Social and Employment Insurance in Japan: A Guide for Foreigners

When you start working full-time at a Japanese company, a number of social insurance programs that aim to provide security and support throughout your career and beyond come into play.

These programs can seem complicated at first, especially if you've never been part of the Japanese workforce. Understanding the basics, however, is essential for both navigating your finances and easily accessing the benefits these systems are meant to provide.

In this overview, we’ll explain the purpose of each one of these insurance programs. We’ll share how they are used, what they cover, and what you can do to claim the benefits. 

The Different Types of Employee Insurance

Before diving into the details of employee-focused social insurance policies, it's worth acknowledging that not everyone who works in Japan enrolls in the same type of health and pension coverage. 

For individuals who are self-employed, work part-time with insufficient hours, are students, or are currently unemployed, there is a different form of framework known as National Health Insurance, or Kokumin Kenko Hoken (国民健康保険). This insurance covers people who aren’t eligible for employer-sponsored health insurance. 

We won’t be covering this type of insurance in this post. To learn more about it, check out our in-depth guide on Japan's Healthcare system.  

Today, we’ll focus on the social insurance that’s generally available through your employer once you sign a full-time contract. This includes social insurance types like:

• Employee health insurance 

• Pension insurance

• Long-term care insurance 

As well as labor insurance types such as:

• Employment insurance

• Workers’ compensation insurance

First, let’s start by explaining what social insurance entails.

The Social Insurance System in Japan (社会保険 – Shakai Hoken)

In Japan, “social insurance” often serves as an umbrella term. In a general sense, it refers to a series of mandatory insurance programs designed to protect workers from various life risks, such as illness or being incapacitated or unable to work due to aging.

While each has different characteristics and details, the common thread between all social insurance is that they're all run by the government or government-related organizations, which ensures standardized benefits and contributions. 

If you're a full-time employee, you will have each of these insurance types as a benefit, with a premium deducted from your salary each month. Before you start getting all up in arms about it, remember that these insurances save you from worrying about things like treatment and medication costs when you fall ill. You’re essentially gaining access to a system that provides a wide range of support throughout your career and life in Japan. 

Let’s discuss each insurance type in more detail, and explain how to enroll and what each type offers. 

Social Health Insurance Japan: Employee Health Insurance (健康保険 – Kenko Hoken)

Employee health insurance plays a pivotal role in Japan's employment landscape, offering a structured approach to healthcare coverage for full-time workers. By being enrolled, employees ensure that a portion of their medical expenses—be it for routine checkups, illnesses, or more involved treatments—will be significantly reduced.

The employee health insurance system essentially prevents sudden, unforeseeable medical costs from placing unneeded strain on employees and their families, which ultimately supports the long-term well-being of Japan’s workforce.

What’s Covered by The Employee Health Insurance

The employee health insurance offered by the Japanese government is quite extensive. The scope of coverage extends beyond basic consultations to include hospital stays, surgical procedures, and prescribed medications.

In fact, in many cases, even dental care and certain preventive measures are also covered, which might be shocking if you’re used to the healthcare system in the U.S. 

The employee’s health insurance covers the health costs of employees under 75 years old, as well as their dependants who are below 75 years of age. So, when you or your dependent visits a hospital, clinic, or dentist, you'll only pay a portion of the total cost which is usually 30%, while the insurance covers about 70% in most cases.

Even though most standardized medical services fall under this umbrella, it's worth noting that some elective or specialized treatments may not be fully covered, which, for the most part, is expected. Still, the range of services included is generally comprehensive enough to include the most common and emergency medical needs. 

Remember to inquire about health checkups, too, since insurance can sometimes cover these as well. As you can see, your health is in good hands in Japan.

Enrollment and Cost Calculation: Who Pays for Shakai Hoken?

Enrolling in employee health insurance consists of simply providing some details to your new employer, who will take care of the registration.

Once you've met the standard eligibility criteria, such as working for the prescribed number of hours (no less than 75% of a full-time employee’s work) or being under a full-time contract, the company initiates your enrollment on your behalf. 

After the administrative steps are complete, you'll receive your health insurance card. From that point onward, you can benefit from reduced medical costs whenever needed. 

