The Act on the Revision of the Pension System passed the 2025 ordinary Diet session. The law includes a number of changes relating to the overall social security system. Among them, this article focuses on areas affecting companies’ practical operations.
[1] General picture of the pension system revision
The revision is roughly comprised of six parts:
Expansion of the scope of companies to be enrolled in the social insurance scheme;
Review of the old-age pension system for elderly workers;
Review of the employees’ pension system for survivors;
Phased increase of the ceiling of standardized monthly remuneration;
Review of the private pension system; and
Future increase in the basic pension’s benefit levels.
In particular, expansion of the scope of companies to be enrolled in the social insurance scheme, review of the retirement pension system and phased increase in the ceiling of standardized remuneration will have a major impact on company operations.
[2] Expansion of the scope of companies to be enrolled in social insurance
This change is comprised of the following items.
a. Abolition of wage requirement
b. Abolition of company size requirement
c. Expansion of the scope of applicable sole proprietors
a. Abolition of wage requirement
Currently, in a company with 51 or more insured employees (enrolled in the Employees’ Pension Program,) part-time workers who satisfy all of the three conditions below are also required to enroll in the social insurance systems (health insurance and employees’ pension programs).
1. Weekly scheduled working hours are 20 hours or more.
2. Regular monthly wage is 88,000 yen or more.
3. The worker is not a student.
Among these conditions, 2 is often called, “the 1.06 million-yen annual income barrier,” which will be abolished in the future. The government will set the timing of abolition within three years from the promulgation (June 20, 2025) after confirming that nationwide minimum wage reaches 1,016 yen.
b. Abolition of company size requirement
Currently, at companies with up to 50 insured employees, part-time workers whose weekly and monthly working hours exceed three-fourths of those of regular employees are enrolled in the social insurance program. Even if this criteria is not met, part-timers who regularly work 20 hours or more per week at companies with more than 50 employees are required to be enrolled.
Over the next ten years, this company size requirement will be revised in phases and will be eventually lifted as in the table below.
|
Company size |
Time of implementation |
|
51 or more employees |
Oct 2024 (already implemented) |
|
36 or more employees |
Oct 2027 |
|
21 or more employees |
Oct 2029 |
|
11 or more employees |
Oct 2032 |
|
10 or more employees |
Oct 2035 |
Since it is expected that some part-timers will reduce their working hours to avoid premium payment, the government will take exceptional measures for a limited duration to reduce workers’ burden.
c. Expansion of the scope of applicable sole proprietors
Incorporated enterprises are subject to social insurance enrollment, regardless of company sizes or types of business. In the case of sole proprietors, entities that regularly employ five or more workers and fall under any of the 17 business categories stipulated by law are required to register in the social insurance system. However, if a company become exempted from social insurance enrollment by September 2029, it will remain subject to exemption for a certain period after that.
[3] Reviewing of the retirement pension system for elderly workers
Retirement pension system for elderly workers is aimed to adjust pension benefits for individuals who receive pension benefits and also earn wages above a certain standard.
The number of elderly people who wish to continue working is increasing, while many companies need to retain older workers to secure manpower. In the meantime, it is common for elderly workers to adjust their working hours to ensure their pension benefits will not be reduced. To address this issue, the government will raise the threshold of base amount to partially halt payment of employees’ pension benefits from current 500,000 yen to 620,000 yen in April 2026. Workers will be able receive the full amount of pension benefit if the total sum of their monthly wage and pension benefit as of 2024 does not exceed 620,000 yen.
[4] Phased increase in the ceiling of standardized remuneration
The ceiling of standardized remuneration, used for the calculation of insurance premiums and pension benefits, will be increased in phases. This is aimed to have high income earners to shoulder pension premiums in accordance with their salaries and receive appropriate pension benefits after retirement.
Since wages are generally on the rise, the ceiling of standardized monthly remuneration will be raised from 650,000 yen to 680,000 yen in September 2027, and thereafter to 710,000 yen in September 2028, and to 750,000 yen in September 2029.
In addition to the changes that will affect companies’ administrative operations, many other changes are included in the revision. For further details, please check the materials from the links below.
[Reference]
The Labor Ministry, “The act on the revision of the pension system has been enacted”
https://www.mhlw.go.jp/stf/seisakunitsuite/bunya/0000147284_00017.html
“Expansion of the scope of companies to be enrolled in the social insurance scheme”
https://www.mhlw.go.jp/stf/seisakunitsuite/bunya/0000147284_00021.html
“Revision in the old-age pension system for elderly workers”
https://www.mhlw.go.jp/stf/seisakunitsuite/bunya/0000147284_00022.html
“Phased increase in the ceiling of standardized remuneration”
https://www.mhlw.go.jp/stf/seisakunitsuite/bunya/0000147284_00024.html
*The information is valid as of the date of the original article.
