In Japan, the employees' pension insurance is a public pension insurance for the employed population. Farmers, sole proprietors, and the unemployed are not eligible to participate in the Employees' Pension Insurance.
The first public pension system for employed individuals in Japan was the mariners insurance for mariners. At that time, Japan was preparing for war supplies, with the purpose of securing the operation of the shipping industry, the Mariners Insurance Act (in Japanese, “船員保險法”) was announced on April 6, 1939, shortly before the Second World War, and for the first time, Japan had a comprehensive insurance policy to provide protection for mariners in terms of medical care, pensions, work-related injuries, and unemployment.
Later, the Japanese government announced the Workers' Pension Insurance Act (in Japanese, “労働者年金保険法”) on March 11, 1941, and implemented it two months later, in order to increase productivity and expand military equipment to deal with the needs of a larger scale war. Compared with the mariners insurance, the workers' pension insurance coverage was expanded to male workers. The successful implementation of the law greatly motivated Japanese workers to produce, resulting in a significant rise in the military power of the old Japanese Empire. While the workers' pension improved the well-being of Japanese workers, it indirectly brought sufferings to people around the world. On December 7 of the same year, the Japanese navy attacked Pearl Harbor, igniting the Pacific War.
The Workers' Pension Insurance Act established the foundation of the current Employees' Pension Insurance Act (in Japanese, “厚生年金保険法”). In 1944, the Laborers' Pension Insurance Act was renamed as the Employees' Pension Insurance Act, and female workers were also included in the scope of insurance coverage. ln 1954, to accelerate the country's post-war reconstruction process, the Japanese government implemented drastic and comprehensive revisions to the Employees' Pension Insurance Act, by adjusting the ratio of the premium to benefits, restructuring the financial model, and raising the age of recipients of the pension, etc. as a first step towards a series of challenging reforms in the future.
Since 1961, Japan's employees' pensions have been continuously developed through trial and error and have become the highly mature employees' pension insurance system that it is today.
In this passage, Kaizen will briefly introduce the Japanese employees' pension system, as well as summarizing the obligations of participation and the benefits based on the information from the Ministry of Health, Labour and Welfare of Japan, for a reference to our current and potential clients. In addition, Kaizen do provide services on
social insurance enrolment and salary calculation in Japan, please contact our consultants for further information
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Outline
The employees' pension is a public pension for employed individuals, the amount of premiums is based on the payroll of employment and is managed by the Japanese government in accordance with the law. Under the current system in Japan, the employees' pension is a Tier 2 pension based on Tier 1(national pension, in Japanese, “国民年金”) of the public pension insurance system. Therefore, participants of the employees' pension insurance are also enrolled in the national pension insurance, and they are the No.2 participant (in Japanese, "第2号被保険者") of the national pension insurance.
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Obligation to Participate
All legal entities with one or more participants and individually owned businesses with five or more regular employees (in Japanese, “常用従業員”) should enroll in the employees' pension insurance for all officers, representatives, regular employees, probationary employees, part-time employees, foreign workers, etc. in the entity.
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Applicable Place of Business
The obligation to participate in the employees' pension insurance depends on whether the business establishment meets the criteria for participation, which is called an “applicable place of business” (in Japanese, “適用事業所”). The term “business places” is not limited to the offices of companies in the general context.
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Compulsory Applicable Place of Business
Compulsory applicable place of business refers to legal entities with one or more participants and individual businesses with five or more regular employees (except those engaged in agriculture, forestry, fisheries, services, etc.). When hiring an employee with obligation to be enrolled in social insurance, he/she is required to enroll in the employees' pension insurance.
Starting from October 2022, individual businesses of “Sigyou” (in Japanese, “士業”) firms will be considered as compulsory applicable place of business. The subjected Sigyou including attorney (in Japanese, “弁護士”), Okinawa attorney, attorney at foreign law (in Japanese, “外国法事務弁護士”), certified public accountant (in Japanese, “公認会計士”), notary (in Japanese, “公証人”), judicial scrivener (in Japanese, “司法書士”), land and buildings investigator (in Japanese, “土地家屋調査士”), certified administrative procedures legal specialist (in Japanese, “行政書士”), marine procedure commission agent (In Japanese, “海事代理士”), certified public tax accountant (in Japanese, “税理士”), public consultant on social and labor insurance (in Japanese, “社会保険労務士”) and patent attorney (in Japanese, “弁理士”).
