Japan Delays Abolishment of Company Size Threshold for Mandatory Enrollment in Employee Pension Program

The Yomiuri Shimbun

21:00 JST, February 3, 2025

The welfare ministry plans to push back the phased abolishment of the company size threshold for which part-time workers are required to enroll in the employee pension program, The Yomiuri Shimbun has learned.

Eliminating the threshold, which is the move is part of reforms designed to expand the number of workers enrolled in the pension program, was initially set for October 2029, but under the plan this will be delayed until October 2035. This will be included in pension reform-related bills set to be submitted during the current Diet session.

According to outlines of the bills presented Wednesday to the Liberal Democratic Party’s Research Commission on the Social Security System, the size of companies required to enroll workers in the pension program will be gradually lowered from the current level of 51 or more employees to 36 or more employees in October 2027, 21 or more employees in October 2029, and 11 or more employees in October 2032. The threshold will be scrapped in October 2035.

A proposal presented by the Health, Labor and Welfare Ministry to the LDP on Jan. 24 suggested axing the company size threshold in October 2029. However, pushback from LDP members concerned about the financial burden the additional premiums would place on small and midsize businesses prompted the abolishment to be deferred and the entire process of expanding the scope of companies covered by the change to be split into four phases.

Other requirements for mandatory enrolment in the employee pension system included a monthly salary of at least ¥88,000 and therefore an annual income of ¥1.06 million or more. The threshold will be abolished within three years of the promulgation of the relevant laws like the ministry’s initial proposal.

After the company size and income requirements have both been eliminated, an employee who works at least 20 hours per week at a business of any size — except for students — will be obligated to enroll in the pension program.

In principle, the employee and the company each pay half of the employee’s pension contributions. To alleviate the reduction in take-home pay due to deduction of premiums, the bill specifies the establishment of exceptions in which the proportion that a company shoulders of these contributions could be increased. The exceptions would be limited to firms with 50 or fewer employees and private businesses with five or more workers.

The ministry wants to use employee pension reserve funds to boost the basic pension program, which is open to all people including those who do not work for a company. A decision on this will be made after 2029, which is aiming to include in the law.

During questions from political party representatives in the House of Councillors on Wednesday, Prime Minister Shigeru Ishiba said he would “make every effort” to finish compilation of the pension reform-related bills and map out a definite plan on the matter.