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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 based on the employee’s monthly compensation amount and is determined according to a table provided by the social insurance office. The standard salary is capped. The maximum standard salary for pension is 620,000 yen, and 1,390,000 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. 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 10 years. The benefit amount depends on one’s total contribution.

Non-Japanese workers who lived and worked in Japan for less than 10 years may apply to claim a lump sum payback on their national pension when they leave Japan and no longer will be eligible to receive Japanese pension benefits. However this only applies for those who have been covered by employees’ pension insurance for at least six months. The application must be sent within two years after leaving Japan.

Employers pay a child allowance premium 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, raising to 80 or 90% for children under elementary school age or those 75 or over depending on income. 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.

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 9.58% (Niigata, currently the lowest) to 10.73% (Saga, currently the highest); Tokyo’s rate is 9.87%, paid half by employer and half by the employee. Persons ages 40 to 64 are subject to an additional 1.79% 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. Allowance is paid monthly, 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.

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) can be eligible. The premium rate differs according to the employer’s industry type, and the employer pays a larger percentage than does the employee.

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.

As with unemployment insurance, company directors and executives are not eligible for this insurance, however, they 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 0.25% to 8.8%.

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 join or 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.

All premium rates and numerical values on this article are correct as of February 2020.

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



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