Since the Lower House election in October 2024, “annual income barriers” have become a hot topic, such as the 1.03 million yen barrier concerning income tax. As a matter of fact, there are many annual income barriers, including those at 1 million yen, 1.03 million yen, 1.06 million yen, 1.3 million yen, 1.5 million yen and 2.01 million yen. Among them, 1.06 million and 1.3 million barriers are related to social insurance, as explained in this article.
[1] 1.06 million yen barrier
This issue is about the annual income level requiring part-time workers at companies with 51 or more workers (employees registered in workers pension insurance program) to enroll in social insurance systems (health insurance, employees’ pension insurance.) In actual operation, “monthly wage of 88,000 yen” is used as the criterion, rather than annual income figures. The monthly wage multiplied by 12, roughly 1.06 million yen, is referred to as the income barrier.
In addition to monthly wages, standard weekly work hours are also examined. This means part-timers who work less than 20 hours a week are not required to enroll in social insurance, even if their monthly wages exceed 88,000 yen.
[2] 1.3 million yen barrier
Workers under age 60 whose annual income is less than 1.3 million yen may become covered by their family members’ social insurance as dependents (in the case of spouses, they become so-called “the category III insured” individuals.)
However, if their annual income exceeds 1.3 million yen, they will be required to enroll in the National Health Insurance System and pay premiums on their own. Workers who were recognized as “the category III insured” will thereby become “the category I insured” and also have to pay premiums under the National Health Insurance program.
[3] Impacts of exceeding the income barriers
By earning beyond these income barriers, workers have to pay social insurance premiums, which will be deducted from their salaries. This often result in a decline in net income. This is a major difference between income barriers relating to social insurance and those relating to income tax.
The chart below shows impacts of 1.06 million yen and 1.3 million yen barriers on salary items and allowances, indicating that there are differences even between the two barriers.
Chart: Items impacted by income barriers (〇:Subjected / ―: Not subjected)
|
|
Base salary, miscellaneous allowances |
Family and commutation allowances, etc. |
Extra wages for overtime and holiday work |
Bonuses, etc. |
Real estate income, business income, dividends, etc. |
|
¥1.06m barrier |
〇 |
― |
― |
― |
― |
|
¥1.3m barrier |
〇 |
〇 |
〇 |
〇 |
〇 |
Requirements for social insurance enrollment will be discussed at the ordinary session of the Diet this year. We will continue to report on latest information.
[Reference]
The Labour Ministry, “Annual income barrier support package”
https://www.mhlw.go.jp/stf/taiou_001_00002.html
*The information is based on laws and regulations as of the date of this article.
