"What Is Secondment? A Japan EOR Term, Explained." - Employer of Record and Global Employment Outsourcing Services in Japan

The legal guardrails for shukko (出向)”secondment” in Japan, in the government’s own words

“Secondment” gets used loosely in cross-border HR conversations. Japanese law is not loose about it. Zaiseki-gata shukko (在籍型出向), or in-service secondment, is a specific legal structure with specific conditions attached, and those conditions come directly from the Employment Security Act, the Labor Contract Act, and the Ministry of Health, Labour and Welfare’s own administrative guidance.

This article sets out what the law and MHLW actually require for an arrangement to qualify as secondment, using direct citations rather than paraphrase. It is not directed at any specific company or arrangement.

1. The employment relationship has to exist on both sides

In 2008, an MHLW deliberation council was presented with a reference document comparing worker dispatch (労働者派遣) and in-service secondment (在籍型出向) side by side:

労働者派遣：雇用関係は派遣元のみ。指揮命令関係は派遣先。在籍型出向：雇用関係は出向元と出向先の両方。

Dispatch: the employment relationship sits with the sending company only; direction-and-command sits with the receiving company. In-service secondment: the employment relationship sits with both the sending company and the receiving company.

The same document explains the consequence:

在籍型出向については、出向元事業主との間に雇用契約関係があるだけではなく、出向元事業主と出向先事業主との間の出向契約により、出向労働者を出向先事業主に雇用させることを約して行われていることから、労働者派遣には該当しない。

For in-service secondment, there is not only an employment relationship with the sending employer — the secondment agreement between the sending and receiving employers commits to having the receiving employer actually employ the worker. That is what places it outside the definition of worker dispatch.

Requirement: the receiving company must form a genuine second employment relationship with the worker, with the accompanying capacity to meet payroll, tax, social insurance, and Labor Standards Act obligations in Japan, not simply a right to direct the worker’s day-to-day tasks.

2. Secondment is a form of labor supply that requires a specific justification

The same MHLW document is explicit that secondment is not automatically exempt from Japan’s labor-supply rules:

しかし、在籍型出向の形態は、労働者供給に該当するので、その在籍型出向が「業として行われる」場合には、職業安定法第44条により禁止される労働者供給事業に該当する。

The form of in-service secondment does fall within “labor supply.” Where that secondment is conducted as a business, it falls within the labor-supply business prohibited under Article 44 of the Employment Security Act.

Article 44 itself:

何人も、次条に規定する場合を除くほか、労働者供給事業を行い、又はその労働者供給事業を行う者から供給される労働者を自らの指揮命令の下に労働させてはならない。 — 職業安定法第44条

No person shall conduct a labor-supply business, or cause a worker supplied by a person conducting a labor-supply business to work under their own direction and command, except as provided in the following article.

(The following article, Article 45, is a narrow exception for labor unions operating a supply business with MHLW permission on a non-fee basis. It has no general application to companies.)

Secondment is therefore not a separate, self-standing category outside labor-supply regulation. It is treated as a form of labor supply that is excused only where it satisfies the purpose test below.

3. The recognized purposes

MHLW’s guidance identifies the specific purposes under which a secondment is unlikely to be treated as “conducted as a business”:

在籍型出向のうち、一、労働者を離職させるのではなく、関係会社において雇用機会を確保する二、経営指導、技術指導の実施三、職業能力開発の一環として行う四、企業グループ内の人事交流の一環として行う等の目的を有しているものについては、出向が行為として形式的に繰り返し行われたとしても、社会通念上業として行われていると判断し得るものは少ないと考えている。

Among in-service secondments, those with purposes such as: securing continued employment at an affiliated company rather than allowing the worker to be separated from employment; carrying out management or technical guidance; conducting it as part of vocational skills development; or conducting it as part of personnel exchange within a corporate group — even where the secondment is formally repeated, it is considered unlikely to be judged, under ordinary social norms, as “conducted as a business.”

These four purposes are the operative basis for the exemption. An arrangement should be able to point to one of them specifically, rather than to a general business rationale.

In practice, genuine secondment always has a specific reason for a specific person to go to a specific company. A few real-world shapes:

Employment security (雇用機会の確保). A manufacturer hits a downturn in one product line and, instead of laying those employees off, seconds them to an affiliated company or a long-standing business partner that needs hands — keeping them employed until demand recovers.
Management or technical guidance (経営指導・技術指導). An electronics maker seconds a senior engineer to a company it has invested in, to help stand up a new production line and transfer manufacturing know-how. This is close to the very example Japan’s tax authority uses.
Technical guidance across a partnership. A shoe manufacturer with deep leather-working expertise seconds a small team to a partner handbag maker, to help it launch a new leather line.
Skills development (職業能力開発). A computer-hardware company seconds an engineer to a software partner for a fixed term, so the engineer can build software skills the company lacks in-house and bring them back.
Intra-group personnel exchange (企業グループ内の人事交流). A holding company rotates staff among its trading, logistics, and finance subsidiaries, so people gain experience across the group.

