‑Day Notice and Pay

Article 20 of the Labour Standards Act (労働基準法) is the foundational notice provision. It requires employers to give at least 30 days’ advance notice before dismissing a worker. Where the employer does not give the full 30 days, it must pay an allowance equal to at least 30 days’ average wages (解雇予告手当 / kaiko yokoku teate). The notice period can be shortened by one day for each day’s average wage paid, so an employer offering 15 days’ notice must pay an additional 15 days’ wages.

Article 20 applies to virtually all employees, with limited exceptions for daily workers, seasonal workers within specified periods, probationary employees during the first 14 days of employment, and workers on fixed‑term contracts of two months or less.

Labour Contract Act, Dismissal for Cause Standard

Article 16 of the Labour Contract Act (労働契約法) codifies the judge‑made “abuse of the right to dismiss” doctrine. A dismissal that lacks objectively reasonable grounds, or that is not considered appropriate in general societal terms, is treated as an abuse of rights and is therefore invalid. This means the employer bears the burden of proving both the factual basis for dismissal and the proportionality of the sanction. Courts routinely reinstate employees, and order back‑pay, where the employer’s evidence falls short.

2026 Targeted Amendments

The 2026 overhaul of the Labour Standards Act introduces expanded employer obligations around public disclosure of workforce data, including dismissal and disciplinary statistics, for companies above specified employee thresholds. Early indications suggest that regulators intend these disclosures to function as both a compliance tool and a deterrent against unfair termination practices.

Lawful Grounds for Dismissal in Japan (and the Employer Evidence Threshold)

Japanese law recognises three broad categories of lawful grounds for dismissal, but in every case the employer must clear a high evidentiary bar. Simply identifying a ground is insufficient; the employer must also demonstrate that dismissal is the proportionate response after all lesser measures have been considered.

Gross Misconduct, When Immediate Dismissal May Be Defensible

Summary dismissal (即時解雇 / sokuji kaiko), termination without notice or notice pay, is permitted only in cases of gross misconduct so severe that continuing employment, even for 30 days, is untenable. Examples include criminal conduct such as embezzlement or violent assault, serious fraud, or fundamental breach of fiduciary duties. Even in these situations, the employer must obtain advance approval from the Labour Standards Inspection Office (労働基準監督署) under Article 20, paragraph 3 of the Labour Standards Act before withholding notice or notice pay. Without that approval, the employer must still pay the full 30 days’ allowance, even if the misconduct is ultimately proven.

The practical threshold is extremely high. Courts have invalidated summary dismissals where the employer failed to investigate thoroughly, did not give the employee a chance to explain, or where the misconduct, though real, did not rise to a level justifying immediate termination.

Performance and Incapacity, Progressive Steps and Documentation

Dismissal for poor performance or incapacity requires the employer to demonstrate a sustained and documented pattern of underperformance, together with evidence that the employer took meaningful steps to help the employee improve. The dismissal procedure in Japan for performance cases typically includes:

• Written performance reviews identifying specific deficiencies with measurable targets.
• A formal Performance Improvement Plan (PIP) with a reasonable timeline (commonly 3–6 months).
• Counselling and retraining opportunities, including possible reassignment to a different role.
• Contemporaneous records of every meeting, warning and assessment.

Courts frequently reject performance‑based dismissals where the employer jumped straight to termination without demonstrating that it exhausted these intermediate measures. The burden falls squarely on the employer.

Economic Dismissal, Business Necessity Criteria

Redundancy or restructuring dismissals (整理解雇 / seiri kaiko) are governed by a well‑established four‑factor test derived from case law:

1. Business necessity. The employer must prove a genuine, pressing economic need to reduce headcount, not merely a desire to improve profitability.
2. Avoidance efforts. The employer must show it explored all reasonable alternatives: hiring freezes, overtime reduction, temporary wage cuts, voluntary early retirement solicitation and redeployment.
3. Objective selection criteria. The employees selected for dismissal must have been chosen using fair, transparent and non‑discriminatory criteria.
4. Good‑faith consultation. The employer must have engaged in genuine consultation with the affected employees or their union representatives, providing adequate information and time.

