Business expansion into Japan allows companies to access a quickly growing market, gain a competitive advantage, and boost revenue. However, companies must attract the best talent and maintain a motivated workforce to succeed in Japan. As a result, many employers are happy to offer greater employee benefits in Japan alongside other kinds of compensation.
Not being aware of your responsibilities as an employer in Japan leads to the high risk of penalties. Because of this, we’ll clarify the rules around employee benefits in Japan and how companies can profit from outsourcing such duties to a global Employer of Record (EOR).
Understanding the Rules for Employee Benefits in Japan
National labor laws demand employers administer certain employee benefits in Japan to comply with local legal requirements. By doing this, they avoid fines and penalties from noncompliance.
All permanent contracted employees in Japan must have access to the mandatory benefits discussed below. This means that contractors or gig workers in general are not eligible for employee benefits.
In addition to mandatory benefits, many companies choose to offer further employee benefits in Japan as perks. This helps companies to attract top talent, but they are left to the discretion of the employer.
Mandatory Employee Benefits in Japan
Mandatory employee benefits in Japan are part of social security which employers must register employees for when they begin.
The following are mandated employee benefits in Japan:
- Retirement benefits
- Medical care benefits
- Unemployment benefits
- Work-Injury and disability benefits
- Maternity and parental benefits
Retirement Benefits in Japan
Individuals in Japan become eligible for retirement or pension benefits at the age of 65 after making at least 10 years of contributions to the Japanese National Pension Fund as part of social insurance.
Employee benefits in Japan that guarantee retirement come from two separate funds.
The national pension scheme (called kokumin nennkin), which all employees between 20 and 59 must be enrolled in by their employer, including foreign workers. Every employee must pay around JPY 16,520 per month into this fund (as of 2023). The fund covers old age pension, disability benefits, and survivors basic pension payments.
The employee pension insurance plan (called kosei nenkin) is for employees who earn over JPY 88,000 per month. Contributions are shared equally between employee and employer, and this is meant to supplement the national pension scheme.
Medical Care Benefits in Japan
Taxes and contributions by employees and employers fund Japan’s National Health Insurance system. The basic healthcare plans for all employees in Japan covers:
- Hospital visits
- Primary care
- Specialty care
- Mental health care
- Prescription drugs
- Hospice care
- Physical therapy
Japan’s health insurance plans typically cover 70% of ordinary medical expenses while the individual pays the other 30%.
Every prefecture has its own calculation for the amount required to be contributed to an employee’s health insurance fund per month. Tokyo’s rate is around 5% of the employee’s monthly salary (with slightly higher percentages for older employees.
Unemployment Benefits in Japan
Japanese employees can receive a subsidized allowance upon losing a job, thanks to unemployment insurance contributions paid each month.
Unemployment insurance payments depend on the worker’s age, the reason for leaving work, and the amount contributed to their unemployment insurance fund. On average, they are equivalent to somewhere between 50-80% of the employee’s pre-termination wage.
Contributions vary according to the worker type and prefecture, but most employees pay around 0.6% of their salary per month.
Work-Injury Benefits in Japan
Japan’s labor insurance covers workers’ accident compensation. Individuals with an illness, injury, or sickness can have this benefit.
These are funded through premiums paid 100% by employers according to insurance premium rate. This rate depends on the age, position, and location of the worker.
Vacation and Leave Policies
Japan has 16 days of public holidays yearly. While companies are not legally obligated to grant workers paid time off for these holidays, they are expected to do so.
In Japan, employees are entitled to annual leave, depending on their employment tenure. This vacation leave becomes available after 6 months of service with a company.
Caregivers receive unpaid leave of up to 93 days per years to care for sick or disabled family members.
Parental Leave in Japan (Maternity and Paternity)
Female employees in Japan are entitled to 6 weeks of paid maternity leave before birth and 8 weeks of paid leave after childbirth (14 weeks total).
Male employees may take up to 8 weeks of leave after the birth of a child. However, despite government attempts to change the situation, many male employees typically do not take all of the leave available to them.
In addition, parents may take childcare leave for the 1st year after the birth of a child. However, employers don’t have to pay this leave. Instead, parents during the period of childcare leave may apply for an allowance of 2/3rds their standard salary from the government.