As for the cost calculation, contributions are calculated as a percentage of your salary. This means that both you and your employer share the cost. The exact rate varies depending on the region and other factors, but it typically ranges from 9% to 12% of your salary, with half paid by you and half by your employer.

Pension Insurance (厚生年金保険 – Kōsei Nenkin Hoken): Social Insurance Japan For Foreigners

Pension insurance provides financial support for employees after they retire and in cases of disability or bereavement, which you can read more about in our retirement in Japan post. It ensures a stable source of income during old age or in unforeseen circumstances.

What Are The Benefits of The Pension Insurance?

As we mentioned, there’s more than one way to be eligible for the pension insurance:

• Pension due to old age: You’ll start receiving monthly payments upon reaching the designated retirement age, which is typically 65 in Japan.

• Pension due to disability: If you become unable to work due to injury or illness, you’ll start receiving payments due to the job loss incurred by your situation.

• Survivor’s pension: If a person who is or was previously insured under the National Pension Insurance or Employees' Pension Insurance passes away, their loved ones who depended on them for financial support can receive a survivor's pension to help them manage.

Enrollment and Cost Calculation: Social Insurance Japan Calculation

Good news—just like the employee health insurance, you're also enrolled in the pension insurance if you're employed by a company, without having to lift a finger.

However, if you are self-employed or do not work for a company, you'll need to enroll in the national pension system yourself.

Once enrolled, the payment  is a team effort. Your employer covers half, and the other half is deducted from your monthly paycheck. 

The contribution rate is a fixed percentage of your salary and can change over time as government regulations shift. That said, at the time of writing this article, the insurance contribution rate is set at 18.3% of the insured party’s standard monthly salary and standard bonuses, half of which is deducted from your salary while the employer pays the other half.

If you’d like to learn more about retirement, our post on the “Retirement age in Japan” dives deeper into the topic.

Long-Term Care Insurance (介護保険 – Kaigo Hoken) 

Long-term care insurance helps support elderly care services for people aged 65 and older, or those aged between 40 and 64 who have specific health conditions requiring care. Even though we’re exploring it separately, this is actually a part of employee health insurance.

Think of this insurance as a safety net for when daily life tasks become challenging due to age or illness. Basically, this insurance is meant to ensure that people can access essential care services without being financially overwhelmed.

It can provide support if you or a family member needs help with everyday tasks such as bathing, dressing, or moving around. It's also there if you need rehabilitation services after surgery or injury, and it even covers stays in nursing facilities if living at home isn’t an option for you in your condition. 

What Are The Benefits of Long-Term Care Insurance?

As we mentioned, long-term care insurance can take various forms depending on the needs of the person who needs special care, such as:

• Home care services: If your condition prevents you from doing basic house chores, you can get help with daily tasks and personal care at home. This can include assistance with cooking, cleaning, and even personal hygiene, and the insurance will cover 70% of the costs.

• Nursing home facilities: If it’s impossible for you or your dependant to be properly cared for at home, the insurance covers the cost of stays at nursing homes or other care facilities that provide around-the-clock care.

• Rehabilitation services: If you need some help before you can get back to full health, this insurance provides support for recovery after events such as surgery, injury, or illness, helping people regain independence as quickly as possible.

Enrollment and Cost Calculation for Long-Term Care Insurance

Enrollment in long-term care insurance is an automatic process in Japan. 

Here's how it works: For those aged 40-64, enrollment occurs automatically when you turn 40. You're insured through your company's social insurance, and this continues until you change jobs. For those aged 65 and older, long-term care insurance is mandatory by law, regardless of employment status.

So, who’s paying for it? 

Because it’s essentially a part of your employee health insurance, the cost of the long-term care insurance is also paid half by you and half by your employer. As with other premiums, the premiums for this insurance are also paid from your salary, so if you’re working as an employee, you don’t need to worry about it.

That said, if you’re not an employee with a contract and are instead a freelancer or have your own business, you’ll have to handle your premiums on your own, which you can learn more about in our article about freelancing in Japan.

Labor Insurance in Japan, Explained

While the above health, long-term care, and pension insurances are often referred to as social insurance, there’s also a labor insurance system, which covers:

• Workers’ accident compensation insurance 

• Employment insurance 

Together, these insurances aim to support employees during periods of unemployment or in case of accidents and illnesses caused by work-related activities. 