Failure on any single factor can invalidate the entire redundancy programme. For multinational employers accustomed to “at‑will” employment regimes, this represents one of the most common compliance traps when operating in Japan.

Step‑by‑Step Dismissal Procedure for Employers: The 12‑Point Checklist

The following dismissal procedure covers the complete process from initial allegation to post‑termination compliance. Each step should be documented with dated records that an employer can present in court if the dismissal is challenged.

1. Investigate the facts. Appoint an impartial investigator (or team). Gather documentary evidence, interview witnesses and secure digital records. Do not rely on second‑hand accounts alone.
2. Draft written findings. Prepare a factual summary identifying the alleged ground for dismissal, the evidence supporting it and any mitigating circumstances. This document is internal and should be reviewed by legal counsel.
3. Hold a disciplinary hearing. Invite the employee in writing, state the allegations clearly, and allow the employee to present a defence, including bringing a representative where company rules permit.
4. Issue written warnings. For misconduct or performance cases, issue at least one formal written warning (and often two) before proceeding to dismissal, unless the conduct is so grave that it warrants immediate action.
5. Implement an improvement plan. For performance cases, set measurable targets and a reasonable improvement period. Monitor and document progress at regular intervals.
6. Hold a final review hearing. If the employee has not improved or the misconduct has recurred, hold a final hearing. Present the accumulated evidence and give the employee a last opportunity to respond.
7. Make the dismissal decision. The decision should be taken by a senior manager (or board, for executive employees) after reviewing the full record. Document the rationale in writing.
8. Deliver 30‑day written notice or payment in lieu. Provide the notice of dismissal in writing, specifying the effective date and the ground(s). If paying in lieu, calculate 30 days’ average wage and ensure payment is made on or before the separation date.
9. Issue the kaiko tsuchisho. Prepare and deliver the formal dismissal notice (解雇通知書). If the employee requests a certificate of dismissal reasons (解雇理由証明書) under Article 22 of the Labour Standards Act, the employer must provide it without delay.
10. Complete final payroll and benefits. Calculate and pay all outstanding wages, accrued but unused annual leave pay, and any contractual severance. Under Article 23 of the Labour Standards Act, final wages must be paid within seven days of the employee’s request.
11. File social insurance and pension notifications. Notify the relevant authorities, including the Japan Pension Service and the applicable health insurance association, of the termination within the prescribed periods.
12. Retain records and conduct a post‑termination risk review. Preserve all investigation files, hearing minutes, correspondence and payroll records for the statutory retention period. Brief the management team on litigation risk and prepare a chronological timeline of events in case of challenge.

How to Conduct a Legally Defensible Disciplinary Hearing

A disciplinary hearing is the centrepiece of procedural fairness. The following template talking points help structure the meeting and create a defensible record:

• State the purpose of the meeting and the specific allegations, referencing relevant work rules (就業規則 / shūgyō kisoku).
• Present the evidence to the employee and allow time to review documents.
• Invite the employee to respond, explain, or provide mitigating information.
• Ask whether the employee wishes to have a representative present.
• Take contemporaneous notes, or, with consent, record the meeting.
• Confirm next steps and timeline in writing before the meeting concludes.

When to Offer Negotiated Voluntary Resignation

In many cases, negotiated voluntary resignation (合意退職 / gōi taishoku) is the lower‑risk path. By inviting the employee to resign voluntarily, typically accompanied by a severance settlement and a mutual release, the employer avoids the stringent “abuse of right to dismiss” scrutiny under Article 16 of the Labour Contract Act. A negotiated voluntary resignation negotiation checklist should include:

• Settlement amount. Calculate an offer based on tenure, salary and litigation risk (common benchmarks range from 3–12 months’ salary depending on circumstances).
• Mutual release clause. Draft a comprehensive release covering all employment‑related claims.
• Reference and non‑disparagement terms. Agree on the language to be used in references and internal communications.
• Adequate consideration period. Allow the employee sufficient time (typically at least two weeks) to consider the offer and seek independent advice.

