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Rise of Contract Recruitment in Japan

Updated: Sep 7, 2023

The gig economy, defined as a labour market that relies heavily on temporary and part-time positions filled by independent contractors and freelancers, is gradually gaining traction in Japan in recent years. Statistics published by Lancer, Japan's leading online talent marketplace, revealed that the freelance community in Japan grew by 23% from 2015 to 2018. Additionally, the earnings of Japanese freelancers increased by 125% from 2018 to 2019.

There is no denying that the gig or contract economy is expected to grow in the next few years. With the shift in mindset towards hiring and accepting contract workers in the workplace, HR also needs to restructure its hiring and onboarding process when recruiting contract workers.

Contract employees in Japan

A contract employee (契約社員: Keiyaku Sha-in) is one of the three common types of employment contracts in Japan. Contract employees often work for a short and specified term, such as three, six or twelve months. Most employees tend to use contract employees as a way to test waters or as a form of probation. However, benefits entitlement for contract employees have tightened in recent years.

Contract employees in Japan generally have the same benefits entitlement as permanent employees and are covered by health and social insurance. They are also eligible for paid leave, paid holidays and the right not to be terminated without reason. This is applicable to all contract employees regardless of the tenure of their employment contract.

Upsides of contract recruitment

Contract recruitment enables employees to "test waters" on the type of job that they are interested in without having to fully commit to it. There is also a lot of flexibility when it comes to contract work as contract employees can also work remotely. This tends to make their work more stimulating and engaging as people can explore jobs that they are interested in while allowing them to enjoy flexibility and prioritization of their time.

Downsides of contract recruitment

Given the short duration associated with contract recruitment, this may be a bane to organisations. Employers may find it difficult to hire contract workers, particularly if they have to fulfill lengthy or large projects.

The lack of job security can be stressful to an employee as well as contract employees are not considered as full-time employees. While an employee may wish to continue working for the organisation, there may not be sufficient vacancies for these contract employees.

Contract recruitment is an upcoming alternative to addressing talent gaps within the workplace. And it is a growing trend in the Japanese economy. Contract workers offer a flexible solution to organisation and at a lower cost. That said, there are still some disadvantages to recruiting contract workers due to the lack of continuity and the inability to establish long-term work relationships. Organisations who are keen to engage contract workers should always be mindful of the benefits and downsides as well as local labour regulations that come with these types of employment.

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