When a fixed-term contract exceeds five years in total, how does the conversion to a permanent contract arise?

In short: When a fixed-term labor contract with the same employer exceeds five years in total, the worker gains the right to apply for conversion to a permanent (no-fixed-term) contract (Article 18, paragraph 1 of the Labor Contract Act). If the worker applies, the employer is deemed to have accepted, and from the next contract it becomes one with no fixed term. Unless there is a separate provision, the working conditions after conversion are the same as the immediately preceding fixed-term contract (except that it becomes permanent). If there is a gap of six months or more between contracts (cooling), the total is reset. This article sorts out, in practice, how to count the five-year total, cooling, and the application right. Putting work rules in order and labor-management response are for a Shakai Hoken Roumushi; an individual dispute such as a non-renewal to dodge conversion is for an attorney (a separate business entity from this office, contracted separately).

"We have had a contract worker or part-timer for over five years — must we do something?" and "does conversion mean making them a regular employee?" — these are consultations we receive from companies with fixed-term employees. This page is for HR staff at small and medium enterprises who hold part-timers, contract workers or re-employed staff and face the permanent-conversion rule. Whether an individual non-renewal is valid, and handling a dispute, are outside the scope of this article.

When does the right to apply for permanent conversion arise?

When the total contract period of two or more fixed-term labor contracts concluded with the same employer exceeds five years, that worker gains the right to apply for permanent conversion (Article 18, paragraph 1 of the Labor Contract Act). Because it is "exceeds," the trigger is not exactly five years, but entering a contract that goes beyond five years.

• If the contract period is one year, the right arises during the contract after the fifth renewal (i.e. the sixth-year contract)
• If the contract period is three years, the right arises during the contract that enters the sixth year in total (the second contract after the first renewal)
• If the worker applies during a contract period in which the right has arisen, the employer is deemed to have accepted, and from the day after the current contract ends it becomes a permanent labor contract

The permanent-conversion rule (Article 18) came into force on 1 April 2013. Therefore, as a rule, the first permanent-conversion application right arose on or after 1 April 2018. The point that a fixed-term contract requires re-clarifying working conditions at each renewal is also touched on in the residence deadline and the labor-contract period.

How is the cooling period calculated?

If there is a gap (a no-contract period) of a certain length or more between contracts, the earlier contract period is reset from the total. This is called cooling (Article 18, paragraph 2 of the Labor Contract Act).

Length of the one fixed-term contract just before the gap	Gap that constitutes cooling
One year or more	Six months or more
Less than one year	A period defined by Ministry ordinance based on half of that contract period (rounded up to one month if under one month)

For example, if the immediately preceding contract is one year or more, a gap of six months or more means the period before it does not enter the total. Conversely, if the gap is under six months, the total continues. The practice of "leaving a small gap between renewals so that five years does not accumulate" does not work if the gap is short. Also, a practice of ending a contract and rehiring the same person after a set period, if seen as substantially aimed at avoiding conversion, leads to the non-renewal issue discussed below. Because the counting changes with the individual sequence of contracts, it must be checked against the contract history.

Do the working conditions change after permanent conversion?

As a rule, nothing changes except that there is no longer a fixed term. Article 18, paragraph 1 of the Labor Contract Act provides that the working conditions that are the content of the labor contract after conversion are the same as those of the immediately preceding fixed-term contract, except for parts where there is a separate provision.

• "Permanent conversion" is not "becoming a regular employee." The hourly wage, the content of the work, the workplace and so on are carried over as they were under the fixed term, unless a separate provision is made
• Whether to give the same treatment as a regular employee is a matter the company designs by a separate provision (work rules or an individual agreement)
• Preparing a work-rules category for permanently-converted workers in advance clarifies the working conditions at the time of conversion

Conversion does not occur automatically; it arises on the worker's application. The practical key is to decide in advance how to set the working conditions of a converted worker, and whether to create a work-rules category, in readiness for the application. The duty to create and file work rules arises from ten or more workers on a regular basis (from how many employees are work rules mandatory). For designing a regular-employee conversion as the target of a subsidy, see if you aim at a subsidy, the first contract form decides it.

What is the problem with non-renewal or dodging conversion?

Moving to not renew a contract (a non-renewal) before the permanent-conversion application right arises is a part prone to dispute. Where a fixed-term contract has been repeatedly renewed to a state substantially no different from a permanent contract, or where there is a reasonable ground to expect renewal, a non-renewal may not be allowed if it lacks objectively reasonable grounds and is not found appropriate by social convention (Article 19 of the Labor Contract Act, the non-renewal doctrine).

• A non-renewal just before the right arises, on that ground alone, is easily viewed as dodging conversion
• Even when setting a renewal cap such as "renewal is not made in principle," clarity from the first contract and consistency of operation are questioned
• Whether an individual non-renewal is valid, and handling a dispute, are an attorney's work. It is a separate business entity from this office, contracted separately

Have a question about your situation?

Tell us about your social insurance, payroll or employment enquiry.

