Do worker co-operative members also sign an employment contract? Social insurance and labour on conversion

In short: A member of a worker co-operative in principle also signs an employment contract with the co-operative, because Article 20(1) of the Worker Co-operative Act (Act No. 78 of 2020, in force from October 1, 2022) requires the co-operative to conclude an employment contract with members who engage in its business (excluding members who execute the business or only perform the duties of a director, and members who are auditors). That is, a member is at once an investor and a worker, and labour law such as the Labour Standards Act and the Minimum Wage Act applies in principle. Because the co-operative is a juridical person, social insurance (health insurance and employees' pension) is mandatory (Health Insurance Act, Article 3(3); Employees' Pension Insurance Act, Article 6), members who sign an employment contract become insured, and they fall under labour insurance (workers' accident insurance and employment insurance) too. The co-operative comes into existence by registration (a system of rules — unlike a company or an NPO, no authorisation or certification by the authority is needed), with a filing to the authority after establishment. Note that the special route to convert from an enterprise co-operative or an NPO (supplementary Article 4) ended three years after enforcement, on September 30, 2025. This page organises the employment contract, work rules and social insurance of members from a shakai hoken roumushi's viewpoint, leaving the establishment registration to a judicial scrivener and the drafting of the articles and the filing with the authority to a gyoseishoshi, each under separate engagements as independent business entities.

A worker co-operative is a juridical person whose basic principles are investment, reflection of opinions, and engagement (Article 3). It is built differently from a company or an NPO, on the premise that "the people who work themselves invest, take part in running it, and engage in the business." This distinctive structure gives rise to labour questions such as "are they workers even though they invest?" and "what about social insurance?" This page is for groups considering setting up a worker co-operative or moving across from an enterprise co-operative or an NPO, organised around labour.

How does a worker co-operative differ from a company or an NPO on the labour side?

The biggest difference is that a member has a dual position — both an investor and a worker. A shareholder of a company is an investor, and whether they work is separate. A member of an NPO has no duty to invest and is not necessarily a worker. In a worker co-operative, a member who engages in the business in principle signs an employment contract with the co-operative and is protected as a worker.

The establishment procedure also differs. A worker co-operative draws up its articles, has the investment paid in, and comes into existence by registration (a system of rules). As with a company, no authorisation or certification by the authority is required. An NPO, by contrast, needs certification by the competent authority, and an enterprise co-operative (under the Small and Medium-Sized Enterprise Co-operatives Act) needs authorisation by the authority.

	Worker co-operative	Company	NPO
Governing law	Worker Co-operative Act	Companies Act	Act on Promotion of Specified Non-profit Activities
Establishment	By registration (rules; no authorisation/certification)	By registration	Certification by the authority + registration
Investment	Members invest	Shareholders invest	No concept of investment
Relationship of those who engage in the business	In principle an employment contract (Art. 20)	Employment (employment contract)	Employment or unpaid activity
Surplus	No dividend on investment; dividend by extent of engagement	Dividend by investment	No dividend

Why do members also need to sign an "employment contract"?

Article 20(1) of the Worker Co-operative Act provides that the co-operative must conclude an employment contract with members who engage in its business. However, members who execute the business or only perform the duties of a director (the representative director, executive directors, and so on) and members who are auditors are excluded from this employment contract. The purpose is that, even though they are investors, members who engage in the business on the ground are treated as workers and protected by the Labour Standards Act, the Minimum Wage Act, and so on.

So stating the working conditions (Labour Standards Act, Article 15), managing working hours, breaks and holidays, premium wages (Article 37), annual paid leave, and securing the minimum wage are all needed, just as for a company. Work rules, too, must be drawn up and filed where there are normally 10 or more workers (including members who sign an employment contract) (Article 89). Whether work rules are required and what they must contain are covered in Work rules: from how many people and what to write.

Article 20(2) further provides that a member's withdrawal (Article 14 or Article 15(1)) must not be construed as terminating the employment contract. The position as a member (investment) and the position as a worker (the employment contract) are separate regimes — leaving the co-operative does not mean instant dismissal. Conversely, the end of the employment contract (resignation or dismissal) and the loss of membership must be considered separately.

What about members' social and labour insurance?

