Published: June 2026 | FY2026 rates effective April 2026

"It's a bit more than 15% of the gross salary" — this is how one r/JapanFinance user summed up the employer's social insurance burden in Japan. They're right, but 15% understates it once you factor in everything.

If you're running a business in Japan and thinking about your first hire, here's what an employee actually costs you — broken down with the current FY2026 rates.

The Components

When you pay an employee a monthly salary, you also pay the following on top of that salary, entirely from your pocket:

Health Insurance (健康保険): 4.925% This is the employer's half of the 9.85% total rate (Tokyo, FY2026). Rates vary by prefecture — Saga is the highest at 5.275%, Niigata the lowest at 4.605%. The rate applies to the employee's "standard monthly remuneration" (標準報酬月額), which is their salary bracketed into one of 50 grades.

Nursing Care Insurance (介護保険): 0.81% Only applies if the employee is aged 40-64. Employer pays half of the 1.62% total rate.

Child Support Levy (子ども・子育て拠出金): 0.36% This is employer-only — employees don't pay anything. Increased to 0.36% in April 2026. It's small but it adds up, and most cost calculators miss it.

Employees' Pension (厚生年金): 9.15% The biggest single cost. 18.30% total rate split equally. This is a flat national rate — no regional variation. Applies to the same standard monthly remuneration base as health insurance.

Employment Insurance (雇用保険): 0.85% Employer pays 0.85%, employee pays 0.50% (general industry, FY2026 — reduced from 0.9% in April 2026). Construction and agriculture have slightly higher rates.

Workers' Accident Insurance (労災保険): 0.25%–0.90%+ Employer-only. Rate depends on your industry: office/service work is 0.25%, retail is 0.30%, construction is 0.90%. Unlike other insurance, this applies to total payroll including overtime, not standard remuneration.

Worked Example

Employee profile: ¥350,000/month salary, age 35, Tokyo, office work, 2 months bonus, ¥15,000/month commuting allowance.

Item Monthly Annual
Base salary ¥350,000 ¥4,200,000
Commuting allowance ¥15,000 ¥180,000
Bonus (2 months) — ¥700,000
Subtotal: Cash to employee ¥365,000 ¥5,080,000
Health Insurance (4.925%) ¥17,238 ¥241,325
Child Support (0.36%) ¥1,260 ¥17,640
Pension (9.15%) ¥32,025 ¥448,350
Employment Insurance (0.85%) ¥3,103 ¥43,180
Workers' Accident (0.25%) ¥913 ¥12,700
Subtotal: Employer insurance ¥54,538 ¥763,195
Total employer cost ¥419,538 ¥5,843,195
Cost above salary +19.9%

That ¥350,000/month employee costs you ¥420,000/month. Over a year, the gap is ¥763,000 in employer-side insurance alone.

→ Calculate with your own numbers

What Most Guides Miss

Bonuses are also subject to social insurance. Health insurance, pension, and employment insurance apply to bonuses at the same rates. A 2-month bonus on a ¥350,000 salary adds another ¥70,000+ in employer insurance costs.

Commuting allowance is included in employment insurance and workers' accident calculations, but excluded from the health insurance and pension base (up to ¥150,000/month).

The rates change every year. Health insurance rates update in March, employment insurance updates in April. Any calculator using last year's rates gives you the wrong number. Ours uses FY2026 rates effective April 2026.

Retirement allowance (退職金) isn't mandatory but is expected. Many Japanese companies accrue 退職金 at roughly one month's salary per year of service. This isn't a legal requirement (unlike social insurance), but employees expect it and it affects your competitiveness in hiring.

When Does It Make Sense to Hire?

A rough rule: if the work would cost you more than ¥420,000/month to outsource to a freelancer, and it's consistent enough to fill 160 hours/month, hiring is cheaper. Below that threshold, contracting is more flexible and often cheaper despite the higher hourly rate.

Also consider: hiring triggers a cascade of compliance obligations. You'll need employment contracts (労働条件通知書), a payroll system, 36協定 if there's any overtime, 就業規則 if you reach 10 employees, and annual 年末調整 processing. Each of these has its own requirements.

→ See all free HR tools for Japan employers

BridgeInvoice helps businesses in Japan generate compliant invoices and manage their billing. Try it free →

General information only, not tax or legal advice. Confirm current rules with the NTA or a qualified professional (税理士 / 社会保険労務士). Created by BridgeInvoice.