Prime Minister Fumio Kishida stated on October 25 that measures will be implemented starting in October to address the “annual income barrier,” a barrier that prevents part-time employees who are supported by their spouses from working fewer hours in order to avoid paying social insurance premiums. He announced the establishment of a subsidy of up to 500,000 yen per person to be paid to companies that shoulder the insurance premiums of their employees. He also expressed his intention to create an allowance that would prevent a reduction in take-home pay. He stated, “We will decide on a package of measures to strengthen support within the week.”
In addition to the ¥500,000 subsidy, companies provide a “social insurance coverage promotion allowance” to their employees as a measure against the “¥1,060,000 barrier” that prevents a decrease in take-home pay. This allowance is excluded from the calculation of social insurance premiums, thus avoiding the burden of insurance premiums.
The prime minister stated at the Prime Minister’s Office that he will ensure that take-home pay rises proportionately with salary income, even after surpassing the threshold.
As minimum wages will be raised in various regions starting in October, there may be a growing trend to curb working hours with an eye to the annual income barrier. Companies facing labor shortages have been searching for solutions.
Subsidies of up to ¥500,000 per person will be provided to companies that pay promotional allowances or raise wages, with no upper limit on the number of eligible employees.
For companies with less than 100 employees, dependents are removed from the support system if their annual income exceeds 1.3 million yen. The policy will also include a measure to clarify the requirements of the current system, which allows dependents to remain covered for up to two consecutive years in the event of a temporary increase in income due to overtime work or other reasons.
Additionally, the government will implement measures to combat the “1.03 million yen barrier” that hindrances certain companies from providing spousal allowances. The government will create instructional materials that showcase the process for evaluating spousal allowances and urge companies to undertake the review.
There is concern that the measures may create inequity for individuals who already earn above a certain annual income level and pay insurance premiums. The government will review the system during discussions on the revision of the pension system in 2025.
(Kyodo News)
