Labor insurance in Japan consists of:
– Unemployment Insurance
– Accident Compensation Insurance
Directors of companies usually cannot join the Labor Insurance.
Accident Insurance Benefits
Accident Compensation Insurance provides benefits to support employees or their families. The insurance covers when employees suffer injury, sickness or death during their work or commuting to their work place. In practice, it is however quite difficult for employees to get coverage from this insurance.
Calculation of Accident Insurance premium
As of April 2014, current rate of insurance premium ranges depending on the category of business. For services business with no particular danger, the rate is currently 0.3%.
Accident Insurance premium = Salary (rounded to 1,000) X accident insurance rate.
Accident insurance premiums are paid only by the employer.
Unemployment insurance Benefits
Unemployment insurance provides benefits to employees who become unemployed.
Duration of benefits is limited to a period of time usually 3 months to one year and depends on length of employment and age. Unemployment benefits usually do not reach more than 350,000 JPY per month.
Unemployment insurance Calculation
Unemployment Insurance premium is based on salary. Company share and Employee share are calculated as below:
Unemployment Insurance premium (company) = Salary (rounded to 1,000) X unemployment insurance rate (company) Unemployment Insurance premium (employee) = Salary (rounded to 1,000) X unemployment insurance rate (employee)
The unemployment insurance rate varies. Currently for services business the rates are :
Unemployment Insurance rate (company) = 0.7% Unemployment Insurance rate (employee) = 0.4%
In addition, companies have to pay Labor insurance office a general contribution calculated as 0.002% of annual salary.
Payment of Labor Insurance
Labor insurance premium are paid annually in advance before July 10th for the current period from April to March. They are based on the labor insurance premium annual report
The payment is based on:
– a true-up for the previous period April the year before to March this year based on the actual salaries paid,
– an estimation of the premium due for the current period (March to April of next year)
– and the general contribution
For example, Labor insurance premium payment before July 10th 2014 is the sum of:
– a true-up for the period April 1st 2013 to March 31st 2014
– an estimation of the premium due for the period April 1st 2014 to March 31st 2015
– the general contribution