By Ashutosh Agarwal, Manager, Global Benefits, GoGlobal
Japan stands as one of the top-ranked countries globally for its achievements in innovation, education and corporate governance.
These accolades underscore why the country remains a premier destination for international companies pursuing growth opportunities and global hiring. However, navigating the complexities of Japan’s employment benefits system is critical for attracting and retaining top talent in this competitive market.
In this blog post, we explore the mandatory statutory benefits that every employer in Japan must provide to their workforce.
Statutory benefits in Japan
Japan’s Labor Standards Act mandates several key benefits that employers must provide to their employees. These benefits are essential for ensuring the well-being and security of the workforce. Non-compliance can lead to significant penalties for employers.
Pension
The National Pension System forms the cornerstone of Japan’s retirement benefits.
Employees aged 20 to 59 must contribute to this system, with premiums split equally between employers and employees. The contributed amount is contingent on the size and scale of contributions made throughout their careers.
The Japanese pension system also offers a disability pension and a survivor’s pension for family members of deceased employees.
Health Insurance
Japan operates a universal health insurance system where all citizens enjoy healthcare coverage. Premiums are funded through taxes and contributions from employers and employees.
The system covers a wide range of healthcare services, including hospital visits, primary care, mental health care and prescription drugs. Basic plans typically cover 70% of medical expenses, with the remaining 30% paid by the insured.
Labor Insurance
Labor insurance in Japan includes two main components:
- Workers Compensation Insurance:
Nearly all employers in Japan are required to cover their employees with workers compensation insurance. This scheme provides medical care, income indemnity and compensation for work-related injuries. Employers pay 100% of these premiums.
- Unemployment Insurance:
Japanese employees are entitled to a subsidized allowance in case they lose their jobs. Payments depend on age, salary and reason for leaving. Premiums are calculated based on an employee’s wage and are split between employer and employee.
Long-Term Care Insurance
This mandatory benefit provides Japanese residents aged 65 and older with nursing home and at-home services from long-term care attendants. All Japanese employees aged 40 and older contribute to this system based on their income.
Paid Leave Entitlements
According to the Labor Standards Act, employees in Japan are entitled to various types of paid leave:
- Annual Paid Leave:
Employees who have worked continuously for at least six months are entitled to paid vacation days. The total amount of paid leave days is based on their length of service.
- Maternity Leave:
Pregnant employees may take up to six weeks off before childbirth and up to eight weeks after. Compensation allowances are not always statutorily required. However, employees with workplace-funded health insurance generally receive two-thirds of their salary reimbursed.
- Child Care Leave:
Parents of either gender are entitled to take leave until the child turns one year old. However, employers are not required to provide salary compensation during this period.
- Caregiver Leave:
Employees in Japan can take leave to provide nursing care for an ailing family member. This leave is granted up to three times per family member, totaling up to 93 days. However, this total is not to be granted consecutively. Employers are not required to pay employees during this leave.
Statutory Holidays
Employees in Japan are entitled to paid time off during 15 statutory holidays. This allows for adequate rest and relaxation throughout the year.
Key takeaways and points to remember
Understanding and complying with statutory benefits is a non-negotiable for international companies aiming to establish a presence in Japan.
By correctly providing these mandatory benefits, employers not only adhere to legal requirements but also demonstrate their commitment to employee well-being and satisfaction.
It’s important to note that the benefits required by the government of Japan are statutory minimums. Employers may offer more than these mandatory benefits with supplemental benefits packages.
Up next: supplemental benefits in Japan
In the next blog post of this series, we will explore supplemental benefits in Japan. While not legally required, supplemental benefits can offer a competitive edge in attracting and retaining top talent. Stay tuned as we delve into additional perks and strategies for building a successful cross-border workforce in Japan.
Learn more about regulations and hiring in Japan here: Hire in Japan | GoGlobal
Contact us today to discover how the GoGlobal Global Benefits Team can help you design benefits that fuel business expansion and hiring in Japan.