If you run a company in Japan, you will join the social insurance system. If you are a business owner and do not join the social insurance system, you will have to join the national health insurance system(国民健康保険＝国保). Then you will have to pay a high insurance premium unnecessarily. So, if you create a company, you will join the social insurance system（社会保険）.
Social insurance and national health insurance are different systems. If you are an employee, you join social insurance. If you are self-employed, you join national health insurance (roughly speaking).
Social insurance (社会保険) includes health insurance(健康保険) and welfare pension insurance(厚生年金).
|Social insurance (社会保険)|
welfare pension insurance(厚生年金)
Even if you do not have any employees in your company other than you, if you run a company (corporation) and receive a salary, you have an obligation to join the social insurance system (社会保険).
If your face value salary (額面給与) is 200,000 yen per month, your company will deduct about 10,000 yen and pay you your salary of 190000 yen(手取り給与).
This 10,000 yen is the social insurance premium(社会保険料) that you bear.
In addition, the company will also bear about 10,000 yen of social insurance premiums.
You(employees or officers) and your company have to pay the funds for the medical expenses that you need when you get sick and the pension that you receive when you get old to the country.
To record the social insurance premiums that you (the company’s officers or employees) and the company each bear in the accounting books, you need to separate the amount that the company pays and the amount that you pay. And then, you need to process them with appropriate accounts.
The company’s share is recorded as “legal welfare expenses(法定福利費)” as an expense.
The employee’s share is recorded as “deposits received” (預り金) in the accounting books.
This means that your company is holding the money that it should pay you without paying it to you. I will explain more later, so please keep reading.
|Company’s share /||Legal welfare expenses (法定福利費)|
|Employee’s share /||Deposits received (預り金)|
Let’s review social insurance again here.
There are “narrow social insurance” and “broad social insurance”.
Health insurance (健康保険), welfare pension insurance (厚生年金), and nursing insurance(介護保険) are classified as narrow social insurance. And labor insurance（労働保険） consisting of employment insurance（雇用保険） (also called unemployment insurance失業保険) and workers’ compensation insurance（労災保険） is added broad social insurance.
So, if someone says “social insurance is this and that”, you should check whether the social insurance is broad or narrow.
Health insurance (健康保険) + welfare pension insurance (厚生年金) + nursing insurance(介護保険) = narrow social insurance
Health insurance (健康保険) + welfare pension insurance (厚生年金) + nursing insurance(介護保険) + employment insurance（雇用保険）+ workers’ compensation insurance（労災保険） = Broad social insurance
In this page, social insurance means Narrow social insurance.
Because, if you are running your company by yourself alone, you are not eligible for Labor insurance, generally.
Health insurance premiums, welfare pension insurance premiums, and nursing insurance premiums (介護保険) (which you need to join if you are over 40 years old) must be shared by you and your company equally.
Social insurance premiums are calculated based on the “standard monthly remuneration table(標準報酬月額)” calculated from the average salary for three months from April to June every year.
Use this table to categorize based on the average salary from April to June. For example, if the average is between 200,000 and 250,000 yen, use this category, and if it is between 260,000 and 300,000 yen, use this category.
Your salary amount will change every year, so your company needs to submit a document to the pension office every July and let them know your salary amount.
And then, based on that document, the pension office will send a document to your company to let you know your social insurance premium.
And then, the changed social insurance premium will be applied from September every year.
Anyway, your company needs to submit a document to the pension office every July, so it’s a good idea to write it down on your calendar in July.
Also, if your salary amount changes significantly during the year, you need to submit a document to the pension office without waiting for July.
The company’s share of social insurance premiums is accounted for as “legal welfare expenses”, and the employee’s share is accounted for as “deposits received” in the accounting books.
(There are other methods, but I will omit them here)
Now let’s see how to actually record these in the books and explain the accounting method in detail.
The accounting for the following situation
Payroll closing date: end of month
(When deciding your salary for August, I will base it on your performance from August 1st to August 31st)
Salary payment date and social insurance premium deduction date: 25th of the following month
(The payment of your salary based on your work in August is on September 25th)
Social insurance premium payment deadline: end of the following month
(The deadline for paying the social insurance premium deducted from your salary based on your work in August (10,000 yen in the example above) is September 30th)
There are several ways to do the accounting, but I will explain a simple and easy way.
August 31st Record the salary
Debit(借方) Salary 190,000 yen / Credit(貸方) Unpaid expenses（未払費用） 190,000 yen
Debit Salary 10,000 yen / Credit Deposits received（預り金） 10,000 yen
(At the end of August, your company has an obligation to pay you salary. Therefore, even if no money has moved to you, this accounting is necessary at the end of the month. Unpaid expenses（未払費用） means that the company has a debt to pay you salary. Deposits received means that the company is holding your social insurance premium on your behalf.
September 25th The company paid you salary for August.
Debit Unpaid expenses（未払費用）190,000 yen / Credit Cash 190,000 yen
(At this point, the company is still holding your social insurance premium of 10,000 yen)
September 30th The company paid the social insurance premium at the bank.
Debit Deposits received 10,000 yen / Credit Cash 10,000 yen
Debit Legal welfare expenses 10,000 yen / Credit Cash 10,000 yen
(The company paid the 10,000 yen that it was holding from you and the 10,000 yen that it had to bear as social insurance premiums in cash.)
A simpler way (Strictly speaking, this is not correct way, but it does not make a significant difference in the amount of taxes paid. It’s not efficient to spend time on administrative processing.)
No entries are made in the books in August. The journal entry is made when the cash is physically transferred.
September 25th The company paid you salary for August.
Debit Salary 190,000 yen / Credit Cash 190,000 yen
(The company is holding your social insurance premium, but no money has actually moved, so I omit the accounting for the social insurance premiums)
September 30th The company paid the social insurance premium at the bank in cash.
Debit Legal welfare expenses (employee’s share従業員負担分) 10,000 yen / Credit Cash 10,000 yen
Debit Legal welfare expenses (company’s share会社負担分) 10,000 yen / Credit Cash 10,000 yen
Thank you for reading to the end.