The Payment of Japanese Employees' Pension Guideline Note-Company Formation_Trademark Registration_Tax Service - Hong Kong CPA

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The Payment of Japanese Employees' Pension Guideline Note

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The Payment of Japanese Employees' Pension Guideline Note

The year 2004 was a very important year for the Japanese public pension system. The Ministry of Health, Labour and Welfare released a calculation table in 2002, which indicated that if the economic downturn continued without a reversal in the problems of childlessness and ageing population in Japan, the premium rate of the public pension system would be doubled in 30 years, and it was expected to reach 23.1% in 2030, putting an enormous burden on the citizens and causing a serious damage to the country's economy. Therefore, the Japanese government carried out a substantial reform to the public pension system in 2004.

Under the 2004 reform of the public pension system, the Japanese government has introduced a macroeconomic floating system and fixed the insurance premium rate, successfully achieved the strategic goal of having the government bear 50% of the national pension. After a series of reforms from 2004 to 2016, the premium rate of Japan's Employees' Pension was fixed at 18.3% in 2017, reducing the speed of the premium rate increase to a significant extent. In addition, the reduction in the amount of subsidy payments for the Employees' Pension was kept within 3%, which was much lower than the 16% shown in the 2002 calculation table.

After 2020, the reform focused on the issues that have not been resolved yet, including the full implementation of the macroeconomic float system, extending the number of years of enrolment in the basic pension, post-65 pension for the working population, etc. It is expected that the target group of the public pension system will be further broadened, and the retirement age will be further postponed.

In this passage, Kaizen will briefly introduce the payment of the Japanese employees' pension, including the premium amount and the settlement method 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.

Japanese Employees' Pension

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.
Due Date of Japanese Employees' Pension Premium

At the moment, the collection of premiums for the Japan Pension Service is carried out by the Japan Pension Service's pension offices located throughout the country. Each month, employers shall withhold the employee's contribution from the salaries and bonuses paid to employees, and shall settle the amount of the employee's contribution and the employer's contribution by the last day of the month following in which the month of salary or bonus is paid, at the appropriate pension office.

If the last day of a month following the payment month falls on a holiday, the due date will be extended to the nearest working day.

Payment Method

As of 2022, the Japan Pension Service accepts three methods of payment for the employees' pension insurance premiums: remittance, paying through a counter, and electronic payment.

(1)	Remittance Employers who prefer to pay the premiums of the employees' pension insurance by remittance should fill in the “Application(changes) for paying insurance premiums by remittance for health insurance and employees' pension insurance” (in Japanese, “健康保険厚生年金保険保険料口座振替納付(変更)申出書”) , and mail it to the pension office or the pension organization office at the place of business, after obtaining the confirmation from the financial institution where the account is maintained. Employers will also be able to submit the application in person at the counter of the pension office.
(2)	Paying Through a Counter After receiving the payment notice (in Japanese, “保険料納入告知書” or “納付書”) from the Japan Pension Service, the employer may bring along the notice to a financial institution and settle the premiums at the corresponding counter. Japan Pension Service will email the payment notice every month the employer will receive the notice approximately on the 20th of each month.
(3)	Paying Through a Counter Participants can pay their insurance premiums through online banking, mobile banking, ATM, phone banking, etc. with the information of the receiving institution number (“00500”, in Japanese, “収納機関番号”), payment code (16 digits, in Japanese, “納付番号”) and confirmation number (6 digits, in Japanese, “確認番号”) from the payment notice. Prior contracts should be signed with the corresponding financial institutions. In principle, electronic payment systems of the Japan Pension Service operate 24 hours a day, 365 days a year, but may be temporarily shut down for reasons such as system maintenance. Employers should take note of the information from Japan Pension Service's official website in order to avoid the situation in which the payment of insurance premiums cannot be made within the stipulated time due to the system maintenance. It is important to note that a certificate of payment (in Japanese, “領収証書”) will not be issued for electronic payments.

Premium Rate

The premium amount of the employees' pension insurance depends on the monthly pre-tax salaries and bonuses paid by the employer to the employees, and is determined by multiplying the standardized monthly amount of remuneration (in Japanese, "標準報酬月額") and the standardized amount of bonus (in Japanese, "標準賞与額") by the insurance premium rate, while the employer and the employee will bear 50% of the premium amount respectively.