Notice, Pay in Lieu, and Severance Practice in Japan

The 30‑day notice rule under Article 20 of the Labour Standards Act is the statutory minimum for every dismissal that does not qualify for summary termination. There is no statutory severance pay obligation in Japan, a point that frequently surprises foreign employers, but severance is deeply embedded in common practice.

The 30‑Day Rule in Practice

Average wages for the purpose of calculating notice pay are determined under Article 12 of the Labour Standards Act: total wages paid during the three calendar months immediately preceding the dismissal, divided by the total number of calendar days in that period. Employers must be precise in this calculation because underpayment can itself become grounds for a Labour Standards Inspection Office complaint.

Example 1: An employee earned a total of ¥1,200,000 over the preceding 91 calendar days. Average daily wage = ¥1,200,000 ÷ 91 = ¥13,187. The minimum notice allowance (30 days) = ¥395,610.

Example 2: An employer gives 20 days’ notice. The shortfall is 10 days. The employer must pay at least 10 × the average daily wage on or before the separation date.

Severance Pay: Custom, Not Statute

While no law requires employers to pay severance in Japan, most mid‑to‑large companies maintain retirement allowance (退職金 / taishokukin) schemes. These are typically defined in the company’s work rules or a separate retirement allowance regulation. Where such a scheme exists, it becomes a contractual obligation and the employer cannot unilaterally withhold payment. Additionally, even where no formal scheme exists, employers routinely offer ex gratia severance settlements to secure a voluntary resignation and a release of claims, substantially reducing the risk and cost of litigation.

For employers operating with Article 36 overtime agreements (三六協定 / saburoku kyōtei), it is worth noting that overtime hours worked during the notice period must still comply with the agreement’s caps and be compensated at the statutory premium rates. Dismissal does not suspend any wage or overtime obligations.

Kaiko Tsuchisho: Requesting and Issuing a Dismissal Notice

The kaiko tsuchisho (解雇通知書) is the formal written notification of dismissal. Employers should issue it proactively, not only because it is good practice, but because the Labour Standards Act, under Article 22, gives employees the explicit right to request a certificate stating the reasons for their dismissal. Failure to provide this certificate when requested constitutes a violation of the statute.

The kaiko tsuchisho should contain:

• Employee name and position.
• Effective date of dismissal.
• Statement of the reason(s) for dismissal, referencing the applicable provision of the work rules.
• Statement of the notice period or payment in lieu.
• Employer name, signature and date of issuance.

Sample English phrasing (for legal team review):

“This is to formally notify you that your employment with [Company Name] will be terminated effective [Date], for the following reason(s): [state reason(s) referencing work rule provision]. You are entitled to [30 days’ advance notice / payment of 30 days’ average wages in lieu of notice]. Should you wish to receive a certificate of the reasons for your dismissal, please submit a written request and we will provide it without delay in accordance with Article 22 of the Labour Standards Act.”

Sample Japanese phrasing (法務チームによるレビュー用):

「貴殿に対し、[日付]をもって、以下の理由により解雇する旨を通知いたします。[就業規則第○条に基づく解雇理由を記載]。なお、労働基準法第22条に基づく解雇理由証明書をご希望の場合は、書面にてご請求ください。」

Practical Templates and Language: Notice, Warning and Settlement Offer

The following templates are provided as starting frameworks and should be adapted to each employer’s specific circumstances and work rules. All templates should be reviewed by qualified legal counsel before use.

Template 1: Disciplinary Warning Letter

“Dear [Employee Name], This letter constitutes a formal written warning regarding [describe conduct/performance issue]. On [date(s)], it was identified that [specific facts]. This conduct is in breach of Article [X] of the Company Work Rules. You are required to [corrective action] by [deadline]. Failure to improve may result in further disciplinary action, up to and including dismissal. Please acknowledge receipt of this letter by signing and returning the attached copy. [Signature, Date].”

