Four pillars. Nenmatsu Chosei. My Number. Japan payroll, owned.
Japanese payroll is not a configuration exercise. It demands a live four-pillar Shakai Hoken engine with monthly Social Insurance Authority filings, progressive income tax withholding via official NTA tables, employer-run year-end adjustment (Nenmatsu Chosei), My Number reporting for every employee, and prefectural residence tax collected in arrears. Most providers handle two of these correctly. Mercans handles all of them — on a single proprietary stack with no intermediaries.
native payroll
vs nearest peer
since inception
- Income Tax — Top Rate
- 45% above ¥40M/yr
- Reconstruction Surtax
- +2.1% on all income tax through 2037
- Kosei Nenkin EE/ER
- 9.15% each — cap ¥650,000/mo
- Kenkou Hoken EE/ER (Tokyo 2025)
- 4.955% each — cap ¥1,390,000/mo
- Kaigo Hoken EE/ER (age 40–64)
- 0.795% each — nationwide uniform
- Koyo Hoken EE/ER (Apr 2025)
- 0.55% EE · 0.90% ER
- Residence Tax (Jumin-zei)
- ~10% flat on prior-year income
- Pension Cap — Monthly SMR
- ¥650,000/month
- Health Insurance Cap — Monthly SMR
- ¥1,390,000/month
- Bonus Pension Cap
- ¥1,500,000 per bonus payment
- Min. Wage — National Avg (Oct 2025)
- ¥1,121/hr (Tokyo ¥1,226/hr)
- Annual Paid Leave
- 10 days min after 6 months service
- 36 Agreement OT Cap
- 45 hrs/month · 360 hrs/year
- Totalization Agreements
- 24 countries (incl. US, UK, Germany)
Payroll compliance: the details that can’t be missed
Japan’s regulators don’t grade on a curve. The NTA audits Nenmatsu Chosei calculations. The Japan Pension Service tracks standard remuneration grade re-evaluations. The Labour Standards Inspection Office monitors 36 Agreement overtime compliance. My Number violations trigger the Personal Information Protection Commission. None of these failures announce themselves — they accumulate silently until an audit or inspection surfaces them.
Nenmatsu Chosei error creates annual tax shortfall
The employer-run year-end tax adjustment reconciles 12 months of withholding against actual annual liability. Errors in social insurance deductions, dependent deductions, insurance premium deductions, or missing the 2.1% Reconstruction Surtax create a tax shortfall discovered in December, requiring catch-up withholding and potential NTA penalties.
Standard remuneration grade misclassification
Social insurance premiums are based on standard remuneration (Hyojun Hoshu Geppo) grades — not actual salary. Failing to re-evaluate in September (annual Teiki Kenpo) or when pay changes by ¥75,000 or more (irregular revision) results in incorrect filings to the Health Insurance Association and Japan Pension Service, triggering retroactive premium assessments.
My Number non-collection triggers audit risk
Every employee — including foreign nationals and secondees — must provide their 12-digit Individual Number (My Number) for social insurance applications, salary payment records, and employment insurance filings. Failure to collect and correctly report triggers NTA and Social Insurance Authority audit exposure and potential fines under the My Number Act.
36 Agreement overtime cap breach
Overtime exceeding 45 hours/month or 360 hours/year without a special 36 Agreement, or exceeding the absolute cap of 100 hours/month or 720 hours/year under any agreement, constitutes a criminal violation of the Labour Standards Act. Labour Standards Inspection Offices conduct targeted audits and can name employers publicly for violations.
The three types of providers who struggle with Japan
Global Aggregator Platforms
Aggregator platforms operate through a partner network in Japan — they don’t own the entity, don’t directly manage Social Insurance Authority filings, and don’t control the compliance relationship. Nenmatsu Chosei is typically outsourced to local tax accountants and not integrated into the payroll run.
