Paying Social Insurance During a Leave of Absence in Japan: No Exemption, and How Collection Works

You remain insured under health insurance and the employees' pension throughout a leave of absence, and contributions keep accruing even when your pay is zero. The exemption that applies to maternity and childcare leave has no equivalent for leave taken through illness or injury.

This article covers how much you will owe each month, the three ways employers handle collection, and what to consider if the burden becomes difficult.

The Key Difference From Maternity and Childcare Leave

A great many people confuse these, so it is worth settling first.

• Maternity and childcare leave: On application, both the employee's and the employer's shares are exempted. The exempted period is still treated as though contributions were paid, so your future pension is unaffected.
• Leave through illness or injury: There is no exemption. Contributions arise every month even on unpaid leave.

If you assume that contributions stop because you are not working, the first invoice comes as a shock.

How Much It Comes To

Contributions are calculated from your standard monthly remuneration. That figure does not fall the moment you go on leave. The amount based on your pre-leave salary continues to apply, so even with your income at zero, contributions arise at the same level as when you were working.

For a rough figure, look at the deductions section of a payslip from before your leave. The combined total for health insurance, long-term care insurance and the employees' pension is what you will owe each month. Employment insurance contributions are calculated as a rate applied to wages, so they do not arise where there are no wages.

Resident Tax Comes On Top

Easily overlooked, but resident tax is charged on the previous year's income. In other words you pay tax assessed on a year when you had income, at a time when you have none. This is the element that weighs most heavily on cash flow in the first year of leave.

Three Ways Employers Collect

With no wages, nothing can be deducted at source, so you and your employer have to agree an alternative.

1. Monthly transfer to the employer: The most common arrangement. Setting up an automatic transfer avoids missed payments.
2. Offsetting against the injury and sickness allowance: Available where the allowance reaches you via your employer. Less administrative work, though the amount landing in your account looks smaller.
3. Settling the total after you return: Immediate outgoings drop, but a large sum is deducted from your salary once you are back. Several months' worth adds up considerably.

Which one applies depends on your employer's practice. Confirm the monthly amount and the method at your leave interview. Going on leave with this left vague means carrying financial uncertainty through your recovery.

If the Burden Becomes Difficult

Where treatment runs long, contributions and resident tax together can consume most of the injury and sickness allowance. If payment becomes difficult, do not simply let it slide; the following counters exist.

• Resident tax: The tax counter at your municipality can discuss instalment arrangements.
• National Pension (after leaving employment): Where income falls below a threshold, exemption and deferral schemes are available through the pension office or your municipality.
• High-cost medical expense benefit: Where medical costs mount, anything above the cap is refunded. Obtaining a certificate of applicable limits in advance keeps the amount you pay at the counter down.

If You Resign

Where your leave period expires and you resign, you will need to choose how to handle health insurance. There are three main options.

1. Voluntary continuation of your existing cover: You stay with your former employer's health insurance. There is a deadline for applying, so you have to act promptly after leaving. Since you now pay the employer's share too, the amount is usually higher than while employed.
2. Switching to National Health Insurance: Contributions are set by the previous year's income, so the year after your income drops is cheaper.
3. Becoming a dependant of a family member: If you meet the income requirement, no contributions are payable. Note that the injury and sickness allowance counts as income, so depending on the amount you may not qualify.

Which works out better depends on your previous year's income and your family situation. Before deciding to resign, ask both your former employer's health insurer and your municipality for figures and compare them.

Common Questions About Contributions During Leave

What happens if I do not pay?

Your employer remits both shares on your behalf, so continued non-payment means the employer will pursue you for it. That said, being unable to pay does not immediately invalidate your insurance card. If payment is difficult, raise it with HR rather than letting arrears build up in silence.

Do contributions fall if my leave runs long?

Standard monthly remuneration is reviewed at set intervals, but how leave is handled varies from case to case. It does not automatically fall, so if your leave looks likely to be extended, check with HR or your health insurer.

Does time on leave affect my pension?

As long as you keep paying contributions, the period counts toward your employees' pension coverage. In this respect the position matches the exemption during maternity and childcare leave: your future pension is not disadvantaged.

Is the injury and sickness allowance taxable?

It is not taxable. Being non-taxable is a separate question from whether social insurance contributions are owed, however. In practice you receive the allowance and pay contributions out of it.

Summary: Confirm the Amount and Method Before You Go

There is no exemption from social insurance contributions during leave, and they arise at the same level as when you were working even if you are unpaid. Resident tax based on the previous year's income lands on top. Confirming the monthly amount and the collection method at your leave interview, then subtracting it from your expected injury and sickness allowance, is what makes it possible to focus on recovery.

This article sets out general principles. Contribution amounts and procedures vary with your health insurer, your municipality and your individual circumstances, and are subject to legislative change. For specific figures ask your HR department or your health insurer, and for questions about the schemes consult a qualified professional such as a certified social insurance and labour consultant.