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Voluntary Applicable Place of Business
When to any business places other than the abovementioned compulsory applicable place of business which over half of the employees agree to become an applicable place of business, it can be registered as a voluntary applicable place of business (in Japanese, “任意適用事業所”).
According to the Japan Pension Service, the Japanese government is encouraging companies which are not a “non-applicable place of business” to become a voluntary applicable place of business by providing guidance and advise. For those non-applicable places of business that do not become a voluntary applicable place of business after guidance, the government will conduct on-site investigations and who do not cooperate with the investigation will be sentenced to a penalty of a maximum imprisonment of 6 months or a maximum fine of 500,000 yen.
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Participant
Participant refers to a person under 70 years of age who has a regular relationship of employment with a company, factory, store, ship, or other applicable business, regardless of his/her nationality or gender. Regardless of whether an employment contract has been signed, a relationship of employment is considered to exist when there is a fact of working in the applicable place of business and receiving wages as remuneration for the work performed. The fact that remuneration is paid during the probationary period is also considered to be an employment relationship.
Participants mainly cover company representatives, officers, regular employees, probationary employees, part-time employees (if applicable), and foreign employees (regardless of nationality). The conditions for part-time employees to participate in the policy are that the required working hours in a week and the required working days in a month do not fall below three-fourths of the working hours of a full-time employee who is engaged in the same job within the same company, which is called the “three-fourths basis”.
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Non-participants
In an applicable place of business, an individual who is not subject as a participant of the employees' pension insurance will become a participant when he/she meets the following conditions.
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Non-participants
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Condition to be
a participant
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Daily Employment
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The first day of when the employment
continuous for over 1 month.
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Employment period within 2 months
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The employment period was 2 months
from the beginning but foresee the employment period will excess 2 months.
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Employed by a business without a
regular working place
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Will never be a participant.
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Employment by seasons (within 4
months)
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If the employment period is foreseen
to excess 4 months.
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Employed by a temporary business
(within 6 months)
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The first date of employment, if the
employment period is foreseen to excess 6 months.
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Benefits Receivable
The types of benefits receivables under the employees' pension insurance are employees’ old-age pension, employees’ disability pension and employees’ pension for surviving family.
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Employees' Old-Age Pension (In Japanese, “老齢厚生年金”)
The participant who is aged 65 and has been an employees’ pension participant for more than 1 month as well as eligible to receive an old-age basic pension will be eligible to receive the employees’ old-age pension. When a participant aged 60 and has been an employees’ pension participant for more than 1 month as well as eligible to receive an old-age basic pension, he/she will be eligible to receive a specially paid employees’ old-age pension in advance which the date of receiving the benefits depends on the date of birth and gender of the participant.
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Employees’ Disability Pension (In Japanese, “障害厚生年金”)
When an employees’ pension participant becomes disabled because of illness or injury during the period of enrollment, he/she will be entitled to an employees’ disability pension according to his/her level of disability from the date of the visit to the hospital with the condition that a certain amount of employees’ pension premiums have been paid.
A participant with a disability grade of 1 to 2 can receive both the disability basic pension (in Japanese, “障害基礎年金”) and the employees’ disability pension, when a disability grade 3 participant is only eligible to the employees’ disability pension. For those with a disability grade is milder than the grade 3, only a one-off disability allowance can be received.
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Employees’ Pension for Surviving Family (In Japanese, “遺族厚生年金”)
After the death of an employees’ pension participant who had paid for a certain amount of premiums for the employees’ pension, the surviving family members who depended on the participant for their livelihood can receive an employees’ pension for surviving family. Priorities for receiving the compensation are, in descending order, spouse or child, parent, grandchild, grandparent.
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Premiums
The premium for the Japanese employees’ pension is calculated by multiplying the participant's standard monthly salary (in Japanese, “標準報酬月額”) by the premium rate. As of December 2022, there are 32 levels of standard monthly salary, with Level 1 being under ¥93,000 per month and Level 32 being over ¥635,000 per month. For the year Reiwa 4 (April 2022 to March 2023), the insurance premium rate is 18.300% and both the employer and employee contribute 9.150%. The premiums are withheld from the employee’s salaries and paid to the pension office by the employer.
KNOWLEDGE
