Japanese payroll taxes and health insurance
These payroll taxes can be broken into four components : pension, health insurance, accident insurance and unemployment insurance.
Of these four items, pension is clearly the largest cost. As stipulated by law, all Japanese must be covered by a pension insurance program. There are two basic types of pension insurance, one administered by the Ministry of Health and Welfare and the other by privately organized pension funds.
For small firms with less than five employees, each employee must take part in the government's national pension for the self-employed. Firms larger than five employees must enroll in the mandatory Employee Insurance program. Very large firms with over 1,000 employees or a group of firms may establish their own pension fund. Such funds usually offer better benefits.
Most firms in Japan have pension plans that consist of two parts - the part mandated by Japanese law and the other, a company plan. The company pension, a multiple of years worked times final monthly salary, is usually paid as a lump sum. Each year the company takes a deduction on income to form a reserve for such pensions, but the actual funds remain within the firm.
As far as the government pension plan goes, employees and businesses must both contribute seven percent of the employee's salary. People can begin to earn pensions after reaching age 65.
Health insurance is mandatory for firms with more than five employees. There are two types of health insurance programs - those managed by the government and those managed by health insurance societies. For firms with less than five employees, each employee must enroll in the government's national health insurance program.
Larger firms with over 300 employees can form a health insurance society, but in reality the government requires at least 1,000 employees before it will permit such a society to be formed. Several firms may join together, but in this case 3,000 employees are required.
Under the government's health insurance plan, the cost to both employees and companies is 4.2% of the employee's base salary, but firms and employees pay only about 0.4% of the employee's bonus.
Unemployment insurance is mandatory, with employers paying 0.9% of an employee's salary, and employees contributing 0.6% of their salary.
Accident insurance is also mandatory, and the employer must pay 0.6% of the employee's monthly salary for this coverage.