- ×No direct Shakai Hoken filing capability — partner-dependent
- ×Nenmatsu Chosei outsourced to third-party accountants
- ×Standard remuneration re-evaluations manual and untracked
- ×My Number compliance relies on partner procedures
Legacy Domestic Payroll Software
Japan-market payroll software typically requires local payroll staff to operate. Shakai Hoken re-evaluations, Nenmatsu Chosei, and My Number management need full customer administration and are not managed-service scope.
- ×Customer-operated — requires in-house Japan payroll expertise
- ×Irregular standard remuneration revisions require manual customer input
- ×No Nenmatsu Chosei managed service — client responsibility
- ×No HCM connector for Workday, SAP, Oracle without custom integration
Mercans
Fully managed payroll with native Shakai Hoken monthly filings, Gensen Choshu via official NTA tables, employer-run Nenmatsu Chosei, My Number secure collection and reporting, and residence tax collection — all in-platform on one contract.
- ×Native Shakai Hoken filings — all four pillars, direct to Health Insurance Association and Japan Pension Service
- ×Nenmatsu Chosei fully managed — no third-party accountants
- ×My Number Act-compliant isolated vault with access audit trail
- ×Standard remuneration re-evaluation automated — annual and irregular
The only provider that closes every gap
Mercans is the only Japan payroll provider that combines a proprietary payroll technology stack, full-time Japan-resident compliance specialists, direct NTA and Social Insurance Authority relationships, and enterprise-grade data security — simultaneously, on one contract, with no intermediaries.
The only engine built for Japan’s actual payroll architecture
G2N Nova™ natively models all four Shakai Hoken pillars as distinct calculation layers using official standard remuneration grade tables updated each April and September. It applies NTA official withholding tax tables monthly, runs Nenmatsu Chosei fully in-platform, and applies the 2.1% Reconstruction Surtax automatically through 2037. Monthly filings are submitted directly to the Health Insurance Association and Japan Pension Service — no intermediary, no partner.
Japan-resident payroll & compliance specialists — not a shared-service queue
Mercans operates a Japan-resident payroll team fluent in Japanese regulatory requirements, with specialists in Shakai Hoken, Nenmatsu Chosei, My Number compliance, and 36 Agreement monitoring. Named account managers, bilingual support, and embedded Labour Standards Act expertise. When the NTA or Japan Pension Service updates guidance — we apply it before your next payroll run.
APPI & My Number Act compliance — the certification stack Japan demands
Japanese payroll data is governed by the Act on Protection of Personal Information (APPI) and the My Number Act, which imposes strict purpose limitation and security controls for Individual Number data. Mercans holds BCR approval, ISO 27701, SOC 1 Type II, SOC 2 Type II, and ISO 27017/27018. My Number is stored in an isolated, access-controlled vault with full audit trails, compliant with the My Number Act security guidelines issued by the Personal Information Protection Commission.
Where Mercans wins on every Japan-specific capability
Each row is a Japan payroll capability. Each cell shows native coverage as a fill bar — full = native in-platform, half = partial / manual workaround, empty = gap.
Japan Capability Coverage · 10 dimensions
Health + Care + Pension + Employment — SMR grades direct to SI Authority
Annual September Teiki Kenpo + irregular revision on ¥75k change
Employer-run annual tax reconciliation in December payroll
Additional levy on income tax — through December 2037
Individual Number for all employees incl. foreign nationals
Municipality-notified collection Jun Y+1 to May Y+2
24 countries · Certificate of Coverage processing
45 hrs/month cap · 360 hrs/year · alert before breach
Every rate. Every cap. Every obligation.
Japan’s 2025–26 payroll framework operates on exact rates, grade tables, and hard filing deadlines. Mercans builds every figure below into G2N Nova™ and monitors them proactively — including standard remuneration table revisions each April and September, the annual employment insurance rate reset on April 1, and the NTA’s December withholding table update.