Template 2: 30‑Day Dismissal Notice

“Dear [Employee Name], This notice is to inform you that your employment with [Company Name] will terminate effective [Date, at least 30 calendar days from the date of this notice]. The reason for this dismissal is [state reason with reference to work rules]. Your final pay, including accrued annual leave entitlement, will be calculated and paid in accordance with the Labour Standards Act. Please contact [HR contact] to arrange the return of company property and to discuss any questions regarding your final settlement. [Signature, Date].”

Template 3: Negotiated Voluntary Resignation and Mutual Release

“This Separation Agreement is entered into between [Company Name] and [Employee Name]. The Employee agrees to resign voluntarily effective [Date]. In consideration, the Company agrees to pay a separation payment of ¥[amount]. Both parties agree to a mutual release of all claims arising from or relating to the employment relationship. The Employee acknowledges that they have been given [number of days] to consider this agreement and have been advised to seek independent legal counsel. [Signatures, Date].”

Final pay timing: Under Article 23 of the Labour Standards Act, when an employee requests it, wages owed must be paid within seven days of the request. Employers should ensure payroll systems can process final settlements within this window.

Employer Post‑Dismissal Compliance Steps and Litigation Risk Management

The dismissal process does not end when the employee leaves the premises. Post‑termination compliance failures can expose the employer to administrative penalties, regulatory scrutiny and adverse inferences in litigation.

• Final payslips. Issue a final payslip showing all amounts paid, deductions made and accrued leave settled.
• Social insurance notifications. File loss‑of‑qualification notices with the Japan Pension Service, the health insurance association and the Employment Insurance (Hello Work) office within the prescribed periods.
• Internal communication. Brief the team factually and neutrally. Avoid disclosing confidential details of the dismissal grounds, defamation claims can follow careless internal announcements.
• Record retention. Preserve all HR records, including investigation files, warnings, hearing minutes, correspondence and the kaiko tsuchisho, for a minimum of three years (five years for wage‑related records under the Labour Standards Act as amended).
• Reference management. Agree internally on the factual reference statement to be provided if a prospective employer contacts the company.
• Litigation readiness. Within 48 hours of the effective termination, prepare a chronological timeline of events with supporting documents. Identify potential witnesses and brief external counsel if the case is borderline.

Board Oversight and Reporting

For high‑risk dismissals, including summary dismissals, terminations involving senior employees, cases with discrimination or retaliation allegations, and mass redundancies, the matter should be escalated to the board or a designated governance committee before the dismissal decision is taken. Under the 2026 disclosure framework, companies above specified thresholds may be required to report aggregated dismissal data, making board‑level awareness operationally necessary as well as legally prudent.

Timeline of Actions: From Allegation to Effective Termination

The timeline below illustrates a standard individual dismissal for misconduct or performance, assuming the employer provides the full 30‑day notice period. Timelines for summary dismissal and redundancy will differ.

Next Steps

Dismissing an employee in Japan is one of the highest‑risk actions an employer can take. The combination of the “abuse of right to dismiss” doctrine, strict procedural requirements under the Labour Standards Act and the 2026 expanded disclosure obligations means that errors at any stage can result in the dismissal being declared void, the employee being reinstated with full back‑pay, and reputational damage through regulatory reporting. Understanding how to dismiss an employee in Japan, and building robust internal processes to match, is not optional; it is essential corporate governance.

Employers facing an imminent dismissal decision, planning a restructuring, or seeking to audit their existing termination procedures should engage experienced Japanese employment counsel at the earliest opportunity. Early legal input consistently reduces exposure, and the cost of pre‑termination advice is a fraction of the cost of post‑termination litigation.

Sources

1. Ministry of Health, Labour and Welfare (MHLW), Labour Standards Act Official Guidance
2. JETRO, Resignation & Dismissal Guidance
3. L&E Global, Termination of Employment Contracts (Japan)
4. JILPT, Dismissals in Japan (Research Paper)
5. City-Yuwa Partners, Individual Employee Termination (Japan)
6. Verybest Law Offices, Notice of Dismissal
7. Rippling, Termination in Japan
8. Legal 500, Japan Employment and Labour Law Guide