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Payroll Social INsurance Japan Social Insurance in Japan

Social insurance in Japan is comprised of Pension, Health, Unemployment and Worker’s Accident Compensation.

Social insurance premiums are deducted from a salaried worker’s monthly salary. Pension and health premiums are calculated as a percentage of the ‘standard salary’. Standard salary is determined  by taking the average compensation for three previous months, and binning that average according to a standard salary table that provides a single amount, called the standard salary, for any salary in that binned range. The standard salary is capped. The maximum standard salary for pension is 620,000 yen, and 1,210,000 yen for health. Unemployment and workers’ accident compensation insurances premiums are calculated as a percentage of the actual compensation instead of the standard salary.

Pension Insurance

All residents contribute to pension insurance. Students, self-employed and unemployed persons of ages 20 to 59 pay a monthly flat-rate premium of 14,980 yen. This premium is revised every April, and is determined by factors such as price fluctuation and real wage index. Salaried workers under the age of 70 pay a percentage of their standard salary. As of September 2017, the premium for salaried workers is 18.30%, paid half by the employer and half by the employee.

Pension benefit is paid once the insured person is 65, unemployed, and if they have paid pension premiums for at least 25 years. The benefit amount depends on one’s total contribution. Assuming that a person was employed from 22 to 65, monthly pension benefit will be approximately 125,000 yen for a person that had an annual compensation of 5 million yen, 185,000 yen if annual compensation was 10 million, and 230,000 for compensation of 15 and 20 million.

Employers pay a child allowance premium (0.23%) along with the pension premium. This premium funds the government program that provides childcare allowance to residents with children.

Health Insurance and Long-term Care Insurance

Health insurance provides medical coverage for all insured residents, and long-term care insurance provides elderly care benefits. It also provides allowances in cases of childbirth, injury, sickness and death. National Health Insurance insures non-salaried residents under the age of 75. Employees’ Health Insurance covers salaried workers under 75 and their dependents under 75. Both non-salaried and salaried persons become insured under Latter-Stage Elderly Healthcare System upon turning 75.

National Health and Employees’ Health insurances cover 70% of medical expenses for persons under 70, and for those that are 70 to 74 with a standard salary of 280,000 yen or more. Otherwise, the government covers 90% of medical expenses for those that are 70 to 74 with a standard salary below 280,000 yen, and for those over 75. If total monthly medical costs of a household exceed a maximum amount, the exceeded amount will be reimbursed. The maximum is determined by the insured person’s compensation and age (Table 1).

Like pension, Employees’ Health insurance premiums are calculated based on standard salary. The percentage depends on the employer’s registered prefecture, and may vary from 9.69% (Niigata, currently the lowest) to 10.47% (Saga, currently the highest); Tokyo’s rate is 9.91%, paid half by employer and half by employee. Persons ages 40 to 64 are subject to an additional 1.65% premium on top of their health premium, with the employer and employee each paying half. National Health insurance premiums are determined by the previous year’s income and number of family members.

Unemployment Insurance

Unemployment insurance provides unemployment allowance, as well as childcare and family care leave allowances.

The length of receiving unemployment allowance depends on age, termination reason, and period which one has paid unemployment insurance premiums (Table 2). The waiting period for the first allowance payment is four weeks if the company has terminated the employee, as opposed to a waiting period of up to three months if the employee quit on his own accord. Allowance is paid monthly from thereon, if the person can prove that he is actively searching for a job.

Unemployment allowance amount is determined by dividing the total compensation of the 6 months prior termination by 180. This formula gives the allowance amount on a per day basis. There is a cap on the allowance amount receivable per day, and this maximum is determined by one’s age. For those ages 29 and below, the cap is 6,440 yen. Ages 30 to 44 is 7,155 yen, ages 45 to 59 is 7,870 yen and 60 to 64 is 6,759 yen.

For example, a person between the ages of 30 and 44 who quit on his own, and was earning 5,000,000 yen a year will receive unemployment allowance for 90 days, and his total allowance amount will be 625,000 yen.

