Social and Labor Insurance

Social Insurance System in Japan

Overview –Health Insurance System in Japan

Japanese citizens, permanent residents, and any non-Japanese residing in Japan with a visa of three month or longer are required to be enrolled in both the health insurance and pension insurance systems in Japan.
“National Health Insurance” and “Employees’ Health Insurance” are the two major insurance programs that are available in Japan. These programs are offered through the government, however private insurance is also available. Under Employees’ Health Insurance, employees including their dependents can receive 70% coverage of medical treatment fees.
Generally, all incorporated companies are required to take part in Employees’ Health Insurance. The contribution rate to Employees’ Health Insurance is 10.00% of wages, which is equally split between employers and employees.

Overview –Pension system in Japan

The current system consists of three pillars: a) the flat-rate National Pension System, b) the Employee’s Pension Insurance system, and c) voluntary occupational pensions provided by large corporations. Small to middle-size companies typically do not provide voluntary occupational pensions. Thus, employees whose employers do not provide additional benefits can set up voluntary private pension plans.
Generally, all incorporated companies are required to take part in Employee’s Pension Insurance system. The contribution rate to Employee Pension Insurance is 18.30% of wages, which is equally split between employers and employees.

Social and labor insurance system for companies in Japan

All incorporated companies are required to enroll in social and labor insurance program designated for companies in Japan. Generally, “Workers’ Accident Compensation Insurance” and “Unemployment Insurance” are generally referred to as “labor insurance,” while “Health Insurance” and “Employees’ Pension Insurance” are referred to collectively as “social insurance.”
The table below summarized the type of insurances which all of companies must enroll in hiring employees:

# Insurance Type Benefit Insurance Provider Timing of Payment
Social insurance 1) Employee’s Pension Insurance Retirement Pension, Disability Pension, Survivor’s Pension Japan Pension office Once a Month
2) Health Insurance 70% of Medical expense, Sick pay, Maternity Allowance    
  3) LT Nursing Care Insurance Nursing care expenses    
  4) Child Benefits Contribution Contribution to a social welfare system for child benefit    
Labor insurance 5) Workers’ Accident Illness or accident incurred by employees during work Labor Bureau Once a year
6) Unemployment Insurance Financial aid in case of unemployment Employment Security Bureau Once a year
# Insurance Type Employees’ Cost Employers’ Cost Notes
Social insurance 1) Employee’s Pension Insurance X * 9.15% X * 9.15%  
  2) Health Insurance X * 5.00% X * 5.00%  
  3) LT Nursing Care Insurance X * 0.91% X * 0.91% Applied to employees over 40 years old
  4) Child Benefits Contribution X * 0.36%  
Labor insurance 5) Workers’ Accident D * 0.30%
(service industry)
 
  6) Unemployment Insurance D * 0.60% D * 0.95%  

X: Standard salary which is determined by taking the average compensation for previous three months
D: Actual compensation

Employee Pension Insurance

All incorporated companies including GK and KK are subject to Employee Pension Insurance program offered by the Japan Pension office. Salaried employees under 65 years old including directors have to pay a pension insurance premium as a percentage of their standard salary, which is determined by taking an average of their base salary for the previous three months. Part-time employees should be enrolled in the employee pension insurance if their working hours are over 75% of full-time employees. In most cases, a part-time employee who works 30 hours or more per week would need to be enrolled. The premium for pension insurance is 18.30% (as of September 2023), paid 50% by the employer and 50% by the employee.
Pension benefits are comprised of:
a) Retirement Pension: Monthly pension benefits are given to persons over 65, if they have paid pension premiums for at least 25 years.
b) Disability Pension: Benefits are given to persons who are unable to work due to a disability.
c) Survivor’s Pension: Surviving family members can receive benefits that would have been paid to a deceased Retirement Pension-eligible family member.

Health Insurance and Long-Term Nursing Care Insurance

Similar to the Employee Pension Insurance, all incorporated companies including GK and KK are required to enroll in the Health Insurance and Long-Term Nursing Care Insurance offered by the Japan Pension Office. Salaried employees under 75 years old including directors have to pay insurance premiums as a percentage of their standard salary. Part-time employees are covered in the case that their working hours are over 75% of those of full-time employees.

Health Insurance benefits are comprised of:
a) Medical expenses: 70% of medical expenses (including dental) are covered by the insurance, while the insured person must pay the remaining 30%.
b) Excessive medical expenses: High cost medical expenses can be reimbursed to the insured person as “excessive medical expenses.”
c) Health Insurance benefit for dependents: Health insurance benefits are given to an employee’s dependents if they are financially dependent.

Child Benefits Contribution

Employers must pay a Child Benefits Contribution (0.36%) along with the pension premiums and health insurance premiums. These contributions support government programs that provide childcare allowances to people with children.

Workers’ Accident Compensation Insurance

Workers’ Accident Compensation Insurance applies to all general workers. Directors and Representative Directors are not eligible for this insurance as they are not under an employment agreement, but Directors are eligible if they also hold a position with an employee status. The rate depends on the company’s industry type, and varies from 0.25% to 8.8%.
(Service and IT industries: 0.3%, Finance, Insurance and Real Estate industries: 0.25%, and Wholesale/Retail Trade, Restaurant industries :0.3%)
Accident Compensation is paid for any illness, injury, disability or death incurred at work or while commuting.

Unemployment Insurance

All incorporated companies including GK and KK are subject to Unemployment Insurance. Full-time employees excluding Directors qualify for Unemployment Insurance. Part-time employees are covered in the case that they work over 20 hours per week.
Premiums are calculated as a percentage of each worker’s total wage, and is currently 1.55% with the employer paying 0.95%, and the employee paying 0.6%.
Unemployment benefits are given to those unemployed if they work at least one year in total for the past two years before leaving their job. The amount of benefits are determined based on the reason for leaving their job, the time and amounts of premiums paid, and their age, among others.

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