Japan’s government has decided to delay the removal of company size restrictions for mandatory enrollment in the employee pension program. Originally planned for 2029, the change will now happen in 2035. This delay is due to concerns from small and medium-sized businesses about financial burdens. The reform aims to expand pension coverage to more workers by gradually lowering company size requirements in four phases. Additional discussions will take place regarding financial support for businesses and adjustments to pension contributions.
Japan Extends Timeline for Pension Enrollment Reforms
The Japanese government has decided to delay an important change in its employee pension system. Originally, the plan was to remove company size restrictions for mandatory pension enrollment by October 2029. However, due to concerns from small and medium-sized businesses, the deadline has been pushed back to October 2035.
The pension system reform aims to ensure that more workers, especially part-time employees, receive pension benefits. The government believes that expanding pension coverage will help workers in the long run. However, businesses with fewer employees have raised concerns about the additional financial burden of paying pension premiums.
This delay was confirmed in a proposal by Japan’s Health, Labor, and Welfare Ministry. The decision was also influenced by discussions with members of the ruling Liberal Democratic Party (LDP), who wanted more time for businesses to adjust.
Gradual Expansion of Pension Enrollment
The new plan involves a step-by-step expansion. Currently, only companies with 51 or more employees must enroll part-time workers in the pension program. Under the revised plan, the requirement will change in four phases:
October 2027: Companies with 36 or more employees must enroll workers.
October 2029: Companies with 21 or more employees must comply.
October 2032: Companies with 11 or more employees will be included.
October 2035: All businesses, regardless of size, must enroll eligible workers.
This gradual process allows businesses time to prepare for the financial impact of the changes.
Other Conditions for Pension Enrollment
Apart from company size, employees must meet certain conditions to be eligible for mandatory enrollment in the pension system. One key requirement is a minimum monthly salary of ¥88,000 (approximately ¥1.06 million per year). The income requirement is expected to be abolished within three years after the new law is enacted.
Once both the company size and income requirements are removed, any employee working at least 20 hours per week in any business, except students, will have to enroll in the pension program.
Currently, pension contributions are split equally between the employer and the employee. However, to ease the financial burden on small businesses, the government is considering special support measures. One such measure is allowing companies with 50 or fewer employees to bear a smaller share of pension costs.
Concerns from Small and Medium-Sized Businesses
The delay in pension reforms is largely due to concerns from small and medium-sized businesses. These businesses argue that they are already struggling with financial challenges, and the additional pension contributions could make things even harder.
Many business owners worry that hiring part-time workers will become more expensive. Some fear they might have to reduce hiring or cut working hours to manage costs. Given these concerns, the government decided to slow down the reform process and introduce changes gradually.
To further assist businesses, the government may consider using pension reserve funds to support basic pension programs. However, no final decision has been made on this matter, and discussions will continue after 2029.
Government’s Next Steps
The Japanese government is now focused on finalizing pension reform-related bills. During a recent session in the House of Councillors, Prime Minister Shigeru Ishiba stated that he would “make every effort” to complete the pension reform plans and create a clear roadmap for implementation.
The new pension system aims to provide better financial security for workers while balancing the needs of businesses. However, finding a fair solution that supports both employees and employers remains a challenge.
As discussions continue, the government will look into possible financial aid for smaller companies and adjustments in pension contribution policies. More details will be finalized in future legislative sessions.