As of December 2022, the premium rate of the employees’ pension insurance is 18.3%. The premium rate is set by the Ministry of Health, Labor and Welfare and may change at any time.

(1)

Remuneration

Remuneration shall be deemed to be the “standardized monthly amount of remuneration” if any one of the following is satisfied:

i. The participant receives payment in consideration of his/her efforts to work;

ii. Regular payments paid by an applicable place of business (in Japanese, “適用事業所”) that are substantially used in the daily livelihood of the participant.

Generally speaking, remuneration is cash or other in kind payments made by the applicable place of business, including but not limited to basic salary, performance bonus, incentive bonus, job allowance, position allowance, special work allowance, location allowance, cost of living allowance, day-shift allowance, night-shift allowance, family allowance, leave allowance, travel allowance, lodging allowance, separation allowance ( for work-related separation with family members), overtime payment, consolation payment with continuous nature, etc.

(2)

Standardized Monthly Amount of Remuneration

Under the Employees' Pension System, a participant (employee) receives a monthly salary that will be divided into 32 levels of standardized monthly amount of remuneration within a given range. The standardized monthly amount of remuneration is used for calculating insurance premiums and future pension benefits.

The Minister of Health, Labour and Welfare will determine the table of distribution of the standardized monthly amount of remuneration based on the salary data from April to June of each year and announce the premium amount by range for October of current year to the following September.

The table of employees’ pension insurance premiums (partial) of Reiwa 4 (2022~2023, in Japanese, “令和４年度”) as shown in the table below:

Level	Salary range of participants (YEN)	Standardized Monthly Amount of Remuneration (YEN)
1	92,999 or below	88,000
2	93,000~100,999	98,000
3	101,000~106,999	104,000
4	107,000~113,999	110,000
……	……	……
29	545,000~574,999	560,000
30	575,000~604,999	590,000
31	605,000~634,999	620,000
32	635,000 or above	650,000

(3)

Bonus

Bonus shall be deemed to be the “standardized amount of bonus” if all the following is satisfied:

i. Regardless of the naming, the participant receives as consideration for his/her own efforts to work;

ii. No more than 3 payments per year.

Generally speaking, bonuses are non-periodic, temporary payments in cash or in kind (including goods produced by the company) paid by an applicable place of business, (including goods produced by the company), including but not limited to rewards, bonuses, periodic bonuses, year-end bonuses, summer/winter subsidies, cross-year subsidies, diligence bonuses, peak seasons subsidies, cake subsidies (in Japanese, “餅代”) one-off year-end subsidies etc.

(4)

Standardized Amount of Bonus

The standardized amount of bonus is the balance of the pre-tax bonus amount received by the participant in a month after removing the portion of the bonus amount that is less than 1,000 yen, subject to a maximum of 1,500,000 yen. For example, if A receives two bonuses from the company in a month, 12,345 yen and 66,666 yen respectively, for a total of 79,011 yen, A's standardized amount of bonus for that month is 79,000 yen.

Contribution Exemption

A female employee (participant) who is unable to work due to pregnancy or childbirth during the period from 42 days prior to the date of childbirth (98 days in the case of multiple pregnancies) to 56 days after the birth is exempted from paying the employees’ pension insurance premium for both the employer and employee portion upon application to the pension office by the employee's employer.

In addition, the employer and employee will be exempted from paying pension premiums also for the period of childcare leave to raise a child under the age of 3, when the employer applies to the pension office.

The above period of exemption from pension insurance premiums does not affect the benefits receivable later in life.

Referenced from：

1. e-Gov法令検索 -厚生年金保険法 (昭和二十九年法律第百十五号)

2. Japan Pension Service (日本年金機構)

Disclaimer

All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

If you wish to obtain more information or assistance, please visit the official website of Kaizen CPA Limited at www.kaizencpa.com or contact us through the following and talk to our professionals:
Email: info@kaizencpa.com
Tel: +852 2341 1444
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The Payment of Japanese Employees' Pension Guideline Note

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