Japan to raise employment insurance premiums

The Japanese government plans to raise employment insurance premiums in fiscal 2022, which starts in April, and is holding discussions to decide the size of increase, it was learned Sunday.

The employment insurance system is running low on funding after a surge in employment adjustment subsidy payments to companies to partially cover leave allowances they pay to furloughed workers amid the novel coronavirus crisis.

The government, therefore, decided to ask for greater premium payments from both employers and employees. It will accelerate talks during work to compile the fiscal 2022 budget toward the end of the year.

The employment insurance system is mostly financed by premiums paid by employers and employees as well as contributions from the government’s general account.

The premium rate for the current fiscal year is set at 0.3% of overall wages for employees and 0.6% for employers. The rates were reduced from the original levels of 0.6% for employees and 0.95% for employers, as the system had more than enough reserve funds.

But the reserves have run out due to the spike in employment adjustment subsidy payments, making a premium hike inevitable.

With both employers and employees concerned over a sharp increase in premium burdens amid the continued lackluster economy, a proposal has been made within the government for raising the premium rate to 0.5% for employees and 0.85% for employers, according to sources.

It is uncertain, however, whether an agreement can be reached to set the new premium rates at these levels. But the Finance Ministry is resisting an increase in state contributions.

The ministry is looking at using a temporary arrangement that allows the employment insurance system to use fund transfers from the general account in times of emergency, a measure introduced in preparation for a funding shortage amid the pandemic. The idea is apparently aimed at keeping state contributions low in normal times.