Japan and South Korea: Disability Employment Quota Systems in Asia

Introduction

Japan and South Korea operate two of the most developed disability employment quota systems outside Europe. Both use a levy-and-grant mechanism — employers who fall short of their quota pay a levy, and the money funds payments to employers who exceed it, plus other employment support. While structurally similar to European models such as those in France and Germany, the two Asian systems have distinctive features worth studying, particularly Japan's Special Subsidiary Company system and South Korea's subsidiary-type standard workplaces, both run alongside national agencies (JEED in Japan, KEAD in South Korea).

Japan

The Quota System

Japan's Law for Employment Promotion of Persons with Disabilities obliges employers to employ persons with physical, intellectual or mental disabilities at or above a statutory rate. Persons with mental disabilities were added to the employment obligation from April 2018.

Statutory employment rates:

The size of private employer covered by the obligation falls as the rate rises: employers with 43.5 or more regular workers before April 2024, 40.0 or more from April 2024, and 37.5 or more from July 2026. The private-sector rate has been raised four times since April 2018 (from 2.0% to 2.2%, then 2.3% in March 2021, 2.5% in April 2024 and 2.7% in July 2026).

How Disability Is Counted

Japan uses a weighting system for quota calculation:

• Persons with severe physical or severe intellectual disabilities count double (each counts as 2)
• Other full-time workers with physical, intellectual or mental disabilities count as 1
• Short-time workers (20 to under 30 hours a week) with non-severe physical or intellectual disabilities count as 0.5; those with severe physical or intellectual disabilities or with mental disabilities count as 1
• Since April 2024, workers with severe physical or intellectual disabilities or mental disabilities working 10 to under 20 hours a week can count as 0.5

The Levy and Grant System

Administered by the Japan Organization for Employment of the Elderly, Persons with Disabilities and Job Seekers (JEED), the levy-and-grant system works as follows:

Levy (for employers below the quota):

• Employers with more than 100 regular workers who fall short of the statutory rate pay a levy of JPY 50,000 per month for each person short. Smaller employers do not pay the levy.

Payments to employers above the quota:

• Employers with more than 100 regular workers that exceed the rate receive an adjustment allowance of JPY 29,000 per month per person above the requirement (JPY 23,000 for the portion beyond 120 person-months a year).
• Employers with 100 or fewer regular workers that employ more disabled people than a set level (the larger of 4% of their workforce or 72 person-months a year) receive a reward of JPY 21,000 per month per person above that level.

The levy also funds various grants for employers, such as support for workplace facilities and job coaches.

Special Subsidiary Companies (Tokurei Kogaisha)

One of Japan's most distinctive features is the Special Subsidiary Company (tokurei kogaisha): a subsidiary that makes special provision for employing persons with disabilities and whose disabled employees can be counted toward the parent company's employment rate.

Requirements for recognition (subsidiary):

• At least 5 employees with disabilities, making up at least 20% of employees
• At least 30% of the disabled employees have severe physical disabilities, intellectual disabilities or mental disabilities
• Special arrangements for disabled employees, such as improved facilities and equipment and dedicated instructors
• The parent company must control the subsidiary's decision-making body and have close personnel ties with it

Scale: As of 1 June 2025, 631 companies were recognised as Special Subsidiaries (17 more than a year earlier), employing 53,710.5 persons with disabilities (as counted under the quota rules).

Advantages:

• Allows concentrated investment in accessible facilities, trained supervisors and adapted work processes
• Provides a structured environment for workers who need more support than a mainstream workplace can offer
• Counts toward the parent company's quota, providing a compliance pathway

Concerns:

• Separate subsidiaries can reduce pressure on parent companies to make their main operations inclusive
• Career progression inside small, specialised subsidiaries may be limited
• The model may channel disabled workers away from mainstream employment

Employment Support

JEED runs Local Vocational Centers for Persons with Disabilities in all 47 prefectures. Working closely with public employment offices (Hello Work), they provide vocational evaluation and guidance, work preparation support, job coach support and services for employers, such as advice on employment management and help for employees returning from sick leave.

Where Japan Stands

In June 2025, private employers covered by the quota employed 704,610 persons with disabilities (as counted under the quota rules), an actual employment rate of 2.41% — a record, but still below the statutory rate. Only 46.0% of covered companies met the rate.