In every one of these, there is an identifiable reason for that particular person to move to that particular company, and an expectation that they eventually return.

4. What “conducted as a business” (業として) means

Because the exemption turns on this phrase, MHLW’s own definition is directly relevant:

「業として行う」とは、一定の目的をもって同種の行為を反復継続的に遂行することをいい、一回限りの行為であったとしても反復継続の意思をもって行えば事業性があるが、形式的に繰り返し行われたとしても、すべて受動的、偶発的行為が継続した結果であって反復継続の意思をもって行われていなければ、事業性は認められない。 — 労働者派遣事業関係業務取扱要領

“Conducted as a business” means carrying out acts of the same kind repeatedly and continuously for a given purpose. A single act may have business character if there is an intent to repeat it, while even formally repeated acts are not treated as a business where they result from passive or incidental circumstances rather than an intent to repeat.

MHLW also identifies specific indicators used to assess this:

労働者の供給を行う旨宣伝、広告している場合、事務所を構え労働者供給を行う旨看板を掲げている場合等については、原則として事業性ありと判断されるものであること。

Where a party advertises or publicizes that it supplies workers, or maintains an office displaying that it does so, this is, as a general rule, treated as indicating business character.

By contrast, picture a company whose actual business is placing people. It advertises that it will second staff to clients, takes on any client that needs workers, and repeats the arrangement continuously for a fee, with no employment-security, guidance, development, or group-exchange purpose behind any individual placement. That is secondment turned into a product, and it is the clearest picture of “conducted as a business.” However the contracts are worded, an operator that simply supplies workers to whoever asks, as its ongoing business, is conducting the labor-supply business prohibited under Article 44 unless it holds a worker-dispatch licence. The dividing line is not the label on the agreement; it is whether each placement has a genuine, specific purpose, or whether secondment has become the service being sold.

Requirement: the arrangement should reflect an occasional, purpose-specific placement rather than a standing, marketed, repeatable service.

5. No margin: the wage transfer has to be cost-only

There is a fifth element that follows directly from the “conducted as a business” test above, and it shows up in the government’s own model paperwork: a genuine secondment does not generate a profit for the sending company.

MHLW’s own handbook on in-service secondment includes a model secondment agreement, and its wage clause is a straight, dollar-for-dollar pass-through — nothing added on top. Here is that clause, word for word, in the original Japanese, with the English translation directly beneath it:

本件出向に伴う給与負担金として、甲が第７条の定めに基づき出向者に支払った賃金（時間外、休日及び深夜労働に対する割増賃金を含む。）に相当する額を乙が全額負担する。 — 在籍型出向「基本がわかる」ハンドブック、出向契約書（例）第10条 (source, MHLW, PDF)

As the wage reimbursement for this secondment, the receiving company shall bear in full the amount equivalent to the wages — including overtime, holiday, and late-night premiums — that the sending company paid to the seconded worker under Article 7 [of the model agreement].

No service fee. No margin. The receiving company reimburses exactly what the sending company paid the worker, and nothing more. That’s not our interpretation — it’s the exact wording of the model agreement the Ministry of Health, Labour and Welfare itself publishes and hands to employers. You can read the full handbook and the model contract it comes from directly at the link above. The handbook’s recommended matching channel reflects the same principle: 産業雇用安定センター, the public-interest foundation MHLW points employers toward for finding a secondment partner, charges no placement fee for the arrangement it facilitates.

A sending company earning a margin on placing its own employees with another company looks like exactly the kind of commercial activity the four recognized purposes are meant to exclude. The absence of profit is not a footnote — it is part of what makes an arrangement read as personnel management rather than a paid service.

Requirement: the wage arrangement between the two companies must be a cost reimbursement, not a fee. If the sending company is earning a margin on the placement, that fact alone works against the arrangement being treated as secondment rather than a labor-supply business.

6. The order itself must be valid

A secondment that satisfies the purpose test still requires a valid basis for the order. The Labor Contract Act sets the standard:

使用者が労働者に出向を命ずることができる場合において、当該出向の命令が、その必要性、対象労働者の選定に係る事情その他の事情に照らして、その権利を濫用したものと認められる場合には、当該命令は、無効とする。 — 労働契約法第14条

Where an employer is otherwise entitled to order a worker’s secondment, if the order — considered in light of its necessity, the circumstances of the worker’s selection, and other relevant factors — is found to constitute an abuse of that right, the order is void.

