Why Japanese Employee Benefits Need an Urgent Update in 2025
How Japan’s Employee Benefits Must Adapt to a Changing Workforce and Diverse Work Styles
February 12, 2025
Key Points
Only 24.4% of employees in Japan are satisfied with their company’s benefits.
85.7% of HR managers find benefits administration overly complex.
The Need for a Flexible and Growth-Oriented System.
Employee benefits are an essential aspect of working in Japanese companies. However, not many people have a deep understanding of their structure, historical background, and the challenges they face today. This article provides a clear overview of how employee benefits in Japan originated, how they have evolved over time, and the current challenges along with possible solutions.
The Mainstream 20–30 Years Ago
・Male full-time employees were the focus
・Lifetime employment was the norm
・All employees worked in the office (remote work was unthinkable)
・Abundant workforce (due to population growth)
The Japanese corporate model was built on the idea of “men working as full-time employees for life to support their families.” As a result, employee benefits were designed with this structure in mind, focusing on family allowances, company housing, and recreational facilities to support stay-at-home wives and children.
The Diversification of Modern Work Styles
・Gender diversity in the workplace has become the norm
・Remote work and flextime have become common
・Career changes and job transitions are no longer rare
・Companies are shifting toward human capital-focused management
1.Three Key Realities of Employee Benefits in Japan
Despite the rapid diversification of work styles, employee benefits have remained largely unchanged. According to a survey, only 24.4% of employees (1 in 4) are satisfied with their company’s benefits.
Additionally, 82.6% of executives believe that employee benefits are not an investment in human capital management, and 85.7% of HR managers feel that the complexity of managing too many benefit programs is a challenge.
Source: April 11 Press Release: “Market Research on Worker Pains and Employee Benefits Usage 2024”
2.Statutory and Non-Statutory Employee Benefits
Employee benefits in Japan are broadly categorized into statutory and non-statutory benefits.
2-1. Statutory Employee Benefits
These are legally mandated benefits that companies are required to provide, serving as a basic safety net for employees.
1. Health Insurance
Covers medical expenses for employees and their families
2.Welfare Pension (Kosei Nenkin)
Provides retirement, disability, and survivor benefits
3.Unemployment Insurance
Supports workers who lose their jobs or face employment difficulties
・Workers’ Compensation Insurance
Covers injuries sustained during work or commuting
・Annual Paid Leave
A legally defined number of paid vacation days available for both full-time and part-time employees
・Maternity Leave
6 weeks before childbirth (14 weeks for multiple pregnancies)
8 weeks of mandatory leave after childbirth
・Childcare Leave
Allows employees to take leave to care for a child under the age of one
2-2. Non-Statutory Employee Benefits
These are additional benefits that companies voluntarily provide to enhance employee motivation and support their daily lives.
・Transportation, company housing, rent subsidies
・Special leave, refresh leave, anniversary leave
・Family allowances, company cafeterias, recreational facilities
・Childcare services, discounts for leisure facilities, marriage gifts
・Subsidies for certifications, external training fees, defined contribution pensions
・Flextime, telework, gym membership discounts
Traditionally, many of these benefits were designed for male full-time employees with families. However, more companies are now offering benefits that cater to diverse lifestyles and work styles. Despite these improvements, many benefits remain underutilized.
3. Challenges in Modern Employee Benefits: Failing to Keep Up with Diversity
3-1. Many Benefit Programs Are Not Used
Employee benefits might sound appealing on paper, but in reality, complex rules and paper-based manuals often make them difficult to access, discouraging employees from using them.
A survey, Biweekly Employee Benefits Late August 2020, found that 82% of allocated benefit points are used for leisure, food support, and insurance, while only 2.1% are used for personal development. Even though companies aim to introduce diverse benefits, most programs are heavily focused on entertainment, rather than career support or skill development.
3-2. Three Major Barriers
1.Diverse Employee Needs
・Each employee has different backgrounds and expectations, making it difficult to create a one-size-fits-all benefits package.
2.Overly Complex Benefit Programs
・Companies keep adding new programs, making administration fragmented and inefficient.
3.Excessive Focus on Leisure and Unnecessary Costs
・Many benefits are geared towards entertainment rather than essential employee support, leading to wasted resources.
4. The Changing Corporate Landscape in a Diverse Era
Seniority-based promotions, male-centered career paths, and family structures assuming a stay-at-home spouse are no longer the norm.
Today, we live in an era of “100-year lifespans,” where career transitions, remote work, and side jobs have become common. For companies to sustain long-term growth, they must redefine their employee benefits to address individual pain points and cater to diverse needs.
5. The Challenge of Performance Evaluation: A Reflection of Employee Benefits
Another issue closely tied to employee benefits is performance evaluation. Many Japanese companies have complicated evaluation systems with numerous criteria, making them difficult for managers to navigate. As a result:
・Evaluation results are not effectively utilized
・Employees receive vague feedback with low transparency
・Employees are often surprised by their evaluations (lack of regular feedback)
The improvement of performance evaluations and employee benefits must go hand in hand. To enhance both employee performance and company growth, evaluation and compensation (including benefits) should be treated as two sides of the same coin.
Japan’s employee benefits system was originally designed for a male-centered, lifetime employment model, which no longer fits today’s diverse work styles and personal lives. Despite significant changes in the workforce, many companies still rely on outdated structures that fail to meet modern employees’ needs.
To create a more effective benefits system, companies must embrace digital transformation to improve accessibility and user experience. Instead of rigid, one-size-fits-all benefits, businesses should introduce customizable options like cafeteria plans or point-based systems, allowing employees to choose benefits that suit their individual situations. Additionally, employee benefits should be integrated with performance evaluations, providing support for career growth rather than just offering perks.
With Japan’s population declining, the country is increasingly relying on global talent to fill workforce gaps. However, if companies do not modernize their outdated structures, they will struggle to attract and retain international talent. To remain competitive, Japan must redefine employee benefits as a strategic investment in human capital, ensuring a supportive and inclusive work environment for both domestic and foreign employees.
