Have questions? Ask us!

An Employer’s Guide to Social Security Contributions in Japan

Every country has its own social security system, and the employer/employee contributions may include more items than in your home country.  In the US, ‘social security’ is only used to refer to retirement and disability fund contributions, while in other countries like Japan, social security encompasses many types of other insurances as well.

Social Security Contributions in Japan

The social security program in Japan includes five types of insurances: healthcare, nursing care, pension, employment and workmen’s accident compensation (this rate varies depending on the type of business and is only levied on the employer).  Contributions by employee and employer are paid the following month they are due, so there is no contribution due for a new employee on the first month’s salary.

There is a  ‘maximum monthly earnings’ for calculating some categories of insurance, in other words, the contribution calculation will be capped at that amount.  So, the maximum possible aggregate employee contribution is 14.35-15.69%, and for employers, it is 14.685-16.63%.

Subscribe to get more insights like this.

Health Insurance

This insurance is used to pay medical care benefits and allowances.  There is a higher contribution rate used for older employees, who presumably may have a greater need for healthcare. With their insurance card, employees only pay 30% of medical fees at any facility.

These are the rates for Tokyo, and they will vary in other prefectures:

  • Employee Contribution: 4.935%, or 5.83% if 40 years or older

(Maximum monthly earnings: 1,390,000 yen, and 5.73 million for bonuses)

  • Employer Contribution: 4.935%, or 5.83% if 40 years or older

(Maximum monthly earnings: 1,390,000 yen, and 5.73 million for bonuses)

Nursing Care Insurance

For long term care of elderly or disabled employees.

  • The combined employer and employee contribution is 1.57% shared equally, but only payable by employees between ages 40 and 65.

Employment Insurance

For employee support in case of unemployment.

  • Employee Contribution: 0.3%
  • Employer Contribution: 0.6%

Welfare/Pension Insurance

To fund retirement and disability programs.

  • Employee Contribution: 9.15%

(Maximum monthly earnings: 620,000 yen, and 1.5 million for bonuses)

  • Employer Contribution: 9.15%

(Maximum monthly earnings: 620,000 yen and 1.5 million for bonuses)

Client Case: Calculating Social Security

Context:

We had a client with an employee in Japan who had been paid a bonus of almost 2 million yen, and they wanted to know why the social security contribution was different than they expected.

Solution:

We let them know that the wage base for bonuses was higher than for regular income,  which affected the calculation, so the amount up to 1.5 million was included in the calculation for both employee and employer contributions.

Do you need more information about Japan?

Employers who are new to Japan may have other questions such as:

Do social security contributions apply to expats as well as residents?

Does health insurance cover the employee’s spouse and children also?

What is the retirement age when an employee can start collecting their pension?

In the course of foreign employment, our clients run into issues like this frequently and turn to us for solutions about payroll, benefits, and immigration.  We make international employment simple.

 Need more information about employing in a new country? Learn more about:

 

 

Looking to hire an employee in Japan? Get in touch.

Related Articles