Social Insurance Payments for the Self Employed

Social Insurance Payments for the Self Employed

In the last couple of weeks we have been entertained by TV news
reports of politicians who haven't paid their Social Insurance
installments, even as they push for a clamping down of ordinary
people who are not paying into the system. In some cases, the
politicians had not paid 1-2 years' worth of contributions, a
situation where a regular member of the public might expect to be
severely penalized.

It goes without saying that a lot of people, including yours truly,
have lost faith in the whole Social Insurance program. Why is it
that politicians think it is OK to ratchet up the contribution
payments made by company employees and companies, by over 10%
in the coming 5 years? All so that retired people, many of whom by
their own admission don't actually need the money (retired people
own more than 70% of the private savings in Japan), can get a fixed
monthly payout... The sooner government moves to a means tested
system, the sooner our taxes can return to sanity...

Anyway, one huge sector of the working population that falls
through the cracks in making Social Insurance contributions is that
of self-employed people. This includes company directors,
professionals, small-business people, contractors, and often, part-
timers. These people probably make up about 25% of the workforce
in Japan. The government is now cracking down on this sector, but
because of the unique nature of Social Insurance - it's a
"responsibility" not a tax - and the lack of stiff penalties
surrounding non-payment, is finding creative ways to force people
to start paying again.

Things I've heard of personally about government pressure to force
the self-employed to pay include the withholding of services at
Ward Offices - someone told me he was questioned by Shibuya Ward
Office when he was trying to transfer his residence - in the end he
agreed to pay to bring himself up to date. Although such pressure
tactics are still in their early stage, my guess is that within a
year, you won't be able to get much done at government offices
without first proving you are paying your way. So now is a good
time to start thinking about "bringing yourself up to date."

The Social Insurance program is broken up into 3-4 payments if you
are an employee: Health (Kenko Hoken), Pension (Kosei Nenkin),
Unemployment (Koyo Hoken), and Nursing Care (Kaigo Hoken). An
employee receiving a salary of JPY500,000 a month can expect to
lose a massive JPY50-60,000 in pension contributions and another
JPY30-40,000 in health contributions - this is not including your
national and ward/prefectural salary taxes - so it all adds up.

It may come as some surprise then, to learn that the cost of Social
Insurance for the self-employed is quite reasonable, and a good
reason why you might consider being a contractor rather than a
full-time employee. The pension payments are fixed at just
JPY13,300 a month - such a big discrepancy from the amount that
an employee pays, that you have to wonder what the government is
thinking. Maybe it's the government's way of helping self-employed
businessmen grow their businesses and eventually hire others, thus
creating a virtuous circle? Or maybe it's just easier to squeeze the
salary man!

Another part of the Social Insurance program is Health payments.
The law clearly says that everyone resident in Japan for more than
one year must contribute to the (Kokumin) Kenko Hoken, self
employed or not, and if you're over 40, then to the Nursing Care
Insurance program also. However, I have heard of self-employed
people signing up for much cheaper foreign-owned insurance firms'
programs and getting the same quality of care for just JPY15-
20,000 a month. Are these insurance programs a valid alternative
to the government-run insurance program? No one seems to be able
to answer for sure. But one thing is for sure, once you're in the
Kokumin Kenko Hoken program, it is very difficult to break out of it
- usually (I've been told), you have to move to another ward or
prefecture to break the chain. Perhaps this is worth investigating,
especially if you want to use English-speaking doctors, most of
whom don't cover your treatments under the national health plan
anyway.

Terrie Lloyd is the founder of DaiJob, Inc. He also writes a weekly
newsletter for entrepreneurs and business people about business
and political opportunities in Japan. You can find the newsletter at
www.terrie.com.
For further contact with Terrie, email him at
terrie.lloyd@daijob.com.