Know the Facts, Question Counsel, Respect the Risks
When companies enter Japan, they are often presented with various workforce solutions described as outsourcing, secondment (出向), managed services, subcontracting, or other contractual arrangements.
Sometimes these structures are entirely appropriate.
Sometimes they are not.
The purpose of this article is not to provide legal advice, nor to criticize any particular provider, lawyer, or consultant.
Rather, it is to encourage HR professionals, procurement teams, business leaders, and global mobility specialists to understand the facts underlying any proposed arrangement, ask thoughtful questions, and appreciate the risks associated with getting it wrong.
After all, good risk management in any field starts with understanding the facts, testing assumptions, and verifying that reality matches the documentation.
Labels Do Not Determine Compliance. Facts Do.
One of the most common mistakes made by overseas companies entering Japan is assuming that a particular contract title automatically determines whether an arrangement is compliant.
In practice, regulators, courts, auditors, and investigators often look beyond the title of an agreement and examine how the relationship actually operates.
A contract may be called:
- 業務委託 (Outsourcing)
- 請負 (Contract Work)
- 準委任 (Quasi-Mandate Agreement)
- 出向 (Secondment)
- Managed Service
- Professional Services
However, the key question remains:
What is actually happening in practice?
Question 1: Who Manages the Worker on a Daily Basis?
Ask:
Who assigns work, sets priorities, provides instructions, approves leave, and directs the worker’s daily activities?
This is often one of the most important factual questions.
Under a genuine outsourcing arrangement, the vendor is generally responsible for directing and managing its own personnel.
If the receiving company is directing the individual worker on a day-to-day basis, that fact deserves careful examination regardless of what the contract is called.
Question 2: Who Evaluates Performance?
Ask:
Who conducts performance reviews, provides feedback, and determines whether the worker is performing satisfactorily?
If the client organization is exercising these functions directly, it is worth understanding why and how this aligns with the proposed structure.
Again, the objective is not to reach a predetermined conclusion, but to ensure that the facts and the legal rationale are aligned.
Question 3: Is This Really Secondment (出向)?
Many overseas companies are told that a particular arrangement can be structured as a secondment.
Before accepting that explanation, consider asking:
Was this employee already employed by the sending company before this assignment began?
Traditional secondment arrangements generally involve an existing employee being assigned to another organization while maintaining an ongoing employment relationship connected to the sending employer.
If the individual was hired specifically for a single client assignment, it is reasonable to ask how the arrangement satisfies the characteristics of a secondment.
Question 4: What Happens When the Assignment Ends?
Ask:
What role will the employee return to once the assignment is completed?
A secondment arrangement typically contemplates an ongoing relationship with the sending employer.
If the worker was hired solely for one assignment and is expected to leave once that assignment concludes, it is reasonable to ask how that fact was considered when selecting the structure.
Question 5: What Facts Was the Legal Advice Based Upon?
This may be the most important question of all.
Ask:
What factual assumptions was this legal opinion based on?
Legal conclusions are often dependent upon the underlying facts being accurate.
If the facts change, the analysis may change.
For example:
- Who directs the worker?
- Who evaluates performance?
- Who controls schedules?
- Who approves leave?
- Who provides ongoing supervision?
These are not merely administrative details.
They are often fundamental facts.
Question 6: What Government Guidance Supports This Position?
Ask:
Can you show us the relevant government guidance, ministry interpretation, or statutory authority supporting this approach?
Do not rely solely on sales presentations, marketing materials, or informal opinions.
Request the underlying source material whenever possible.
Good advisers should welcome this question.
Question 7: What Business Function Is Actually Being Outsourced?
Ask:
What service, capability, or business function is the vendor responsible for delivering?
A genuine outsourcing arrangement typically involves the transfer of responsibility for a service or function to the provider.
Where a specific individual is identified in advance, hired solely for a particular assignment, and then assigned back to the requesting organization, it is reasonable to ask:
What function is being outsourced, and how does the provider remain responsible for delivering that function?
