In Japan, the main deductions from an employee’s salary include social insurance contributions, employment insurance, income tax and resident tax. However, not every employee has the same deductions, and the amounts may vary depending on factors such as age, dependents, previous-year income and social insurance status.
Social Insurance Contributions
Full-time employees in Japan are generally covered by health insurance and employees’ pension insurance.
The cost of these programs is generally shared between the employer and employee, with the employee’s portion deducted from salary.
One point that can be confusing for overseas HR teams is that health insurance and employees’ pension insurance contributions are not calculated simply by applying a contribution rate to the employee’s actual salary paid each month.
Instead, they are generally calculated based on a set amount called Standard Monthly Remuneration (標準報酬月額).
As a result, an employee’s salary may change without an immediate change in social insurance contributions. Conversely, social insurance contributions may change in a month when the employee’s salary itself has not changed, due to a revision of the Standard Monthly Remuneration.
Depending on the employee, long-term care insurance contributions may also be deducted. In addition, Japan introduced the new Child and Child-Rearing Support Contribution in 2026.
Some contributions, such as long-term care insurance, depend on the employee’s age, making the overall system somewhat more complex.
Employment Insurance
Employment insurance contributions are also deducted from salary, but they are calculated differently from health insurance and employees’ pension insurance.
Employment insurance is generally calculated by applying the applicable contribution rate to the wages subject to employment insurance for that month.
As a result, if monthly wages change due to overtime pay or other variable payments, the employment insurance contribution will generally change as well.
Although both are insurance-related deductions, there is an important difference:
Health insurance and employees’ pension insurance → do not necessarily change with the employee’s actual salary each month
Employment insurance → generally varies according to the wages paid in that month
In addition, company representatives and directors who do not have the status of an employee are generally not covered by employment insurance, so no employment insurance contribution is deducted from their salary.
Income Tax
Income tax is also withheld from an employee’s salary.
The monthly withholding amount is not calculated simply by applying a single tax rate to the employee’s salary.
It may vary depending on factors such as the employee’s eligible dependents and the amount of social insurance contributions deducted from salary.
Therefore, even when an employee’s gross salary remains the same, a change in their circumstances may result in a different amount of income tax being withheld and, consequently, a different net salary.
Resident Tax
Resident tax works differently from income tax.
It is generally based on the employee’s income from the previous year.
When resident tax is collected through payroll under the special collection system, the employer normally deducts the amount notified by the relevant municipality from the employee’s monthly salary from June through the following May.
For this reason, an employee’s resident tax deduction may change in June even when their current salary has not changed, resulting in a change in net salary.
Employees who have only recently arrived in Japan may not yet have resident tax deducted from their salary.
Other Deductions
Depending on the company, other items may also be deducted from salary.
These may include employee contributions to corporate pension plans, company housing costs, union dues or other employee-paid expenses, depending on the company’s policies and arrangements with its employees.
When reviewing a Japanese payslip, it is therefore useful to distinguish between statutory deductions and deductions arising from the company’s own programs or arrangements.
It is also important to note that, as a general rule, deductions other than those required by law, such as taxes and social insurance contributions, require a written labor-management agreement.
Deductions Do Not Always Change at the Same Time
One important feature of Japanese payroll is that these deductions do not all change according to the same rules or at the same time.
Even when an employee’s gross salary remains unchanged, income tax may change because of a change in the employee’s dependents, resident tax may change in June, or social insurance contributions may change following a revision of the employee’s Standard Monthly Remuneration.
At the same time, deductions such as employment insurance may vary according to the wages actually paid in a particular month.
For overseas HR, finance and payroll teams reviewing Japanese payroll, it is therefore important to understand not only:
“What is being deducted?”
but also:
“Why is this particular amount being deducted?”
We have supported international companies with payroll and related social insurance matters in Japan for more than 15 years.
Based on this experience, we believe that good payroll support means not only calculating payroll accurately, but also clearly explaining how each deduction works and why an amount has changed to overseas HR, finance and payroll teams.
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