A worker co-operative is a juridical person. A juridical person's workplace becomes a mandatory social-insurance workplace if it normally employs workers (Health Insurance Act, Article 3(3); Employees' Pension Insurance Act, Article 6). A member who signs an employment contract and engages in the business becomes an insured person for health insurance and employees' pension on the same basis as an ordinary worker. For a short-hours member, whether it applies is judged by whether they work three-quarters or more of an ordinary worker's hours, or meet the short-hours worker requirements such as 20 hours a week or more.

Labour insurance is the same. Workers' accident insurance applies if even one worker is employed, and members who sign an employment contract are covered. For employment insurance, members who meet the requirements for scheduled weekly hours and expected employment become insured. Just after establishment, you file the new-application notice for health insurance and employees' pension, the notice establishing the insurance relationship for labour insurance, and the notice establishing the applicable workplace for employment insurance, within their respective deadlines. The flow of the social- and labour-insurance filings at the time of setting up is organised in When you set up, by when for social and labour insurance.

Insurance	Member who signs an employment contract	Basis / notes
Health insurance & employees' pension	In principle enrolled (same basis as an ordinary worker)	A juridical person is mandatory (Health Insurance Act, Art. 3(3); Employees' Pension Insurance Act, Art. 6)
Workers' accident insurance	All are covered	Applies if even one worker is employed
Employment insurance	Enrolled if requirements are met	Scheduled weekly hours and expected-employment requirements

The representative director, executive directors and auditors are excluded from the employment contract (Article 20(1)), but an officer who receives a reward from the juridical person in return for labour and is recognised to be in a relationship of use may become an insured person for health insurance and employees' pension. Whether it applies changes with the actual situation, so a qualified professional checks it.

What should you watch on the labour side when converting from an enterprise co-operative or an NPO?

First, as a premise: the "special conversion route" by which an existing enterprise co-operative or specified non-profit corporation (NPO) changes its organisation directly into a worker co-operative (supplementary Article 4 of the Worker Co-operative Act; for an NPO, the approval procedure in supplementary Article 16 et seq.) was limited to within three years of the enforcement date (October 1, 2022), and acceptance ended on September 30, 2025. At present, direct conversion by this special route is not possible. Where you are considering a move, you now look individually at options such as newly establishing a worker co-operative and taking over the old entity's business (with the old entity dissolved and wound up).

Have a question about your situation?

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

Chat on LINEContact us

What needs care on the labour side is switching the status of the people who work. When a person who was employed by, or engaged in, the old entity is received into the new worker co-operative as a member (i.e. signing an employment contract), you sort out whether to conclude a fresh employment contract or to carry over the working conditions (wages, hours, retirement allowance, and so on). Social and labour insurance become a transfer of loss at the old entity and acquisition at the new one, and getting the timing wrong creates a gap in insured status. Work rules and wage rules are also redrawn on the premise that members are also workers. The way employment contracts carry over on a company split or business transfer is also helpful: Business transfer / company split and the carry-over of employment contracts.

Who do you ask for the establishment registration, the filing with the authority, and labour?

The establishment registration is the work of a judicial scrivener. Drafting the articles and the filing with the authority (the prefectural governor, etc.) required after establishment are handled by a gyoseishoshi. These are contracted separately from shakai hoken roumushi work, as independent business entities.

On the other hand, sorting out the employment contract with members, drawing up the work rules and wage rules, the procedures for enrolment in social insurance (health insurance and employees' pension) and labour insurance (workers' accident insurance and employment insurance), and stating the working conditions are handled by a shakai hoken roumushi. Because the worker co-operative's feature — a member being both an investor and a worker — bears directly on the design of the employment contract and work rules, building labour in from the establishment stage saves having to go back and sort out working conditions or social insurance later.

What can 四葉社会保険労務士事務所 do for you?

四葉社会保険労務士事務所 in Kohinata, Bunkyo Ward, handles, for the labour of a worker co-operative, sorting out the employment contract with members, drawing up the work rules and wage rules, the procedures for social- and labour-insurance enrolment, stating the working conditions, and designing the carry-over of working conditions and the transfer of social insurance where you move across from an enterprise co-operative or an NPO. The initial consultation is free. We quote according to the content and number of people; for how fees are thought about, see the fee schedule, and the questions we are asked most often are on the FAQ page.

The establishment registration is the work of a judicial scrivener, and drafting the articles and the filing with the authority are the work of a gyoseishoshi; we will guide you to contract with each separately, as an independent business entity. This office does not accept referral fees.