The legal basis for ordering a secondment is generally drawn from one of three sources: a collective labor agreement, applicable work rules, or the worker’s individual consent. Japanese case law has also invalidated secondment orders that were procedurally supported but lacked genuine business necessity or a defensible basis for selecting the particular worker — for example, where a secondment followed a worker’s refusal of a voluntary retirement request, with no operational justification for the reassignment.

Requirement: the order must be necessary, the worker’s selection must be objectively justifiable, and the underlying legal basis must be capable of withstanding challenge.

7. The receiving company’s obligations are substantive, not nominal

Because the receiving company becomes an employer in its own right, it takes on obligations that go beyond direction of daily work. Common practice, consistent with the guidance referenced above, allocates responsibilities roughly as follows:

Wages — final payment obligation typically remains with the sending company, though the receiving company frequently reimburses the associated labor cost, on a cost-only basis, with the specific split defined in the secondment agreement.
Social insurance (health, pension, nursing care) — generally remains with the sending company.
Workers’ compensation insurance — generally follows the receiving company, as the location of the work performed (see Section 8 below).
Work rules — day-to-day matters (working hours, workplace conduct, leave administration) generally follow the receiving company’s rules; matters affecting the worker’s underlying employment status, such as dismissal, remain with the sending company.
Pre-secondment disclosure — the receiving company is expected to provide written notice of working conditions before the secondment begins, covering contract term, workplace and duties, hours, wage calculation method, and grounds for termination.

Meeting these obligations requires the receiving company to have actual administrative capacity in Japan.

8. The workers’ accident insurance test, in the government’s own words

Of all those obligations, the one that is easiest to check — and hardest to fake — is the worker’s 労災 (workers’ accident insurance). Where it sits is the clearest practical marker of whether an arrangement is genuine secondment or worker dispatch, and it is fixed by an MHLW administrative notice, 昭和35年11月2日基発第932号「出向労働者に対する労働者災害補償保険法の適用について」.

On which employer’s insurance applies:

出向労働者に係る保険関係が、出向元事業と出向先事業とのいずれにあるかは、出向の目的及び出向元事業主と出向先事業主とが当該出向労働者の出向につき行なつた契約ならびに出向先事業における出向労働者の労働の実態等に基づき、当該労働者の労働関係の所在を判断して、決定すること。

Whether the insurance relationship for a seconded worker lies with the sending business or the receiving business is to be decided by determining where the worker’s labor relationship resides — based on the purpose of the secondment, the contract the sending and receiving employers entered into regarding it, and the actual conditions of the worker’s work at the receiving business.

On when it attaches to the receiving company:

出向労働者が、出向先事業の組織に組み入れられ、出向先事業場の他の労働者と同様の立場（ただし、身分関係及び賃金関係を除く。）で、出向先事業主の指揮監督を受けて労働に従事している場合には、たとえ、当該出向労働者が、出向元事業主と出向先事業主とが行なつた契約等により、出向元事業主から賃金名目の金銭給付を受けている場合であつても、出向先事業主が、当該金銭給付を出向先事業の支払う賃金として、労災保険法第二五条に規定する事業の賃金総額に含め、保険料を納付する旨を申し出た場合には当該金銭給付を出向先事業から受ける賃金とみなし、当該出向労働者を出向先事業に係る保険関係によるものとして取り扱うこと。

Where a seconded worker is incorporated into the organization of the receiving business and works under the direction and supervision of the receiving employer, in the same position as the receiving workplace’s other workers (except as to status and wage matters), then even if the worker receives a payment in the name of wages from the sending employer under the employers’ contract, provided the receiving employer declares that it will include that payment in the total wages of the receiving business as wages it pays — under Article 25 of the Workers’ Accident Compensation Insurance Act — and pay the premium, that payment is deemed wages received from the receiving business, and the worker is treated as covered by the receiving business’s insurance relationship.

Put simply: the receiving company — the client that receives the seconded worker — must add that worker to its own 労災 (workers’ accident insurance) in Japan and pay the premium. That is the requirement, in the government’s own words. And if you do not have a company in Japan, then obviously you cannot do this — there is no Japanese entity of yours to carry the insurance — so you cannot meet the requirement at all. An arrangement where the worker instead stays on the sending (EOR’s) company’s 労災 (workers’ accident insurance) wherever they work is worker dispatch staffing, not secondment.