Japan · Rate & Compliance Dashboard
Live 2025–26Standard Remuneration (Hyojun Hoshu Geppo) — Grade System
Social insurance premiums are based on standard remuneration grades mapped to salary ranges, not actual monthly pay. There are 50 health insurance grades (¥58,000–¥1,390,000) and 32 pension grades (¥88,000–¥650,000). Grades are re-evaluated annually in September (Teiki Kenpo, based on Apr–Jun average earnings) and irregularly when pay changes by ¥75,000 or more in two consecutive months. Correct grade classification determines all Shakai Hoken premium amounts.
→ Annual September re-evaluation (Teiki Kenpo) · Irregular revision (¥75,000 change trigger)Year-End Adjustment (Nenmatsu Chosei) — Employer Legal Obligation
Employers are legally required to run the year-end adjustment for employees earning under ¥20 million annually and employed through December. The adjustment reconciles monthly Gensen Choshu withholding against actual annual tax liability, applying social insurance deductions, basic deduction (¥580,000 from Dec 2025), dependent deductions, insurance premium deductions, and housing loan credits. The 2.1% Reconstruction Surtax is applied. Over-withheld tax is returned in December; shortfall is collected.
→ Employer-run · December payroll · Legally required for most employeesResidence Tax (Jumin-zei) — Municipality-Notified Collection
Prefectural and municipal residence taxes totalling approximately 10% (6% municipal + 4% prefectural) are assessed on prior-year income and collected by the employer from June of the following year. The employer receives a collection notice from each municipality each June specifying the monthly deduction amount for the 12-month cycle (June Y+1 to May Y+2). Employees resigning mid-cycle require special lump-sum collection handling.
→ ~10% flat · Collected Jun Y+1 to May Y+2 · Municipality-notifiedTotalization Agreements & Secondees — 24 Countries
Japan has totalization agreements with 24 countries (including the US, UK, Germany, France, South Korea, Australia, China, Canada, and Italy — effective April 2024). Secondees may remain in their home country’s social security scheme for up to 5 years with a valid Certificate of Coverage from the home authority. Without a valid certificate, full Shakai Hoken applies from day one. Certificates are time-limited; extensions require advance application.
→ 24 totalization agreements · Certificate of Coverage required · Italy added Apr 2024See your real Japan payroll cost in real time
Switch employment type. Move the slider. Shakai Hoken four-pillar contributions, Gensen Choshu income tax with 2.1% Reconstruction Surtax, and total employer cost — calculated live with 2025–26 rates.
Japan Payroll Cost Calculator · Live
G2N Nova™ engineEight things only Japan payroll experts know to handle
These are the compliance details that don’t appear in standard payroll setup guides — but appear in every NTA audit, Social Insurance Authority inspection, and Labour Standards Office investigation we’ve encountered in Japan over 20 years.
Shakai Hoken Has Four Legally Distinct Pillars
Kenkou Hoken (health), Kaigo Hoken (long-term care, age 40–64 only), Kosei Nenkin (pension), and Koyo Hoken (employment insurance) are four legally separate schemes with different rates, caps, eligibility rules, and filing destinations. Collapsing them into a flat rate or missing a pillar creates retroactive premium liability.
Standard Remuneration Grades — Not Actual Salary
Social insurance premiums are based on standard remuneration (Hyojun Hoshu Geppo) grades — mapped brackets, not actual monthly pay. Grades are re-evaluated annually in September (Teiki Kenpo, based on Apr–Jun earnings average) and irregularly when pay changes by ¥75,000 or more in two consecutive months. Misclassifying a grade or missing a revision filing triggers retroactive premium recalculation.
Nenmatsu Chosei Is an Employer Legal Obligation
The year-end adjustment (Nenmatsu Chosei) is not optional — it is legally required for employees earning under ¥20 million annually who are employed through December. The employer reconciles monthly Gensen Choshu withholding against actual annual tax liability in the December payroll, applying the 2.1% Reconstruction Surtax. Errors create tax shortfalls that attract NTA attention.
My Number Is Mandatory for Every Employee
Every employee — including foreign nationals and secondees — must provide their 12-digit Individual Number (My Number) for social insurance applications, salary payment records (Hoken Shukyu Chosho), and employment insurance filings. The My Number Act imposes strict purpose limitation: collection for unauthorized purposes is a criminal offence. Pre-registration secondees require alternative identification procedures.
