Is Unlicensed Job Placement Illegal? When is a License Required for Paid Employment Placement?

Traditionally, job hunting and corporate recruitment activities were primarily conducted through agents of employment agencies that had obtained a license for paid employment placement services.

However, recently, services that directly match companies and individuals, like Wantedly, have been gaining popularity, especially in the IT industry.

In this article, we will explain whether a license for paid employment placement services, similar to what employment agencies have, is necessary when launching a service that directly matches companies and individuals as a business. We will also discuss how to launch such a service without obtaining a license for paid employment placement services.

What is a Paid Employment Placement Service?

A Paid Employment Placement Service refers to a business that introduces job seekers to employers and receives a referral fee from the employers.

This referral fee can either be a ‘reported fee’ or a ‘capped fee’. In the former, the placement service can receive up to 50% of the job seeker’s annual salary, while in the latter, they can receive up to 10.5% of the wages paid (up to a maximum of six months’ worth).

Today, most placement services opt for the reported fee, with the market rate typically being 30-40% of the annual salary.

When a Paid Employment Placement Business License is Required

The Japanese Employment Security Act defines “job placement” in Article 4, Paragraph 1 as the act of receiving applications for job openings and job seekers, and facilitating the establishment of an employment relationship between the job provider and the job seeker.

From the phrase “establishment of an employment relationship” in this definition, it is understood that if a contract for work or a subcontract, or any other relationship other than employment, is established, it does not fall under the category of “job placement”.

Furthermore, “mediation” in “job placement” refers to the act of intervening between the job provider and the job seeker upon receiving applications for job openings and job seekers, facilitating the establishment of an employment relationship between the two parties, and making its establishment easier.

Services like traditional recruitment businesses, where an agent presents job seekers with job descriptions from hiring companies, encourages applications, sets up interviews, and negotiates salary conditions, are typical examples of “mediation”.

According to the Employment Security Act, those who provide job placement services for a fee must obtain a Paid Employment Placement Business License from the Ministry of Health, Labour and Welfare (Article 30, Paragraph 1 of the Employment Security Act).

Even those who provide job placement services for free, with some exceptions, must also obtain permission from the Ministry of Health, Labour and Welfare (Article 33, Paragraph 1 of the Employment Security Act).

If you provide job placement services for a fee without obtaining a Paid Employment Placement Business License, you may be punished with imprisonment for up to one year or a fine of up to one million yen (Article 64 of the Employment Security Act).

In other words, if you do not introduce jobs individually to job seekers, but only provide job information or job seeker information, and do not receive applications for job openings and job seekers, and do not mediate the establishment of an employment relationship, it does not fall under “job placement”. Even if you do this as a business, you do not need a Paid Employment Placement Business License.

For information on utilizing human resources other than job placement, such as secondment, dispatch, quasi-delegation, and subcontracting, please refer to the article below.

Related article: The Differences and Distinctions Between Secondment, Dispatch, Quasi-Delegation, Subcontracting, Sham Subcontracting, and Labor Supply

Cases Where a Paid Employment Placement Business License is Not Required

It is considered that Wantedly’s operation of a matching service for job seekers and hiring companies does not require a license for a paid employment placement business.

The reasons for this include the fact that they do not only show specific job information, but all jobs that match the job seeker’s search criteria, and that they do not communicate with job seekers, among other things.

For the matching of job seekers and job providers, the Ministry of Health, Labour and Welfare’s grey zone elimination system is utilized. When a job seeker searches for a job, if all jobs that meet the criteria are displayed and no communication is made with the job seeker, even if the order of the jobs displayed is changed for each job seeker, it is interpreted as not falling under “job introduction”. This interpretation has been indicated by the Ministry of Health, Labour and Welfare.

Reference (Public announcement by the Ministry of Health, Labour and Welfare): Utilization of the Grey Zone Elimination System | Ministry of Health, Labour and Welfare (Service that personalizes the order of job postings for each job seeker in providing recruitment information)

Thus, if the business does not fall under “job introduction”, a license for a paid employment placement business is not necessary.