9. A related structure: tenseki-gata shukko (転籍型出向)

Everything above concerns zaiseki-gata shukko (在籍型出向) — the worker keeps their job with the sending company and takes on a second, simultaneous employment relationship with the receiving company. Japanese practice recognizes a second, distinct arrangement that goes by a similar name: tenseki-gata shukko (転籍型出向), sometimes just called tenseki. It is not a variant of the secondment discussed above — it is a different transaction with a different legal basis.

In tenseki, the worker’s employment with the sending company ends outright. The worker becomes an employee of the receiving company only. There is no dual employment relationship, no ongoing role for the sending company, and — because there is no continuing supply of the worker’s labor by one company to another — the Article 44 labor-supply analysis in Sections 2 through 5 above does not apply to it at all. Tenseki sidesteps the entire labor-supply question by exiting the relationship it depends on.

That exit comes at a cost that matters specifically for staffing and EOR arrangements. An employer cannot simply reassign a worker’s employment contract to another company on its own authority. Japan’s Civil Code sets the baseline rule for any assignment of an employer’s contractual position:

使用者は、労働者の承諾を得なければ、その権利を第三者に譲り渡すことができない。 — 民法第625条第1項

An employer may not assign its rights [under an employment contract] to a third party without the worker’s consent.

For zaiseki-gata shukko, this consent can often be satisfied through comprehensive provisions in work rules or a labor-management agreement, because the worker’s status with the original employer continues. Tenseki is held to a stricter standard, because it isn’t merely an assignment of rights — it requires forming an entirely new employment contract with a new employer while ending the old one. General or advance consent in a work rules document is not treated as sufficient on its own; the worker’s actual agreement to the specific transfer, to the specific new employer, is required.

For a company built on placing workers with clients, tenseki does not offer a way around licensing — it swaps one licensing question for another. Arranging, as a business, for workers to transfer permanently to another company’s employment, for a fee, is the activity Japan regulates as job placement (職業紹介), and fee-charging job placement requires its own license, separate from a worker-dispatch license:

有料の職業紹介事業を行おうとする者は、厚生労働大臣の許可を受けなければならない。 — 職業安定法第30条第1項

A person intending to conduct a fee-charging job placement business must obtain a license from the Minister of Health, Labour and Welfare.

Practically, tenseki also stops being useful as an EOR structure the moment it happens. Once the transfer completes, the original company has no further employment relationship with the worker to administer — no payroll, no compliance role, no ongoing service being provided. The receiving company becomes the worker’s sole, direct, permanent employer, which is the outcome a company without a Japan entity was trying to avoid by using an EOR in the first place. Tenseki answers a different question than the one an EOR client is usually asking.

Summary checklist

This checklist applies to zaiseki-gata shukko (在籍型出向) — the dual-employment structure discussed in Sections 1 through 8. Tenseki-gata shukko (転籍型出向), covered in Section 9, is governed by a different test entirely: individual worker consent to the new employment contract under Civil Code Article 625, and, where arranged commercially, a fee-charging job placement license under Employment Security Act Article 30.

Does the receiving company form a genuine second employment relationship, with the corresponding tax, social insurance, and labor law capacity, not only the ability to direct the worker’s tasks?
Does the arrangement fall within one of the four recognized purposes: employment security, management or technical guidance, skills development, or intra-group personnel exchange?
Would the arrangement satisfy MHLW’s own test for whether something is “conducted as a business,” including how it is marketed?
Is the wage transfer between the two companies a cost-only reimbursement, with no service fee or margin for the sending company?
Is the secondment order itself necessary, is the worker’s selection defensible, and does the legal basis for the order hold up under scrutiny?
Is the seconded worker actually enrolled in the receiving company’s own 労災 (workers’ accident insurance) in Japan — with the receiving company declaring the associated wages in its own insurance base and paying the premium — rather than left on the sending company’s insurance?
Does the receiving company carry the substantive obligations of an employer — wages, insurance, work rules, and disclosure — rather than only operational control?

An arrangement that satisfies all of these is properly characterized as secondment under Japanese law. Where one or more of these elements is missing, the arrangement should be evaluated against the alternative legal categories that may actually apply, most commonly licensed worker dispatch, rather than relying on the secondment label alone.

This article quotes Japan’s Employment Security Act (職業安定法), Labor Contract Act (労働契約法), and MHLW’s administrative guidance directly. It is provided for general informational purposes, is not legal advice, and is not directed at any specific company or arrangement. Companies evaluating a workforce structure in Japan should consult qualified Japanese employment counsel regarding their specific facts.

Sources

EOR in Japan — By Jason De Luca