Chat on LINEContact us

There is also a special measure for the permanent-conversion rule. Under the Act on Special Measures for Fixed-Term Employed Workers with Specialized Knowledge etc. (Act No. 137 of 2014), under an employer certified by the Director of the Prefectural Labor Bureau, a special period in which the permanent-conversion application right does not arise is set for a highly-specialized professional engaged in a certain project, or for an elderly person continuously employed after retirement age. Using the special measure requires certification of a plan, which a Shakai Hoken Roumushi puts in order. How the roles of a Shakai Hoken Roumushi and an attorney divide over dismissal and non-renewal is set out in dismissal — a Shakai Hoken Roumushi or an attorney.

What can 四葉社会保険労務士事務所 do?

四葉社会保険労務士事務所, in Kohinata, Bunkyo City, handles sorting out the total period of fixed-term contracts, creating a work-rules category for permanently-converted workers, putting the working-condition clarification documents in order, designing a renewal cap where one is set, and consulting on plan certification for the fixed-term special measure. Judging the validity of an individual non-renewal and handling a dispute are an attorney's work (a separate business entity from this office, contracted separately); this office handles the advance system design and document preparation. Consultation is free. For fees, see the fee schedule; for frequently asked questions, see the FAQ.

Frequently asked questions

Q. Do we have to make them a regular employee upon permanent conversion?
A. No. Permanent conversion only removes the fixed term; it is not making them a regular employee. Unless there is a separate provision, working conditions such as the hourly wage and the content of the work are carried over as they were under the fixed-term contract (Article 18, paragraph 1 of the Labor Contract Act). Whether to give the same treatment as a regular employee is a matter the company sets separately, such as in work rules.

Q. How does a gap between contracts affect the five-year total?
A. If there is a gap of a certain length or more between contracts, the period before it is reset from the total (cooling). If the immediately preceding contract is one year or more, a gap of six months or more resets it. If the gap is under six months, the total continues. For a contract under one year, the standard is a period based on half of that period.

Q. If we do not renew just before exceeding five years, can we avoid permanent conversion?
A. A non-renewal on the sole ground that the application right is about to arise is easily contested as dodging conversion. Where there is a reality of repeated renewal or a reasonable expectation of renewal, a non-renewal may not be allowed (Article 19 of the Labor Contract Act). Individual validity is judged differently by the circumstances, and handling a dispute is an attorney's work.

Q. Is an elderly person re-employed after retirement age also subject to conversion at five years?
A. As a rule they are subject, but there is a special measure. Under the Act on Special Measures for Fixed-Term Employed Workers, under an employer certified by the Director of the Prefectural Labor Bureau, a special period in which the permanent-conversion application right does not arise is set for an elderly person continuously employed after retirement age. Using the special measure requires a plan-certification procedure.

Sources

• Labor Contract Act (Act No. 128 of 2007), Article 18, paragraph 1 = the application for permanent conversion by a fixed-term worker whose total contract period exceeds five years, and the deemed acceptance by the employer / the latter part of paragraph 1 = working conditions after conversion are the same as the immediately preceding fixed-term contract unless there is a separate provision / paragraph 2 = a gap (cooling) of six months or more (where the immediately preceding contract is under one year, a period of at least that defined by Ministry ordinance based on half of it) is not counted in the total
• Labor Contract Act, Article 19 = renewal etc. of a fixed-term labor contract (the non-renewal doctrine: where there is repeated renewal or a reasonable expectation of renewal, a non-renewal lacking objective reasonableness and social appropriateness is not allowed)
• Act on Special Measures for Fixed-Term Employed Workers with Specialized Knowledge etc. (Act No. 137 of 2014) = the fixed-term special measure. By certification of the Director of the Prefectural Labor Bureau, a special period in which the permanent-conversion application right does not arise, for certain highly-specialized professionals and for the elderly continuously employed after retirement age
• The enforcement date of the permanent-conversion rule (Labor Contract Act, Article 18) = 1 April 2013 (the amended Labor Contract Act was enacted in August 2012). As a rule, the first permanent-conversion application right arose on or after 1 April 2018
• Ministry of Health, Labour and Welfare "Permanent-Conversion Rule Handbook" and the portal site for permanent conversion of fixed-term workers (muki.mhlw.go.jp, referenced 22 September 2026)
• The provisions are confirmed from e-Gov Law Search (as of September 2026)

This article does not decide whom to consult. Sorting out the total period of fixed-term contracts, putting work rules for permanently-converted workers in order, clarifying working conditions, and plan certification for the fixed-term special measure are the work of a Shakai Hoken Roumushi. Judging the validity of an individual non-renewal and handling a dispute are the work of an attorney (a separate business entity from this office, contracted separately). For fees when consulting 四葉社会保険労務士事務所, see the fee schedule; for frequently asked questions, see the FAQ.

This article is general information. A judgment on individual circumstances is made by a qualified professional after a consultation. Written by Joji Uramatsu (Shakai Hoken Roumushi, Gyoseishoshi, Registered Real Estate Transaction Specialist).