Starting Up Your Business in Osaka: Introduction
Social Security System
1. Social Security System in Japan
Employers are required to join the following insurance programs if they hire employees who meet certain conditions:
- Workers’ Accident Compensation Insurance
This insurance provides the prescribed insurance benefits to workers or their family members if workers become injured, ill or disabled, or die due to an accident at work or during commute.
- Employment Insurance
This insurance provides benefits to workers when, for example, they lost their jobs in order to secure workers’ living and employment stability.
- Employees’ Health Insurance (including Long-term Care Insurance)
This is a public health insurance program which provides insurance benefits for illness or injury outside work and the time off work due to such illness or injury, childbirth, death, etc. If employees and dependent family members receive medical treatment at authorized insurance medical institutions, 70% of the medical costs are covered by the insurance.
- Employees’ Pension Insurance
This insurance provides old age pension as well as disability pension and survivors pension to help employees and their families stabilize their living and improve social welfare.
In general, (1) Workers’ Accident Compensation Insurance and (2) Employment Insurance are collectively called “labor insurance”, and (3) Health Insurance and (4) Employees’ Pension Insurance are collectively called “social insurance”.
In Japan, all individuals are required to join health insurance and pension insurance under “universal insurance system”. This system applies to all individuals regardless of the nationality.
2. Overview of Each Program and Premium Rate
|Insurance||Benefits||Applies to||Premium Rate|
|Employer's contribution||Employee's contribution|
|Benefits for work-related death/injury/illness/disability, etc.||All business entities which employ one or more workers.||0.25～8.8%
(Varies by industry)
|Employment Insurance※5||Benefits for unemployed employees on childcare leave, elderly workers, etc.||Applies to all workers employed by a business entity
(including short-time workers who work minimum 20 hours per week.)
(Except for some industries such as construction, etc.)
|General Contribution||Benefits for workers who suffer from health damage by asbestos and their families.||All business entities covered by Workers’ Accident Compensation Insurance.||0.002%||(N/A)|
|Employees' Health Insurance||Benefits for death/injury/illness outside work, childbirth, etc.||All individuals employed by a corporation or business entity (including short-time workers whose normal working hours/days are approx. 3/4 or more of regular employees)||Rate for Japan Health Insurance Association, Osaka branch:
(6.005% for aged 40 or older)
|Rate for Japan Health Insurance Association, Osaka branch:
(6.005% for aged 40 or older)
|Long-Term Care Insurance (applies to employees aged 40 or older)||Benefits for employees/family members who require long-term care, etc.|
|Employees' Pension Insurance||Old age pension,? disability pension and survivors pension.||9.15%||9.15%|
|Child Welfare Contribution||Contribution for child allowance, etc.||All employers covered by Employees’ Pension Insurance||0.36%||(N/A)|
(16.417% for aged 40 or older)
(*2, *3, *4)
(15.455% for aged 40 or older)
- Premiums rate as of April 2020
- Total percentage for employer is estimated assuming Workers's Accident Compensation Insurance is 0.3%.
- For Workers’ Accident Compensation Insurance and Employment Insurance, premiums are generally calculated by multiplying employees’ annual income by the premium rates.
- For Health, Long-term Care, Pension Insurance and Child Welfare Contribution, premiums are calculated by multiplying Monthly Standard Remuneration (determined for each employee based on their monthly salary) by the premium rates.
- Employment Insurance: employees aged 65 or older became eligible workers effective on January 1, 2017. Senior insured aged 65 or older also required to pay employment insurance premium effective on April 1, 2020.