Frequently asked questions

Q. Members invest — so why are they treated as workers?
A. Because Article 20(1) of the Worker Co-operative Act requires the co-operative to conclude an employment contract with members who engage in the business (excluding members who execute the business or only perform the duties of a director, and members who are auditors). The purpose is to protect members as workers, so the Labour Standards Act, the Minimum Wage Act and so on apply in principle, separately from whether they invest.

Q. What about members' social insurance?
A. A worker co-operative is a juridical person, so health insurance and employees' pension are mandatory (Health Insurance Act, Article 3(3); Employees' Pension Insurance Act, Article 6). A member who signs an employment contract and engages in the business becomes insured on the same basis as an ordinary worker. A short-hours member is judged by whether they work three-quarters or more of an ordinary worker's hours or meet the short-hours worker requirements such as 20 hours a week or more. Workers' accident insurance covers everyone, and employment insurance applies if the requirements are met.

Q. Can you convert from an enterprise co-operative or an NPO?
A. The "special conversion route" that changes the organisation directly (supplementary Article 4 of the Worker Co-operative Act; for an NPO, supplementary Article 16 et seq.) was limited to within three years of the enforcement date of October 1, 2022, and acceptance ended on September 30, 2025. At present, direct conversion by this special route is not possible; you look individually at options such as newly establishing a worker co-operative and taking over the business. Check the latest handling with the competent window.

Q. If you leave the co-operative, does the work (employment contract) automatically end too?
A. No. Article 20(2) of the Worker Co-operative Act provides that a member's withdrawal must not be construed as terminating the employment contract. The position as a member (investment) and the position as a worker (the employment contract) are separate regimes. The end of the employment contract, such as resignation or dismissal, and the loss of membership are considered separately, each by its own procedure.

Sources for this article

• Worker Co-operative Act (労働者協同組合法, Act No. 78 of 2020), Article 3 (basic principles = investment, reflection of opinions, engagement), Article 20(1) (the co-operative must conclude an employment contract with members who engage in its business, excluding members who execute the business or only perform the duties of a director and members who are auditors), and Article 20(2) (a member's withdrawal must not be construed as terminating the employment contract) (confirmed against e-Gov on October 30, 2026)
• Worker Co-operative Act, supplementary Article 1 (enforcement date), supplementary Article 4 (conversion of an enterprise co-operative or an NPO within three years of the enforcement date), and supplementary Article 16 et seq. (the approval procedure for an NPO's conversion). The enforcement date is October 1, 2022, and acceptance of conversion ended on September 30, 2025 (guidance of the Ministry of Health, Labour and Welfare and the Cabinet Office, referenced October 30, 2026)
• Health Insurance Act (Act No. 70 of 1922), Article 3(3) (application to a juridical person's workplace); Employees' Pension Insurance Act (Act No. 115 of 1954), Article 6 (applicable workplace) (confirmed against e-Gov on October 30, 2026)
• Labour Standards Act (Act No. 49 of 1947), Article 15 (statement of working conditions), Article 37 (premium wages), Article 89 (drawing up and filing work rules, normally 10 or more) (confirmed against e-Gov on October 30, 2026)
• Industrial Accident Compensation Insurance Act (Act No. 50 of 1947) and Employment Insurance Act (Act No. 116 of 1974) = application of labour insurance to workers (referenced October 30, 2026); members' insured status confirmed in the Ministry of Health, Labour and Welfare's guidance that members also become insured for employees' pension and health insurance (referenced October 30, 2026)

How a move is carried out now that the special conversion route has ended, and whether social insurance applies to short-hours members and officers, change with the particular circumstances. This article does not go so far as to decide whom you should consult. The employment contract with members, the work rules and wage rules, and enrolment in social and labour insurance are the work of a shakai hoken roumushi. The establishment registration is the work of a judicial scrivener, and drafting the articles and the filing with the authority are the work of a gyoseishoshi; each is carried out by an independent business entity and contracted separately. This office does not accept referral fees. The cost of consulting 四葉社会保険労務士事務所 is set out in the fee schedule, and the questions we are asked most often are on the FAQ page.

This article is general information. Judgments that fit your particular circumstances are made by a qualified professional after a meeting. Written by Joji Uramatsu (Shakai Hoken Roumushi (Certified Social Insurance and Labor Consultant), Gyoseishoshi (Certified Administrative Procedures Legal Specialist), Registered Real Estate Transaction Specialist).