Today we will discuss about labor insurance in Japan.

1. Labor and Social Insurance in Japan

masashi-araiWhen establishing a business in Japan, employers should note the necessity of enrolling your employees into the Japanese labor and social insurance system. Regardless of nationality or other circumstances, all employees who are eligible (eligibility is determined by criteria outlined later in this article) must be covered under Japanese law.

There are four possible types of insurance to be provided for employees (who meet given criteria) by any business operating in Japan.

These insurance types include:

  1. Workers’ accident compensation insurance
  2. Employment insurance
  3. Health insurance and nursing care
  4. Employees’ pension insurance

This article will deal primarily with two prominent types of insurance: workers’ accident compensation insurance and employment insurance which are included in labor insurance.

Here an outline of these types of insurance will be provided, as well a brief explanation of their application and a loose overview of their benefit and protocol. The information here will provide a basic understanding of two of the four types of insurance to be provided to workers in Japan; more detailed information can be obtained from local offices of the labor and social insurance system.

2. Workers’ Accident compensation insurance

Japan’s mandated workers’ accident compensation insurance is required for all salaried workers.

This type of insurance, provided for all workers (or for their families in the event of death) covers medical care necessary as a result of injury or illness incurred while at the work site or commuting to and from the work site.

Workers are not required to pay a premium for this type of insurance, instead, the business is responsible for payment of premiums. The premium cost for employers varies considerably across different fields. For example, the premium paid by employers in the clerical field is very low, even as minimal as 25%.

Alternatively, premiums paid by employers in the field of construction and other related endeavors may pay very high premiums, the maximum being as high as 8.9%.

Depending on the variety of labor required by a business, the premiums for workers’ accident compensation insurance can prove to be quite costly, however, there is some leeway for small and medium sized business that meet certain criteria and are approved by the Japanese government. All inquiries and notifications regarding this type of insurance should be directed to the business’s local Labor Standards Inspection Office.

3. Unemployment Insurance

payroll-insuranceEmployment insurance, is comparable to what other countries might call “unemployment insurance.” Nearly every worker will receive this type of insurance except directors, although there are some restrictions on whom is eligible to receive the benefits of this type of insurance. Workers are only eligible for employment insurance if they have worked more than twenty hours per week, for a total of more than thirty-one days. As is typical of such insurance, the employee is required to pay a portion of the premium in the form of a certain percentage withheld from each paycheck received. The remainder of the premium is then paid by the worker’s employer.

The most recent revisions to laws regarding Japan’s employment insurance generally require the employer to pay 0.85% of the premium, while the worker pays 5% for a total of 1.35% insurance premium rate for this type of insurance. This particular type of insurance allows workers to receive a predetermined sum of money on a regular schedule following the termination of their employment regardless of the reason for their departure. However, the sum of money and the period for which it is available is determined by the worker’s reason for terminating their employment, their age, and the length of time the worker’s insurance allotted at the beginning of their employment term.

For most purposes, all claims and notifications of starting or ending benefits, as well as any disputes or concerns, should be made at the aforementioned local offices within ten days of any notable change. The importance of working well with the government sponsored labor and social insurance division of the Japanese government cannot be understated, as providing meaningful insurance for employees is not only mandated by law, but will provide a productive and secure work environment.