South Korea

The Quota System

South Korea's Act on the Employment Promotion and Vocational Rehabilitation of Persons with Disabilities requires the state, local governments and employers with an average of 50 or more regular workers to employ persons with disabilities at a set rate.

Mandatory employment rates (2024–2026):

South Korea's private-sector rate of 3.1% is higher than Japan's, though lower than Germany's 5%.

Disability Registration

Disability status is established through registration under the Welfare of Persons with Disabilities Act. The old system of disability grades was abolished on 1 July 2019; employment programmes now distinguish between severe and non-severe (mild) disability, and KEAD can issue a certificate confirming severe disability where needed.

The Levy and Incentive System

Administered by KEAD (Korea Employment Agency for Persons with Disabilities), the system works as follows:

Levy:

• Only employers with an average of 100 or more regular workers that fall short of the quota pay a levy (employers with 50–99 workers have the employment obligation but no levy).
• The levy is the number of missing workers multiplied by a monthly base amount that rises the further an employer falls short. For 2026: KRW 1,295,000 per missing worker if the employer meets at least three-quarters of its obligation, rising to KRW 1,372,700, KRW 1,554,000 and KRW 1,813,000 for lower levels of compliance.
• Employers who employ no disabled workers pay the monthly minimum wage per missing worker: KRW 2,156,880 in 2026.

Employment incentives:

• Employers who exceed the quota receive a monthly employment incentive per disabled worker above the threshold: KRW 350,000 (men) or KRW 500,000 (women) with mild disabilities, and KRW 700,000 (men) or KRW 900,000 (women) with severe disabilities, capped at 60% of the worker's monthly wage.

KEAD: Korea Employment Agency for Persons with Disabilities

KEAD is the central agency for disability employment. Its services include:

For Employers:

• Disability employment consulting
• Levy administration and incentive payments
• Workplace disability awareness training
• Loans and grants for facilities and equipment

For Job Seekers and Workers:

• Vocational ability assessment
• Supported employment for people with severe disabilities
• Assistive technology support
• Work assistant (personal support worker) programmes
• Vocational training through KEAD's vocational skills development institutes, digital training centres and training centres for people with developmental disabilities

Standard Workplaces and Subsidiary-Type Standard Workplaces

Standard Workplaces for Persons with Disabilities (jangaein pyojun saeopjang) are workplaces certified by KEAD that employ at least 10 disabled workers making up at least 30% of the workforce (with a minimum share of workers with severe disabilities), provide accessible facilities and pay at least the minimum wage. Certified workplaces can receive KEAD support for facilities and equipment.

Under the subsidiary-type standard workplace scheme, an employer that controls more than half of a standard workplace (or several employers investing jointly) can count the disabled workers employed there toward its own quota — South Korea's closest equivalent to Japan's Special Subsidiary Companies.

Comparison: Japan, South Korea, and European Systems

Key Observations

1. European quotas are higher, but Japan has been catching up, raising its private-sector rate four times since 2018.
2. Levy design differs: South Korea's levy rises steeply with the size of the shortfall and equals the minimum wage for employers with no disabled workers, while Japan uses a flat JPY 50,000 per missing person.
3. Subsidiary models are a trade-off: Japan's Special Subsidiaries and South Korea's subsidiary-type standard workplaces raise employment numbers but face the same tension between supported employment and separation from mainstream workplaces.
4. Mental health inclusion is recent in Japan: persons with mental disabilities have only been part of the employment obligation since April 2018.

Lessons for International Employers

Companies operating across Asia and Europe should note:

• Quota systems vary significantly in rate, threshold, and counting methodology. A multinational must track obligations separately in each jurisdiction.
• Disability definitions differ: what qualifies as a recognised disability in Japan may differ from South Korea, Germany, or France. Workers may need separate recognition in each country.
• Subsidiary models can be a structured route: both Japan and South Korea let parent companies count disabled employees of qualifying subsidiaries, which multinationals may consider for their Asia-Pacific operations.
• Compliance is just the floor: meeting the quota avoids levies but does not guarantee an inclusive workplace. Best practice requires going beyond numerical compliance to genuine inclusion.

Resources

• Japan — JEED (English): jeed.go.jp/english
• Japan — JEED levy and grant system: jeed.go.jp
• Japan — MHLW 2025 disability employment survey results: mhlw.go.jp
• South Korea — KEAD employment obligation: kead.or.kr
• South Korea — KEAD levy: kead.or.kr