Salary Structure & Components
Learn about the salary system in Japan in general and about the salary structure including the different components of your salary. With this page, we would like to help people better understand their payslip and how net salary is calculated. However, there are various face value breakdowns and this should be noted because there are differences between companies.
The base salary refers to the amount of the determined payment, it can be an hourly, daily, or monthly wage. The base salary does not include incentives such as overtime, allowances, and different kinds of commissions.
The overtime allowance is paid when working time exceeds the predefined working hours, (depending on the company) or when it exceeds the legal working hours of 8 hours a day, 40 hours a week. The overtime allowance is 25% extra of the hourly wage.
>However, working on holidays and days off may fall into a higher rate, depending on the employer.
Allowance for subsidizing a full or fixed amount of transportation expenses for those who commute using transportation such as trains and buses.
Some companies may pay gasoline to those commuting by car.
Housing is arranged by Human Resocia in company houses, besides the administrative support, a monthly allowance is provided.
We have shared some useful tips on renting an apartment in Japan here: https://gitcareer.resocia.jp/support/apartment/
We have shared some useful tips on renting an apartment in Japan.
In some companies, there are special qualification allowance and executive allowance.
Deductions: taxes, insurances
This is a national medical insurance policy that allows you to visit a medical institution if you are ill or injured. The insurance premium will be halved with the employer. Also, the insurance premium rate will vary depending on the health insurance association you are registered.It is about a 5% deduction, which may slightly change each year.
The core benefit of the employment insurance is that it covers 70% of the included medical expenses, for example when visiting a doctor or going to the hospital.
More on the National Health Insurance system: https://www.mhlw.go.jp/bunya/iryouhoken/iryouhoken01/dl/01_eng.pdf
It is widely recognized as an insurance policy that provides unemployment benefits in the event of unemployment, even though there are various benefits. The insurance premium rate will depend on the company’s profile.
This means if you become unemployed you would be eligible for a monthly unemployment allowance equal to 60–80% of your past year’s salary.
More info at https://www.mhlw.go.jp/english/wp/wp-hw5/dl/23010507e.pdf
This is a system in which the participant themselves and the employer pay half the price and pay a premium to receive pension payments.
However, if you leave Japan before turning 65, you may apply for a lump sum payment.
Human Resocia pays into the 厚生年金 (kouseinenkin) or employee’s pension insurance plan on its employee’s behalf, and in this case, you can apply for the lump-sum payment of your last 3 year’s contribution and receive the rest either from Japan (after reaching the age of retirement) or have it transferred to your home country’s pension system if it has an agreement with Japan.
For more information about the pension system, please check Japan’s Pension System’s official website.
The income tax is imposed on the yearly income, it’s a progressive tax, meaning the tax rate varies depending on the annual income (starts as low as 5%). As an employer, it will be deducted from the salary as a “withholding” tax and will be settled by “year-end adjustment or final tax return”.
More information can be found here: https://www.mof.go.jp/english/tax_policy/tax_system/income/02_7.pdf
The residential tax has to be paid to the prefecture or municipality of residence. The amount is determined by the annual income of the previous year. This means in the first year you are not required to pay residential tax, as you had no previous income in Japan.
The amount is about 10% which you can check on the city’s official website.
Read about further information on taxes applied on foreigners: https://gitcareer.resocia.jp/support/tax-support-en/
Nursing insurance: Over the age of 40 nursing insurance also has to be deducted. With this insurance, the employee can welfare services at 10–20% when you need nursing care.
In some companies, union fees, retirement reserves, etc. are also deducted.
To summarize, a sample payslip’s components would look like as follows:
|+||Monthly gross salary|
|+||Overtime Allowance||actual overtime|
|+||Commuting Allowance||actual expense|
|–||Health Insurance||monthly gross salary|
(rate is subject to change every year)
|–||Employment Insurance||monthly gross salary x 0.3％|
|–||Pension Insurance||monthly gross salary x 9.15％|
|–||Income tax||monthly gross salary x 5-45％|
|–||Residential tax||monthly gross salary x 10％|
|Total net monthly salary|