How to choose an Umbrella Company in Japan

Many contractors who are starting a new contract in Japan will have researched the options for dealing with the complex tax and social security regulations and concluded that an umbrella company in Japan is the best option, in principle.

The benefits of that approach - such as maximised earnings, efficient cash flow, full regulatory compliance and low administration overheads – are too powerful to ignore. That is only the start, though - turning it into reality requires some work. The next step is to select the best umbrella company in Japan to suit the contractor’s individual needs.

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Without specific knowledge, knowing how to select an umbrella company in Japan will not be straightforward – there are many companies to choose from. They are not all of a uniform performance standard and fee levels vary from one to another. Just as in any market, there are variations in their service offerings and service delivery.

If a contractor is working through an agency, then a working link between the agency and the umbrella company has to be factored in – how efficient will that be, and how will it affect cash flow? What if there is a dispute – what will happen if ‘A’ blames ‘B’ and vice versa?

There are two ways to choose an umbrella company in Japan – slow or smart.

Take 1: The Structured Approach – but…

Many contractors will take a structured approach when they start out to choose an umbrella company in Japan. They will gather information and categorise it, and draw up a comparison chart to evaluate the options. How much weight should be attached to the evaluation criteria? We all know that a company might commit to immediate payment, but what are the realities?

This initial evaluation might be followed by phone calls and perhaps meetings. It is a time consuming exercise. It is also an imperfect process as the reality of delivery by the umbrella company in Japan may be very different from that in the marketing material and it is difficult for the contractor to assess this.

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There are other issues which influence the choice, and these are not easy to evaluate in a comparison chart. For example, the length of contract, payment routing and whether property purchase is being contemplated; add in provision for retirement and family members and the mix is complex, clouding the clarity of the comparison chart – the ‘intangible’ factors that have to be weighed.

Online forums cannot answer these very personal questions in anything other than a general way. Apart from the dangers of disclosing personal business outside of a formal relationship, the identity of other members may be dubious and their advice coloured.

Take 2: The Expert Approach

Clients hire contractors for many reasons, not least of which is that they are experts in their field. So, rather than take the imperfect and time consuming collect/organise/appraise route, many contractors use an expert who knows how to choose an umbrella company. A good advisor has wide experience of the umbrella company market and is used to dealing with the myriad details of contractor needs and influences, and even sector issues (e.g. IT, Financial Service, Oil& Gas).

They balance their in-depth knowledge of the companies against the highly individual needs of the contractor, to arrange appropriate introductions. Issues of triangulation between contractor/agency/umbrella company are advised on (not all agency/umbrella combinations work together).

The best advisors will have wide working knowledge of Japan umbrella companies and international suppliers, cutting out the contractor’s need to collect and try to evaluate information about the companies.


So, there we have two takes on the approach to solving the umbrella company selection problem. Slow, imperfect and resource consuming, or expert engagement. With ‘Take 2’ needing significantly lower effort from the contractor during the crucial contract initiation stage, it has to make sense.

Our expert advice is friendly and precise, based on years of experience with many contractors, umbrella companies and suppliers, to help an individual best select an umbrella company in Japan. The advice is free, but we do receive a commission from the umbrella company of the contractor’s choice.

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