Representative directors are not eligible for this insurance, as they are not under an employment agreement, but are under a service contract. Directors on the Board of Directors are also not eligible, but directors who simultaneously function as an employee (usually a high-ranking employee with a title such as department head) are eligible. The premium rate differs according to the employer’s industry type, and the employer pays a larger percentage than does the employee. If the employer is of a “general” trade, meaning the employer is not of agriculture, forestry, fishery, sake production or construction industries, the employer will pay a 0.60% premium and the employee 0.30%.

Worker’s Accident Compensation Insurance

Worker’s accident compensation insurance provides medical care allowance for work and commuting related injuries, diseases and deaths, as well as compensation allowance for unpaid medical leave period which exceeds 4 days.

The same rule applies for directors as with unemployment insurance, but there are two ways in which representative directors and directors may become eligible. One way is to apply for Special Enrollment, which has several requirements such as industry type and number of employees. The second way is to receive unemployment insurance eligibility as a director who simultaneously functions as an employee. Representative directors are not eligible for unemployment insurance, and therefore not applicable for this second method.

Premiums are covered by the employer. The rate depends on the employer’s industry type, and can vary from 0.3% to 10.3%. Common industry types are finance, insurance and real estate (0.3%), warehousing and security (0.7%), and wholesale/retail trade, restaurant, and lodging (0.4%).

Employers pay an additional 0.002% premium for asbestos insurance, which funds asbestos health damage relief.

Private Health and Pension Fund

While most employers register with public health insurance, employers within the same industry can set up their own private health insurance for their group of companies. Enrollment in private health insurance has more benefits, such as lower premiums and increased allowances during prolonged medical treatment. Employers can also enroll in a pension fund, which insures employees with increased pension benefits upon reaching pensionable age.

Social Insurance Processing

HTM classifies social insurance processing into 36 payroll event types (such as a salary change, dependent change, bonus payment, or a company relocating). Nineteen of these events require documents to be filed with statutory offices.

There are 14 documents filed for health, 24 for pension, 17 for unemployment and worker’s accident compensation, and 3 for labor standards. When private health providers are used, the documents filed with the pension office also have to be filed separately with the private health provider, and these 38 forms are unique to each private provider.

Table 1: Maximum monthly medical costs

Age

Income

Max. Monthly Medical Cost
(Inpatient + outpatient costs)

Outpatient cost

Lowered flat-rate *

69 and under

High income
(standard salary 530,000 yen and over)

150,000
+
(total medical cost – 500,000) x 1%

-

83,400

Standard salary below 530,000 yen and not local tax exempt

80,100
+
(total medical cost – 267,000) x 1%

-

44,400

Low income (local tax exempt)

35,400

-

24,600

70 to 74

High income (standard salary 280,000 yen and over, and either has household income of more than 5.2 million yen, or one-person household of more than 3.83 million yen annual income)

80,100
+
(total medical cost – 267,000) x 1%

44,000

44,400

Standard salary below 280,000 yen and not local tax exempt

44,400

12,000

44,400

Low income


(local tax exempt)

24,600

8,000

24,600

Low income


(Less than annual pension 800,000 yen)

15,000

8,000

15,000

* If a person receives more than 3 reimbursements in the last 12 months, a lowered flat-rate maximum amount applies.

Example: Age 40 earning 400,000 per month with 1 million yen medical expense in one month would pay 87430 yen (9% of medical expense).

Table 2: Unemployment allowance receivable period

Termination Reason

Age

Insured  Period

Less than 1 year

More than 1 less than 5

More than 5 less than 10

More than 10 less than 20

More than 20

Involuntary

29 and under

90 days

90 days

120 days

180 days

-

30 to 34

90 days

90 days

180 days

210 days

240 days

35 to 44

90 days

90 days

180 days

240 days

270 days

45 to 59

90 days

180 days

240 days

270 days

330 days

60 to 64

90 days

150 days

180 days

210 days

240 days

Voluntary

All ages

-

90 days

90 days

120 days

150 days

All premium rates and numerical values on this article is as of September 2012.

Reference Resources: Payroll in Japan Calculator, Social Insurance Documents in Japan



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