1. What is labor insurance annual renewal?
Companies are required to calculate the premiums of the Employment Insurance and the Workers’ Accident Compensation Insurance annually, based on estimated salaries of their employees and make an advance payment. The amounts are calculated for a period from April 1 to March 31 of the next year. When a company becomes applicable to labor insurance, the premium for the fiscal year must be paid when that occurred, and thereafter the company must pay annual amounts based on estimated salaries.
Companies must carry out this procedure every year between the period from June 1 to July 10. The first payment must be done by July 10, except for companies who have the payment automatically deducted from their bank accounts. If automatic bank transfer is set, the first transfer will take place in September.
If the premium based on estimated salaries exceeds 400,000 yen, the company may pay the amount in three installments. The due dates of the three installments are July 10, October 31 and January 31, respectively.
2. Important points in calculating fiscal 2022 labor insurance
This year, the premium rates will be changed in October 2022 according to a revision in the Employment Insurance Program. Companies have to calculate the premiums before and after the revision and combine the amounts to figure out the full-year premium. The official calculation form provided by the Labor Ministry has separate columns for the premiums for the two periods from April to September and from October to March next year.
3. Penalty for unpaid premiums, arrears
Companies that failed to pay the premium before the legal due date will receive a reminder. If they also miss the deadline stated in the reminder, a penalty will be imposed.
According to the law, the rate of the penalty is set at 14.6%, although a measure to reduce the burden is now being taken in light of the extremely low interest rate.
The amount of penalty is calculated according to the premium and the number of days in arrears. Please note the number of days in arrears is counted from the legal due date and not the date stated in the reminder.
4. Work-related injuries while the payment is in arrears (industrial accidents)
In the event an employee suffered a work-related injury, while the company is in arrears, and the worker received compensation from the insurance program, the company must partially shoulder the compensation.
