Q_iconCan a representative office hire employees? If so, do they qualify for insurance?

A_dark_iconA representative office may hire employees in Japan. In theory, this means the employed individuals would be employed by the foreign company. Also, they are qualified to avail of insurance.

★ Explanation ★

payroll-insuranceRepresentative offices are allowed to hire employees, and have them enrolled under Japan’s insurance system (workers’ accident compensation insurance, unemployment insurance, employees’ health insurance, and welfare pension insurance).

Below we describe further Japan’s insurance system for employed individuals.

  1. Workers’ Accident Compensation Insurance

    If a representative office has more than 1 employee, workers’ accident compensation insurance coverage is mandatory. The representative of a representative office (effectively the employer) isn’t generally covered by this insurance, but special coverage is available for employers through voluntarily application.

    • What is the Workers’ Accident Compensation Insurance

      The workers’ accident compensation insurance pays benefits to workers (or their survivors) if the insured worker suffers injury, illness, or death due to circumstances related to his or her work related duties or commuting.

    • Coverage

      All businesses that employ workers (regardless of their employment classification, meaning this includes full-time employees, contract employees, and part-time workers) must have this insurance.

  2. Employment Insurance

    This type of insurance is sometimes referred to as “unemployment insurance” due to its nature as an unemployment benefit. Similar to the workers’ accident compensation insurance, if the representative office has more than 1 employee, employment insurance coverage is mandatory. This covers all workers who work during prescribed working hours within a week, etc.

    The representative of the representative office (employer) cannot enroll under employment insurance.

    • What is the Employment Insurance

      Employment insurance pays benefits to unemployed workers, workers on child-care leave, and the elderly.

    • Coverage

      All businesses that employ workers (regardless of their employment classification, meaning whether or not they are full-time employees, contract employees, or part-time workers) must have this insurance if they meet both the conditions below:

      • Their prescribed working hours are not less than 20 hours per week; and
      • Employment is expected to continue for 31 days or more
  3. Health Insurance

    While all incorporated companies are mandated to enroll their employees to the health insurance system without exception, representative offices are not considered a “company” in Japan. As such, there is no legal mandate for representative offices to enroll their employees under health insurance coverage.

    If there are less than five regular employees, application for coverage of the employees is voluntary (optional) with the office representative considered the employer; however, the representative is not considered an insured worker.

    Alternatively, there is a voluntary enrollment method where the representative office will be considered as an “organization without juridical personality” for insurance coverage for employees, including the representative.

    For representative offices with more than 5 regular employees and falling under the prescribed kind of business are required to take part in the insurance.

    For insurance applications where the representative is included as an insured worker, since there is currently no legal procedure applicable to representative offices, it is best to consult with the relevant authorities regarding such insurance applications.

    • What is Health Insurance?

      Health insurance is a type of social insurance intended to provide the necessary medical benefits and allowances for should the insured worker or their beneficiaries suffer injury, illness, or death.

    • What is the Employees’ Pension Insurance

      Employees’ pension insurance is a system that provides benefits in the event that the insured worker ages and can no longer work, becomes physically disabled due to illness or injury, or, while being their family’s breadwinner, dies.