Common Types of Additional Employee Benefits in Japan
Offering competitive benefits to Japanese employees allows companies to attract the best talent. Job seekers typically consider the overall benefits package when evaluating job opportunities making perks essential. In addition, such benefits promote employee satisfaction and are crucial for retaining talent and maintaining high workplace morale.
Similarly, offering health and wellness benefits can improve your worker’s overall well-being, increasing productivity and reducing time off.
These additional employee benefits in Japan are common and potential applicants may expect them, especially in competitive industries:
Private Healthcare Coverage
In addition to mandatory medical insurance, some Japanese employers offer extra health insurance as part of their employee benefits. This additional insurance may cover specialist services like dental and vision or reduce the amount paid out of pocket for basic care.
Most employers in Japan use performance-based incentives to reward employees based on individual or team performance. Popular performance metrics for determining top performance include meeting sales targets, reaching project milestones, or positive customer feedback.
Performance-based incentives include cash bonuses, gift cards, or other non-monetary rewards. These incentives motivate employees to excel in their roles, align their efforts with your company’s objectives, and highlight exceptional workers.
Companies can organize recognition programs, such as peer-to-peer recognition, spot bonuses, and employee of the month awards, to help acknowledge employees’ contributions and achievements.
Group Insurance Plans
In addition to national insurance schemes funded by social security contributions, some companies like to offer private insurance options. These may be paid either 100% by the employer or shared between employer and employee according to the employment contract.
While a group plan like this may be expensive for new or smaller businesses in Japan, taking these plans through a third-party provider like an Employer of Record (EOR) in Japan can offer a reduced rate due to their company structure in Japan.
A company may choose to offer a subsidy for their employees’ rent or mortgage repayments, with average housing allowances being between JPY 10-20,000.
Commuting or Travel Allowances
Many companies offer to cover part or all of their employees’ commuting costs.
Many companies in Japan will choose to provide an allowance as a living aid if their employee has dependents or if the employee has moved for the role. This benefit amount typically depends on the company and is not part of the law. However, most companies in Japan provide some kind of family allowance.
These are in addition to national family allowances that the government provides to some families in order to encourage families to have children.
Medical and Health Checks
Japanese companies often pay for a basic annual medical examination for all their employees upon starting their contract or on a yearly basis.
It’s important to note that for companies with over 50 employees in Japan, it becomes a requirement to provide an annual stress check as part of a mental health survey.
Innovative Trends in Employee Benefits in Japan
A small but significant number of employers have also begun to incorporate the following further employee benefits in Japan alongside their overall welfare packages:
Flexible working options: Since the COVID-19 pandemic, more Japanese companies are adopting flexible work arrangements. These allow employees to work flexible hours or from home. This setting promotes productivity and work-life balance.
Paid parental leave: Use of the full amount of parental leave has historically been very low in Japan, particularly among men. Some organizations in Japan enhance their parental leave policies by extending the duration of maternity or paternity leave to support employees with growing families.
Worksite wellness facilities: Some Japanese organizations invest in on-site wellness facilities like gyms and yoga studios. These promote employee health and fitness for long-term happiness. Fit employees report higher work satisfaction and are more productive.
In Conclusion: An Analysis of Japan’s Employment Benefits Landscape
Employment benefits in Japan combine mandatory and voluntary benefits to support and protect the workforce. Offering employee benefits in Japan is critical for attracting and retaining skilled professionals.
Traditionally, employee benefits in Japan have been a way to make up for low wages and high work expectations. Increasingly good benefits come with seniority, and employees with experience will expect highly beneficial packages.
As the workplace landscape evolves, some innovative trends and initiatives try to address modern challenges and the changing needs of employees. These trends largely focus around bringing Japanese workplaces into line with international practices. There is also a movement to decrease the potentially harmful aspects of Japan’s traditionally heavy working culture.
As a result, competitive benefits packages will focus on work-life balance and recognizing employee contributions. Being able to offer competitive employee benefits in Japan will depend on your awareness of your responsibilities as an employer. It also helps to know different group insurance providers.