Residence Tax Is Collected in Arrears by Municipality Notice
Prefectural and municipal residence taxes (Jumin-zei) totalling approximately 10% (6% municipal + 4% prefectural) are calculated on prior-year income, not current salary. The employer receives collection notices from each municipality each June and deducts the specified amount over 12 monthly instalments through May of the following year. Mid-year resignees require special handling for the uncollected balance.
Bonuses Have Separate Social Insurance Caps
Bonus payments (Shoyo) are subject to Shakai Hoken premiums separately from monthly standard remuneration. The Kosei Nenkin pension premium applies per bonus payment up to ¥1,500,000. The health insurance annual bonus cap is ¥5,730,000 per fiscal year. Bonuses paid more than three times per year are treated as monthly remuneration, not bonuses, for SI purposes.
Totalization Agreements Require Active Certificate Management
Japan has totalization agreements with 24 countries (including the US, UK, Germany, France, South Korea, Australia, and China), allowing secondees to remain in their home country’s social security scheme for up to 5 years. A Certificate of Coverage from the home authority is required — without one, full Shakai Hoken applies from day one. Certificates are time-limited and must be renewed for extended assignments.
36 Agreement Overtime Caps Are Criminal Liability
Overtime without a valid 36 Agreement is illegal from the first hour above the 40-hour week. With a standard 36 Agreement, overtime is capped at 45 hours/month and 360 hours/year. Exceeding absolute caps (100 hours/month, 720 hours/year, or 80 hours/month average over 2–6 months) is a criminal violation punishable with fines up to ¥300,000 or imprisonment. Labour Standards Inspection Offices actively audit.
One workforce. Two entirely different compliance tracks.
Japanese payroll divides into two compliance tracks: regular employees and eligible part-timers subject to full Shakai Hoken enrollment and Gensen Choshu income tax withholding, and expatriates or secondees whose social insurance obligations depend on applicable totalization agreements and Certificate of Coverage status. Mercans runs both tracks on every pay cycle with zero handoffs.
Parallel Compliance Engines
(Seishain & Eligible Pato)
Four-pillar Shakai Hoken from enrollment. Kenkou Hoken 4.955% EE+ER (Tokyo 2025), Kaigo Hoken 0.795% EE+ER (age 40–64), Kosei Nenkin 9.15% EE+ER, Koyo Hoken 0.55% EE + 0.90% ER. All calculated on standard remuneration grades, not actual salary.
Gensen Choshu monthly withholding. NTA official withholding tax tables applied to taxable income (gross salary less social insurance less earned income deduction), adjusted for dependents. 2.1% Reconstruction Surtax applied to calculated tax — through December 2037.
Nenmatsu Chosei in December payroll. Employer-run annual tax reconciliation applies total year deductions — basic deduction, social insurance, dependent, insurance premium, and housing loan credits. Returns or collects the difference. Legally required.
Jumin-zei collected in arrears. Residence tax (~10%) collected by employer from June based on prior-year income, per municipality collection notice. 12 monthly instalments from June Y+1 to May Y+2.
Part-timer eligibility thresholds. Part-timers working ≥20 hours/week and earning ≥¥88,000/month (or at employers with 51+ employees) must be enrolled in health insurance and pension from October 2024. Koyo Hoken applies from 20 hours/week regardless of employer size.
(Inbound & Outbound)
Totalization agreement assessment on day one. Japan has agreements with 24 countries. A Certificate of Coverage from the home country authority allows exemption from Japanese Shakai Hoken for up to 5 years. Without a valid certificate, full four-pillar SI applies from day one — retroactively if discovered late.
My Number for all foreign nationals. Foreign employees resident in Japan receive a My Number at municipal registration. Pre-registration secondees require alternative identification procedures for NTA and SI filings. Failure to collect triggers audit risk.
