Labor insurance in Japan consists of:
Directors of companies usually cannot join the Labor Insurance program.
Accident Insurance Benefits
Accident Compensation Insurance provides benefits to support employees or their families in case of an on-the-job injury, illness, or death. This insurance covers instances when employees suffer injury, sickness, or death during the performance of their job duties or when they are commuting to their workplace. While these programs are designed to help employees in need, it can be quite difficult to obtain accident insurance compensation.
Calculation of Accident Insurance premium
As of April 2017, the current accident insurance rate can vary depending on the category of business. For service businesses that do not perform particularly dangerous work, the rate is lower than it is for dangerous occupations. Accident insurance premiums are calculated in the following manner:
Accident Insurance premium = Salary (rounded to 1,000) X accident insurance rate.
Accident insurance premiums are paid only by the employer.
Unemployment Insurance Benefits
Unemployment Insurance provides benefits to employees who become unemployed.
The duration of these benefits is limited to a period of 3 to 12 months and depends on the length of employment and age. Unemployment benefits usually do not reach more than 350,000 JPY per month.
Unemployment Insurance Calculation
Unemployment Insurance premiums are based on salary. The share paid by the company and that paid by the employee are calculated in the following manner:
Unemployment Insurance premium (company) = Salary (rounded to 1,000) X Unemployment Insurance rate (company)
Unemployment Insurance premium (employee) = Salary (rounded to 1,000) X Unemployment Insurance rate (employee)
The Unemployment Insurance rate varies, so be sure to consult with an expert to ensure you are making these calculations correctly.
In addition, companies are required to pay the Labor Insurance Office a general contribution calculated as 0.002% of annual salary.
Labor insurance premiums are paid in advance every year before July 10th for the current period from April to March. They are based on the labor insurance premium annual report.
This payment is based on:
Every company operating in Japan that has employees is required to abide by the laws regarding labor insurance. Knowing the correct rates to be paid and how to properly deduct them from employee salaries can be a complex topic, and if you are not familiar with the Japanese labor insurance system, it can be a daunting task. Get it wrong, and you could run afoul of the Japanese tax authorities.
If you need advice or other services for a business venture in Japan, JMC is the consulting firm to help you. Our team has spent combined decades teaching foreign companies everything they need to know to properly collect labor insurance tax in Japan. Don’t take a chance on trying to set up your payroll system alone; consult with the experts at JMC. In addition to giving you the right advice about the Japanese tax system, our consultants can also provide ongoing services like payroll, accounting, office setup and so much more. Get in touch with us today to schedule a consultation with our experienced team.
Disclaimer: Disclaimer: This information is provided for informational purposes only. Companies should consult with a licensed social insurance consultant before making any decisions based on the information presented here.