- Short-time workers working at a company with 500 or less employees may be applicable under certain conditions from April, 2017
3. Notification to Authorities
|Insurance||Submission deadline||Submit to|
|Within 10 days from the date following the date of establishment of insurance relationship (the date the first worker is employed)
*Estimated insurance premium must be reported and paid within 50 days from the date following the date of establishment of insurance relationship.
|Local Labor Standards Inspection Office|
|Employment Insurance||Within 10 days from the date following the date of establishment of insurance relationship||Local Public Employment Security Office
|Employees' Health Insurance||Within 5 days from the date following the date of establishment of insurance relationship||Local Pension Office (or proceeding centers located in each prefecture by post) or Health Insurance Society|
|Employees' Pension Insurance||Within 5 days from the date following the date of establishment of insurance relationship||Local Pension Office (or proceeding centers located in each prefecture by post)|
4. Application to Foreign Workers
(1) Labor Insurance
- Worker’s Accident Compensation Insurance
Workers's Accident Compensation Insurance applies to foreign workers as well, regardless of the nationality, even to "illegal residants".
- Employment Insurance
Employment Insurance applie to foregn workers as well regardless of the nationality. Employers are required to report information such as names and resident status of foreign workers to Hello Work upon hiring and termination.
(2) Social Insurance
In Japan, social insurance is mandatory for all foreign employees regardless of the nationality except for:
- Individuals who are paid by Head office outside Japan
- Part-time worker who work short time
- Temporary workers
- Individuals employed by a business entity exempted from social insurance ( e.g. a sole proprietor's office with less than 5 emplayees,etc.)
- Individuals aged 70 or older (75 or older for Health Insurance)
- Individuals who have Certificate of Coverage for International Social Security Agreement
*Individuals who fall under any of (1) through (5) above are required to join National Health Insurance and National Pension Insurance on their own.
＜Lump-Sum Withdrawal Payment FOR Short-Term FOREIGN RESIDENTS＞
If a foreign employee who meets all of the conditions listed below withdrew from National Pension Insurance or Employees’ Pension Insurance and left Japan due to international transfer or employment termination, they can apply for Lump-sum Withdrawal Payment after they left Japan. (It is possible to apply for such payment in Japan on or after March, 2017)
- An individual who does not have Japanese nationality
- An individual who has at least 6 months of coverage under National Pension Insurance or Employees’ Pension Insurance
- An Individual who has canceled registered address in Japan within 2 years
- An individual who has never been entitled to any Japanese public pension
Note for the lump-sum withdrawal payment application:
Qualified period for old-age basic pension was shortened to 10 years from August 2017. You may be qualified for the totalization benefits under Japanese system as well as foreign system if you have qualifying coverage periods under pension systems of countries with which Japan have totalization agreements, subject to each qualification conditions. Please check the social security agreement.
＜INTERNATIONAL Social Security Agreement＞
A foreign employee who is covered by a social security system of a country which signed the International Social Security Agreement with Japan is exempt from the Japanese social security system if certain conditions are met. As of June, 2020, Japan has signed the Agreement with 23 countries, and the Agreement has come into effect in 20 countries. Please note that a Certificate of Coverage for International Social Security Agreement is required in order to qualify for exemption.
|Implemented||Germany, United Kingdom, Republic of Korea, United States, Belgium, France, Canada, Australia, Netherlands, Czech Republic, Spain, Ireland, Brazil, Switzerland, Hungary, India, Luxembourg, Philippines, Slovakia, China|
|Signed (Under preparation for implementation)||Italy, Sweden, Finland|
5. Coverage for Directors of Corporation
(1) Worker’s Accident Compensation Insurance
In principle, Workers’ Accident Compensation Insurance does not apply to directors of a corporation as a director is not considered as an employee.
However, if a director is a “director-employee” or has duties in an employee's capacity, the director may be entitled to receive benefits from Workers’ Accident Compensation Insurance for illness or injury related to such duties.
(2) Employment Insurance
In principle, directors of a corporation are not eligible to join Employment Insurance.
However, a director may be able to join Employment Insurance if they are a “director-employee” or has duties in an employee's capacity, and if their income as an employee is higher than their income as a director.
(3) Social Insurance
Health Insurance and Pension Insurance are mandatory for directors of a corporation.
However, since Health Insurance benefits are limited for the illness or injury outside work, they are not paid for work-related illness or injury suffered by a director of a corporation except for certain cases.
In other words, directors should be aware that they may not be able to receive any benefits or compensation from Health Insurance or Workers’ Accident Compensation Insurance for their illness or injury at work.