Business in Japan - Adesse Co., Ltd. Q&A, Labor/Social insurance in Japan

Q1: When paying salary to the employee, what do I need to take care?

A1: You have to pay after withholding an income tax. The tax amount vary depending on the number of the family dependents and depending on whether he/she receives salary from two (or more) companies. Also, when he/she enters into Labor insurance and /or Social Insurance, the social security tax should be withheld as well.

Q2: When and Where should I pay the income tax?

A2: The withheld income tax for the previous month is paid by the company to the tax office by 10th of the next month. However, companies with less than 10 employees, the payment frequency can be reduced to twice a year (Jan. and Jul.) if it submits a particular form.

Q3: When employing staffs, what should I care ?

A3: In the case of a corporation, you must enter into labor insurance and social insurance even if you have only one employee. There are "Rousai Hoken(industrial injury insurance)" and "Koyou Hoken (employment insurance)" in labor insurance, and in social insurance, there are "Kenkouhoken(employees' health insurance)" and "Kouseinenkin Hoken(employees' pension insurance)".

Q4: What is "Rousai Hoken (Industrial Injury Insurance)"?

A4: When an employee get injured or become sick on the job, the medical expenses are paid by the company. Rousai Hoken is the insurance to cover this kind of financial demands. Insurance premium is borne by the company side. It covers only company's employees (does not cover the officers or directors).

Q5: What is "Koyou Hoken(employment insurance)"?

A5: The insurance covers employees to compensate for thier salaries when losing thier job. It also helps them to find a new job as early as possible.

Q6: What is the "Kenkou Hoken(health insurance)"?

A6: There are 2 types. One is "Seihukannsho Kenkou Hoken(government health insurance)", which is administrated by the goverment. The other is "Kumiai Hoken (cooperative insurance)", which is managed by cooperative style. It covers mainly for medical care cost and usually pays 70% of it on behalf of the insured.

Q7: What is "Kosei Nenkin Hoken(Employees' Pension Insurance)"?

A7: It is a kind of employees' pension sysytem. The purposes of this insurance are to guarantee income in post-retirement years, to guarantee the cost needed if the insured person should become unable to work by a sickness ,or to pay for the family of the insured person in case he/she should die.

Q8: What is "Kaigo Hoken(Care Insurance)"?

A8: It covers for the cost of nursing care service to old persons or disables. The nomal cover rate is 90% of the actual cost. The insurance premium should be paid by any employee aged from 40 to 65.

Q9: What is needed for a company to join labor insurance?

A9:　Firstly, submit documents to the relevant Labor Standards Inspection Office.
The documents needed to be prepared are "Roudou Hoken Kankei Setsuritsu todoke (Labor insurance establishment report)" and "Roudou Hoken Gaisan Hokenryou Shinkokusho(Labor insurance premium calculation form).
　The attachements are "Toukibo Touhon (Certified copy of register)" and "Chintaishaku Keiyakusyo(office lease contract)". In addition, "Roudousha Meibo(workers register)", Shukkinbo(attendance book)","Chingin Daicho(payroll book)" are going to be necessary, so it is better to prepare them at the same time.
　Secondly, submit documents to the relevant public employment security office (called "Hello-Work").
　The necessary documents this time are "Koyou Hoken Tekiyou Jigyosho Setchi Todoke("Unemployment insurance applicable office installation report"), "Koyou Hoken Hi Hokensha Shikaku Shutoku Todoke (the report to show that he/she got the qualification as an insured person of employment insurance)","Koyou Hoken Hi Hokenshashou (Insurance card for employment insurance)". Attachements are "Toukibo Touhon(Certified copy of register)", a copy of "Chintaishaku Keiyakusyo(offcei lease contract)", the documents which have been submitted to Labor Standards Inspection Office, the documents which have been submitted to the tax office and so forth.

Q10: What is "Due Diligence" specifically?

A10: "Due Diligence" is used in various senses, but here I would like to highlight the meaning of "Appraisal at the time of the purchace of the company". In this case, "Due Diligence" means to make an appraisal of the target company, to see if there is no accounting fraud or to measure their assets at fair value.

Q11: How the amount of the industrial injury insurance is calculated?

A11: (a company's estimated total amount of the wage for the next year) x (the premium rate: from 4.5/1000 to 118/1000, depending on the industry). Companies will pay all the premium and cannot charge their employees.

Q12: How the amount of the employment insurance is calculated?

A12: (a company's estimated total amount of the wage for the next year) x (the premium rate: from 19.5/1000 to 22.5/1000, depending on the industry). The premium will be split between Company and employee.

Q13: How the amount of the health insurance premium is calculated?

A13: It is calculated by applying the monthly wage to "Hyojun Houshu Getsugaku(standards of monthly compensation)". The premium differs depending on whether the one should enter into "Kaigo Hoken(care insurance)" or not. The burden of the premium will be split between Company and its employees.

Q14: How the premium of the employee's pension insurance is calculated?

A14: It is calculated by applying monthly wage to "Hyojun Houshu Getsugaku(standards of monthly compensation)". The amount for most people will be calculated by the average monthly wage multiplying with 146.62/1000. The burden of the premium will be split between Company and its employees.

Q15: What is "Nenmatsu Chosei (year-end tax adjustment)"

A15: The income tax of an employees is withheld from their monthly salary. But that is an estimated amount actually, therefore, you need to re-calculate the accurate amount of the tax (calculated from the fixed total yearly wage), and make an additional payment or get a refund. The company must do re-culculation for the employees who work at the end of the year (December 31). In the case where an employee earns the annual salary more than 20,000,000 Yen, retires in the year, is a nonresident, or is a daily-hired worker, the company (=employer) cannot do the year-end tax adjustment.

Q16: What is an annual declaration/renewal of labor insurance?

A16:　The amount for labor insurance will be charged for 1 Apr to 31 Mar as a fiscal year, and the payment have to be made by 20 May. In the fiscal year end, the total yearly amount of the wage will be exactly fixed, and the insurance premium amount which has been actually paid based on the estimation will be balanced. At the same time, you must pay the estimated amount for the next fiscal year. Therefore, it is called annual renewal.

Q17: What is ”Teiji Kettei"(annual revision) of the "Hyojun hoshu getsugaku (standerds of monthly wages)" of social insurance?

A17: The monthly wage of an employee, which is initially set at the hiring, will normally change by promotion or performance bonus etc. Therefore, you should report annually (July) the exact wage amount to the Social Insurance Office and revise the insurance premium level. The report should include the wages from April to June. The new premium will be effective from September to the next August.

Q18: When paying commutation expense, what should I care ?

A18: The actual cost, not the estimation, should be paid. Although this is tax-free, there is an upper limit of 100,000 Yen a month. It will be taxable when exceeding this level.

Q19: Are there any regulation about the working hour and break time?

A19: By Labor Standard Law, an employee is supposed to work up to 8 hours a day and 40hours a week in general. Furthermore, if an employee works more than 6hours continuously, you need to give at least 45 minutes break to him/her.

Q20: Is there any regularion about holiday?

A20: By Labor Standard Law, you have to provide an employee at least 1 holiday in a week.