Japanese Labor Law and Social Welfare at a glance

Japanese labor laws are based on two regulations: The Japanese Civil Code, and The Labor Standards Act. They undergo constant revision and define provisions for employee protections and rights relating to work conditions, discrimination, minimum wage, overtime rates, guaranteed paid time off, and much more. The laws regulating the employment relationship for Japanese nationals also generally apply to foreign nationals working in Japan.

Japan has social security agreements with many countries. Workers insured under pension and social security schemes from one of these countries may be exempt from enrolling in Japan’s pension scheme and paying social security insurance premiums, depending on the scope of the bilateral agreement.

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’ and are determined according to a table provided by the social insurance office. The maximum standard salary for pension is ¥620,000, and ¥1,390,000 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 benefits are paid when the insured person reaches 65, is unemployed, and if they have paid premiums for at least 10 years. The benefit amount depends on the 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 – they will then no longer will be eligible to receive Japanese pension benefits. This only applies to those covered by employees’ pension insurance for at least six months. The application must be sent within two years after leaving Japan.

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 the 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. Employees’ Health insurance premiums are calculated based on the prior year’s standard salary. The percentage depends on the employer’s registered prefecture, typically approximately 10%, with persons ages 40 to 64 subject to an additional % premium. Employer and employee each pay half.

Unemployment insurance

Unemployment insurance provides unemployment allowance, as well as childcare and family care leave allowances. The duration of the allowance depends on age, termination reason, and the period for which one has paid premiums. The allowance is paid monthly, if the person can prove that he is actively searching for a job. The daily unemployment allowance amount is determined by dividing the total compensation of the 6 months prior termination by 180. There is a cap based on one’s age. Company and Board directors are not eligible for this insurance, as they are not under an employment agreement, unless they also function as an employee. 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 periods which exceeds 4 days. Premiums are covered by the employer, the rate depends on the employer’s industry type, and can vary from 0.25% to 8.8%.

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 ensures employees with increased pension benefits upon reaching pensionable age.