Hypothetical tax for tax-equalised secondees. For tax-equalised employees, Mercans calculates the hypo-tax deduction representing what the employee would pay in the home country. The employer bears the residual Japanese income tax above the hypo amount.
Split payroll coordination. Where salary is split between home and host country, G2N Nova™ coordinates both shadow and host payrolls, ensuring correct Gensen Choshu withholding on the Japan-sourced component.
Exit settlement & pension lump-sum refund. Nenmatsu Chosei is run at year-end or mid-year departure. Non-Japanese employees leaving Japan permanently may be eligible for a Kosei Nenkin lump-sum withdrawal (Dattai Ichijikin) — eligibility and application coordinated at exit.
Every obligation. Every authority. Mercans owns the calendar.
Japan compliance runs across the National Tax Agency, Japan Pension Service, Hello Work, and Labour Standards Inspection Offices on monthly, annual, and event-triggered cadences. Mercans’ managed payroll absorbs every filing as standard scope — you don’t track deadlines. We do.
Shakai Hoken Premium Remittance
Monthly Shakai Hoken premiums (Kenkou Hoken + Kaigo Hoken + Kosei Nenkin, employer and employee shares combined) remitted to the Japan Pension Service by the end of the month following the payroll month. Late remittance triggers penalty interest.
Gensen Choshu Withholding Tax Remittance
Income tax withheld in the previous month (Gensen Choshu) remitted to the National Tax Agency by the 10th of the following month. Small businesses (10 or fewer employees) may apply for semi-annual remittance (July 10 and January 20). Includes the 2.1% Reconstruction Surtax on all calculated income tax.
Koyo Hoken Employment Insurance Remittance
Employment insurance premiums (0.55% EE + 0.90% ER for general industry, from April 2025) remitted with labour insurance calculations. Employer reports headcount and payroll changes to Hello Work on hire and exit events.
Hoken Shukyu Chosho — Salary Payment Record
Annual salary payment record (Hoken Shukyu Chosho) filed with the NTA by January 31 for each employee, including total compensation, withheld income tax, social insurance, and My Number. Distributed to employees as a withholding tax certificate. The primary NTA audit reconciliation document.
Health Insurance Premium Rate Revision
Tokyo Kyokai Kenpo health insurance premium rates are revised annually effective March 1. The new rate applies from the April payroll (one-month processing lag). Kaigo Hoken (long-term care) nationwide uniform rate also revised effective March 1. All standard remuneration grade premium tables must be updated before April payroll runs.
Teiki Kenpo — Standard Remuneration Annual Re-evaluation
New social insurance standard remuneration grades for all employees take effect from September payroll, based on the average of April to June salary. The employer submits the Standard Remuneration Grade Declaration (Sanpyo) to the Health Insurance Association by July 10. New grades apply from October invoicing cycle.
Labour Insurance Annual Renewal
Annual renewal of Workers’ Accident Insurance (Rousai Hoken) and Employment Insurance (Koyo Hoken) combined as Labour Insurance. Estimated wage declaration submitted by July 10 and final premium adjusted for the prior policy year (April 1 to March 31). Rate changes effective April 1 applied.
Nenmatsu Chosei — Year-End Tax Adjustment
Employer-run annual tax reconciliation of all employees earning under ¥20 million and employed through December. Applies social insurance deductions, basic deduction (¥580,000 from Dec 2025), dependent and insurance premium deductions, housing loan credits, and 2.1% Reconstruction Surtax. Returns over-withheld tax or collects shortfall in December payroll.
Japan is one market.
Mercans covers all of Asia-Pacific on one platform.
From Japan to China, South Korea, Australia, Singapore, and beyond — Mercans delivers native payroll across every major APAC jurisdiction on a single contract, with consolidated multi-country reporting and a single point of contact.
covered
1 contract
consolidation
APAC
Every filing. Every format. Submission-ready.
Mercans generates the exact file types that the NTA, Japan Pension Service, MHLW, Hello Work, and municipality offices expect to receive.