Permission for Paid Employment Placement Services Associated with Job Contracting

As stated above, unless it involves the establishment of an employment relationship, it does not fall under the category of job placement under the Japanese Employment Security Act.

Therefore, if you are facilitating the establishment of a job contracting relationship, not an employment relationship, there is no need to obtain permission for a paid employment placement business.

However, whether it falls under the establishment of an employment relationship is judged substantially from the actual state of the business. Therefore, even if it is called job contracting, if it is substantially judged to be employment, permission for a paid employment placement business is required.

Points to Note When Not Obtaining a Paid Employment Agency License

If you want to start a business that mainly provides job seeker and employer matching services, similar to Wantedly, without obtaining a paid employment agency license, what should you be careful about? Certain phrases or services may require you to obtain a paid employment agency license. Below, we will explain the key points in detail.

What Not to Do When Not Obtaining a Paid Employment Agency License

Providing the following services or making the following statements on the website of the service you operate may be considered “job placement”.

Therefore, if you do not obtain a paid employment agency license, you should be careful not to do the following:

1. Adding promotional phrases to job information or job seeker information, or categorizing job information or job seeker information based on the operator’s judgment
2. Facilitating the scheduling of interviews between job seekers and employers
3. Modifying the content of communication when job seekers and employers communicate on the website you operate
4. The operator selects job information and job seeker information and provides it to individual job seekers and employers

Creation of Job Information and Job Seeker Information

Regarding the above point 1, if the operator creates job information and job seeker information on behalf of job seekers and employers on the website operated as a matching service, it will be considered “job placement”, and it will be necessary to obtain a paid employment agency license.

Therefore, it is necessary to have a system where job information is registered by the recruiting company itself under its own responsibility. Similarly, job seekers must register their own information.

Even if the job information and job seeker information are registered by the recruiting company or the job seeker themselves, there is a risk that adding comments such as promotional phrases and appeal points by the matching service operator may be considered “job placement”.

Therefore, if you do not obtain a paid employment agency license, you should not add to the registered job information or job seeker information.

In summary, the point is whether there is an intervention of the operator’s intention or judgment between the job seeker and the employer. It is important to simply provide information, such as publishing the information registered by the job seeker and the employer on the website as it is.

Communication Between Job Seekers and Employers

As stated in the above point 3, if the matching service operator modifies the content of communication when job seekers and employers communicate, such as when a job seeker makes an inquiry or application to a recruiting company, it will be considered “job placement”, and it will be necessary to obtain a paid employment agency license.

For example,

• Creating a template for contacting job seekers as a service for recruiting companies
• Providing a service to modify the text of an application so that it is well received by the recruiting company when a job seeker applies to the recruiting company

may be considered “job placement”.

Therefore, if you do not obtain a paid employment agency license, you cannot provide such services.

In conclusion, even if you set up a system that allows job seekers and employers to communicate through the website, as long as you only provide a tool for communication and do not interfere with the content of their communication, it is not considered that the operator’s intention or judgment is involved, so it is considered that there will be no problem under the Japanese Employment Security Act.

Conclusion: If you’re having trouble with personnel referrals, consult a lawyer

Originally, matching services between job-seeking companies and job seekers, like Wantedly, started being used mainly in the IT industry. However, recently, it has been expanding to other industries as well. With the diversification of work styles, the demand for such services is expected to increase in the future.

However, due to the strong demand for worker protection in personnel referrals, strict rules have been established by the Japanese Employment Security Law (職業安定法). Therefore, if you are considering launching such a service, you must always check in advance for any legal issues.

Furthermore, in the IT industry, disguised subcontracting can easily become an issue in the personnel business, so it would be good to check this as well. We explain about disguised subcontracting in the IT industry in the following article.

Related article: Criteria and Countermeasures for Disguised Subcontracting in the IT Industry

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