Similarly, consider asking:
Are we purchasing a business service from the vendor, or are we obtaining a specific individual who was identified in advance?
The purpose of these questions is not to challenge any particular structure, but to ensure that the commercial reality and the contractual framework are aligned.
Question 8: If This Is Not Worker Dispatch (労働者派遣), Why Not?
Ask:
What facts support the conclusion that this arrangement is not worker dispatch?
For example:
- Who manages the worker day-to-day?
- Who provides instructions?
- Who evaluates performance?
- Who controls working hours and priorities?
- What business function is actually being outsourced?
If the arrangement is not considered worker dispatch, a competent adviser should be able to clearly explain the reasoning and identify the facts supporting that conclusion.
The purpose of this question is not to challenge the advice.
The purpose is to understand it.
Understanding Key Japanese Terms
労働者派遣 (Worker Dispatch / Haken)
Generally speaking, worker dispatch involves a worker being employed by one organization while performing work under the direction and supervision of another organization.
Worker dispatch businesses are regulated under the Worker Dispatch Act and generally require appropriate licensing.
業務委託 / 請負 (Outsourcing / Contracting)
In a genuine outsourcing arrangement, the contractor is responsible for managing its personnel and delivering the agreed service or result.
The contractor—not the client—should normally maintain responsibility for directing the workforce assigned to the engagement.
準委任 (Quasi-Mandate Agreement)
A 準委任 agreement is commonly used in Japan for professional and intellectual services where a party agrees to perform services rather than deliver a specific completed result.
Examples may include consulting services, advisory services, and certain IT-related engagements.
However, the existence of a 準委任 agreement does not by itself answer questions regarding supervision, management, or operational control.
As with all workforce structures, the underlying facts remain important.
出向 (Secondment)
Secondment generally involves an existing employee being assigned to another organization while maintaining an employment relationship connected to the sending employer.
As with all workforce structures, the actual facts matter more than the title used in the agreement.
Good Governance Means Asking Questions
Questioning assumptions is not a sign of distrust.
It is a sign of responsible governance.
No competent lawyer, auditor, compliance officer, or risk manager should object to being asked:
- What facts support this conclusion?
- What assumptions were made?
- What happens if those assumptions change?
- What are the risks if we are wrong?
These are the same questions that should be asked in finance, cybersecurity, project management, quality assurance, and corporate governance.
Employment compliance should be no different.
Respect the Risks
Companies entering Japan often focus on speed, convenience, and cost.
Those factors matter.
However, workforce compliance decisions can affect:
- Employees
- Immigration status
- Labor relations
- Regulatory exposure
- Corporate reputation
For that reason, organizations should not simply accept labels at face value.
Know the facts.
Question counsel.
Respect the risks.
A Final Thought
If you are evaluating an EOR, outsourcing, secondment (出向), managed service, or other workforce structure in Japan, remember that contract labels are only part of the story.
The more important questions are:
- What are the underlying facts?
- What assumptions support the proposed structure?
- What business function is actually being outsourced?
- Who is managing the worker on a daily basis?
- What are the risks if those assumptions prove incorrect?
Good governance requires asking these questions.
Good advisers should welcome them.
Need a Second Opinion?
If you have employees in Japan, or are considering hiring in Japan for the first time, and would like a second opinion on a proposed workforce structure, please feel free to reach out.
Whether you ultimately work with us or another provider, we encourage you to understand the facts, ask the right questions, and ensure that the structure being proposed aligns with both your business objectives and your risk tolerance.
We are always happy to discuss the facts, the assumptions, and the practical realities involved.
Government Resources
Ministry of Health, Labour and Welfare (MHLW)
Worker Dispatch Business Guidance:
https://www.mhlw.go.jp/general/seido/anteikyoku/jukyu/haken/
Japanese Law Translation
Act on Securing the Proper Operation of Worker Dispatching Business and Protecting Dispatched Workers:
https://www.japaneselawtranslation.go.jp/en/laws/view/4014/en