Let’s see what each covers.

Employment Insurance in Japan (Koyo Hoken, 雇用保険)

Employment insurance provides financial assistance if you lose your job or find yourself temporarily unemployed. In a sense, this is actually unemployment insurance, as it covers you when you’re in between jobs.

The eligibility requirements are as follows:

• Full-time employee requirement: The worker must be a full-time employee. This means that if you have a job contract for less than 20 hours per week or have been working for less than 31 days, you don’t qualify for this.

• Working in the last 12 months: Another eligibility condition includes being insured for at least 12 months in the two years before resignation for voluntary cases or at least six months in the year before dismissal. Applicants also must actively job hunt and be ready to start work immediately when an opportunity arises.

So, as a full-time company employee, eligibility is usually not an issue, as employment insurance comes alongside your job contract. 

To claim your benefits, you'll need to apply through a local Hello Work office with a “certificate of employment termination,” which is usually issued by your former employer within two to three weeks of leaving your job.

What’s Covered By Labour Insurance Japan?

The unemployment insurance benefits kick in when the insured worker leaves their job. When this happens, the insurance provides unemployment benefits for a specific period. The amount of the benefit is influenced by factors such as the worker's age, the duration of their insurance coverage, and the reason they left their job.

So, the employee continues to receive monthly payments, similar to how they receive their salary, which helps them with life expenses as they look for another job. 

In addition to these payments, there are also various benefits aimed at promoting job stability, which include subsidies for vocational training and programs that support individuals in developing new skills.

Enrollment and Cost Calculation: Employment Insurance Premium Japan

Once again, you’re automatically enrolled in employment insurance when you start working for a company. So, there's no need to worry about handling the paperwork yourself.

As for the premiums, these are calculated as a percentage of your total wages with a rate of 1.55% (as of April 2023). Once again, you and your employer pay for the premiums partially. More specifically, the employer covers 0.95% while the employee contributes 0.6%. Keep in mind, however, that specific industries may have different rates.

Another factor that can affect your employment insurance or unemployment payments is whether you quit your job or were dismissed involuntarily. Benefits for voluntary resignations have a longer waiting period before they kick in.

Worker’s Compensation Insurance (Rousai Hoken, 労災保険)

Worker's compensation insurance is your safety net for mishaps that can happen at work or while commuting. Whether it's an accident, illness, or worse, this insurance ensures you're not left to deal with financial burdens all by yourself.

If you happen to get injured on the job or while commuting to work, this insurance will step in to cover the medical expenses and even offer lump sum payments for extreme cases such as permanent disability or death. Let’s get more specific.

What’s Covered By Worker’s Compensation Insurance?

The worker’s compensation insurance is designed to aid the employee in three main ways, covering all possible scenarios:

• If an employee gets sick or injured due to their job: Full coverage of medical expenses for treatments related to work accidents or illnesses is possible.

• If the employee loses work due to said illness or injury: The insurance provides wage replacement for the days you weren’t able to work.

• If an employee becomes permanently disabled or dies on the job: The insurance provides a one-time payout for cases of permanent disability or death. 

Enrollment and Cost Calculation

By law, all companies must enroll their employees in worker’s compensation insurance. So, no action is required on your part. That being said, certain groups like corporate officers or family members living together might not be eligible unless special approval is granted.

One great thing about worker’s compensation insurance, and something that sets it apart from the other types of insurance we discussed, is that the employer covers 100% of the cost! That’s one less thing to be deducted from your paycheck and one less premium to learn how to calculate.

Final Word on Social Insurance Japan For Foreigners

Social insurance in Japan is an essential safety net for employees, offering peace of mind in times of need. From unemployment benefits to workplace injury coverage, these programs we've introduced today ensure financial stability and access to necessary resources in times of need.

As you can see, the Japanese insurance system is comprehensive and protects you as a foreigner. By understanding these protections, you can navigate your life and career in Japan with greater confidence and focus on what truly matters.

If you want to know more about being prepared for an emergency, we encourage you to also read our Japanese emergency numbers guide to find out which services to call and how.